Piper: ACAD :Revenue Surprise Due to Sepracor Partnership; Raised $34M
May 12, 2005
Outperform Volatility: High
Edward A. Tenthoff, Sr Research 212 284-9403,
edward.a.tenthoff@pjc.com
William T. Ho, Research Analyst
212 284-9308, william.t.ho@pjc.com
KEY POINTS:
* ACADIA reported upside revenue surprise of $2.3 million in 1Q:05 due to R&D
support under the new Sepracor partnership.
* We now look for total revenues to reach $9.2 million in 2005, excluding
potential milestone payments from Allergan, and to decline to $6 million in
2006 after the termination of the R&D phase of the Allergan partnership in
1Q:06.
* ACADIA continues to invest R&D prudently to advance its clinical pipeline.
We look for R&D investment of $30 million this year and $40 million in
2006. We look for ACADIA to lose $28.6 million or ($1.29) in 2005 and $43.8
million or ($1.73) in 2006.
* In April, ACADIA issued an estimated 5.3 million shares raising net
proceeds of ~$34 million. Added onto ACADIA's 1Q:05 reported cash position,
we estimate ACADIA retains a pro-forma cash position of $75.6 million or
$3.27 per share, which should last through mid-2007. We forecast ACADIA
will burn $28 million this year, within management's guidance range of $26-
$30 million.
* ACADIA will have significant clinical data releases in 2H:05 and we
recommend purchase of shares ahead of these events.
* In particular, we look for an interim look at Phase II data on ACP-103 in
Parkinson's disease treatment-induced side-effects near-term with full data
available by year-end or early 2006.
* We also look for Phase II data on ACP-103 as adjunctive therapy in
schizophrenia during 2H:05. ACADIA intends to start a larger 400-patient
trial with other antipsychotic agents in 2Q:05.
* Lastly, ACADIA should present Phase II data on ACP-104 (the major
metabolite of clozapine) as a stand-alone therapy for the treatment of
schizophrenia and begin a larger trial assessing cognitive benefits in
schizophrenics by year-end.
Price: $7.43
52 Week High: $8.40
52 Week Low: $4.95
Price Tgt -- $11.00
Proj Enterprise Value of $210M
Shares Out (mil): 23.1
Market Cap. (mil): $171.6
Avg Daily Vol (000): 16
Book Value/Share: $2.87
Cash Per Share: $3.27
Est LT EPS Growth: NM
P/E to LT EPS Growth (FY06): NA
Est Next Rep Date: 07/13/2005
Fiscal Year End: Dec
Note: pro-forma book value and cash per share include est. impact of PIPE transaction
INVESTMENT RECOMMENDATION:
We reiterate our Outperform rating on ACADIA with an $11 price target. We
arrive at this target by projecting an enterprise value of $210 million based
on 3 CNS drugs in Phase II development. ACADIA will have significant clinical
data releases in 2H:05 and we recommend purchase of shares ahead of these
events.
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. |
