piper: KEY POINTS:
* As expected, ACADIA announced a $10 million equity investment by Sepracor
this morning, marking the 1-year anniversary of the 3-year Central Nervous
System (CNS) drug development partnership signed in January 2005. The
investment was made at $12.29 (a 25% premium to a recent close) and resulted
in the issuance of 813,393 shares of ACAD common stock.
* The partnership with Sepracor is for the preclinical m1 agonist program to
address cognition in schizophrenia patients, selected muscarinic agonists
and antagonists for neuropsychiatric conditions and an option on one
preclinical 5-HT2A candidate to be used in combination with Sepracor's
Lunesta. Lunesta received FDA approval on December 15, 2004, to treat
insomnia.
* Sepracor still owes ACADIA milestone payments of up to $40 million in the
muscarinic program and $35 million for combination products with Lunesta in
addition to potential royalties.
* We are maintaining our estimates until ACADIA reports 4Q:05 next month. We
estimate ACADIA to have ended 2005 with ~$54 million in cash and now holds
pro forma cash of ~$64 million, which should be sufficient through mid-2007.
* We look for ACADIA to have a productive 2006 by advancing its CNS pipeline
and presenting clinical data.
* ACADIA has completed enrollment of the Phase II trial of ACP-103 in
Parkinson's disease and we expect full data to be available in 1Q:06. The
positive June 2005 interim analysis increased our confidence in this
program. With an end of Phase II meeting with the FDA likely this summer, we
look for ACADIA to initiate Phase III trials later this year.
* We look for ACADIA to complete all three ACP-104 Phase II trials and present
data during 1H:06 and, following these trials, intends to initiate a 200-
patient, 42-day Phase II efficacy study assessing cognitive benefits in
schizophrenics.
* In December, ACADIA presented Phase II data showing that ACP-103 reduces
akathisia caused by haloperidol therapy in schizophrenics. While the study
did not achieve statistical significance, the data was in line with our
expectations based on earlier results in healthy volunteers and increases
our confidence that ACP-103 could serve as an effective adjunctive therapy
for schizophrenia.
* ACADIA has initiated a larger 400-patient trial of ACP-103 in combination
with haloperidol or risperidone. Recruitment is ongoing in the U.S. and
Brazil, and we anticipate an interim analysis of 200 patients in 2006.
PRICE TARGET AND JUSTIFICATION:
We reiterate our Outperform rating and $13 price target based on a projected
enterprise value of $300 million for the clinical pipeline plus year-end 2006
cash of $23 million.
RISKS TO ACHIEVEMENT OF TARGET PRICE:
Risks associated with shares of ACAD are common to all drug discovery
companies, including developmental, clinical and regulatory. Drug candidates
could fail in the clinic, ACADIA may not enter into new collaborations or
achieve milestones in existing alliances. The company may require future
capital funding and may face future unforeseen litigation.
Related Companies:
ACAD: 10.71 SEPR: 52.27
Important Research Disclosures
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Analyst Certification - Edward A. Tenthoff, Sr Research Analyst
The views expressed in this report accurately |
