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Biotech / Medical : ACADIA Pharmaceuticals Inc (ACAD)

ACAD 26.56

+2.6%

Dec 4 3:59 PM EST

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From: mopgcw	10/29/2004 1:00:24 AM
	of 588

Piper: ACAD :Partner Allergan Files IND For Neuropathic Pain October 27, 2004 Edward A. Tenthoff, Sr Research ACADIA (ACAD - $6.90) Outperform Volatility: High Price Tgt -- $11.00 Price: $6.90 52 Week High: $8.00 52 Week Low: $4.95 (Proj Mkt Cap of $200MM Shares Out (mil): 16.9 Market Cap. (mil): $116.6 Avg Daily Vol (000): 30 Book Value/Share: $2.27 Cash Per Share: $2.89 * ACADIA announced yesterday that partner Allergan (AGN) filed an IND application with the FDA for a drug to treat neuropathic pain - designated AGN-XX. * The IND filing was expected and triggers a milestone payment to ACADIA to be recognized in 4Q:04. * We continue to look for Allergan to advance a second drug for neuropathic pain into the clinic - designated AGN-YY. Allergan expects to advance at least one of these drugs into Phase II trials next year. * ACADIA has entered into 3 partnerships with Allergan, including this neuropathic pain deal and an on-going glaucoma partnership. To date, we believe ACADIA has received $9 million of up to $20.5 million in fees in the pain collaboration. * ACADIA intends to release 3Q:04 results on November 10. * We believe 2005 will be a break-out year for ACADIA driven by clinical progress in its proprietary programs. * Specifically, we look for Phase II data on ACP-103 in Parkinson's Disease treatment-induced psychosis during 1H:05. If all goes well, we believe this program could advance into Phase III trials by late '05 or early '06. The company also continues to develop this drug for PD treatment-induced dyskensia. * ACADIA is also developing ACP-103 as adjunctive therapy for schizophrenia and should commence two Phase II trials near term with data available in 2H:05. We believe ACADIA could potentially partner this drug based on Phase II data. * Lastly, ACADIA is developing ACP-104 as a stand-alone therapy for schizophrenia with cognitive benefit. We believe this drug has blockbuster potential. ACADIA should begin two small Phase II trials to establish safety and PK of ACP-104, and then commence larger Phase II efficacy trials in acute and chronic schizophrenia next year. INVESTMENT RECOMMENDATION: We reiterate our Outperform rating and price target of $11 per share. We project ACADIA's enterprise value should increase to $180 million based on its clinical pipeline, supporting a market cap of $200 million. We look for ACADIA to create value by advancing its proprietary programs and potentially entering into new collaborations. RISKS TO ACHIEVEMENT OF TARGET PRICE: Among the risks associated with shares of ACAD are those typical with all drug discovery companies including developmental, clinical, and regulatory risks, particularly in CNS. ACP-103 and ACP-104 could fail in clinical trials. ACADIA may not enter into new collaborations or achieve milestones in existing alliances. The company will require additional funding. ACADIA could face future unforeseen litigation that could adversely impact business. COMPANY DESCRIPTION: ACADIA Pharmaceuticals is a biopharmaceutical company located in San Diego developing novel small-molecule drugs to treat CNS disorders. The company's lead drug is ACP-103 in Phase II trials for Parkinson's disease. ACADIA should also commence Phase II trials of ACP-103 and ACP-104 for schizophrenia soon. Partner Allergan should advance two pain drugs into the clinic this year.

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