Citi: 5 November 2008 - 8 pages
ACADIA Pharmaceuticals Inc (ACAD) Estimate change Y
Uneventful 3Q08 Results
* Conclusion - We maintain our Hold rating. We believe
the stock remains in an uneventful period. The next major
catalyst and value-creating event for Acadia (PDP Phase
III data) is expected in 3Q 2009.
* What's New - Acadia reported non-eventful 3Q08 financial
results: collaborative revenues of $0.2M, same as our
estimate of $0.2M and compared to Street consensus
estimate of $1.2M. ACAD reported 3Q08 EPS of ($0.42)
compared to our estimate of ($0.39) and consensus of
($0.45).
* Cash on hand to last into 1H 2010 - ACAD expects cash
usage to decrease in 4Q08 and in 2009. With the
previously announced restructuring and reduction in
workforce, ACAD reiterated its prior guidance that it
expects cash to last into 1H 2010. Recall that ACAD
already secured a committed equity financing facility with
Kingsbridge with up to $60M during the next three years.
* Pimavanserin Update - Data from its first Parkinson's
Disease Psychosis (PDP) Phase III trial is expected in
3Q09. There will be an open label safety extension study
from patients enrolled in both Phase III studies. As
well, there is an ongoing open label study from patients
enrolled in the Phase II trial. The longest duration of
treatment has been four years.
See Appendix A-1 for Analyst Certification and important
disclosures.
Hold/Speculative 2S
Price (05 Nov 08)
US$1.94
Target price US$3.00
Expected share price return
54.6%
Market Cap US$72M
Lucy Lu, MD
Kia Khaleghpour, PhD
C o m p a n y d e s c r i p t i o n
Acadia is a research-driven biopharmaceutical company focused on the
discovery, development, and commercialization of drugs for the treatment of
central nervous system disorders. The company's most advanced product is
Pimavanserin, a 5HT2A receptor inverse agonist for schizophrenia co-therapy,
Parkinson's Disease psychosis, and insomnia.
I n v e s t m e n t s t r a t e g y
We rate ACAD Hold, Speculative risk (2S). Acadia is a research-driven
biopharmaceutical company focused on the discovery, development, and
commercialization of drugs for the treatment of central nervous system
disorders. The company's most advanced product is Pimavanserin, a 5HT2A
receptor inverse agonist for schizophrenia co-therapy, Parkinson's Disease
psychosis, and insomnia.
We believe successful Pimavanserin Phase II schizophrenia data with
Risperdal was promising and is reproducible, but we have concerns about the
clinical utility of the tested dose. In addition, the data with Risperdal may
not translate to other atypicals, which would command a higher valuation for
Pimavanserin.
Pimavanserin targets the underserved Parkinson's Disease Psychosis (PDP)
market where there is no FDA approved drug. Theoretically, Pimavanserin
should demonstrate a benefit in PDP, but other atypical antipsychotics have
had difficulty obtaining clinical success in trials.
V a l u a t i o n
Our 12-month price target is $3 and is derived using a 26x P/E multiple on
Acadia's 2013's fully taxed EPS estimate of $0.35 and discounting back at
30% per year. We believe ACAD should be given a similar multiple as the peer
group since we project it will attain profitability and join the ranks of our
comparison group. We acknowledge that significant divergences amongst
constituents of the peers exist. We believe 30%, which is in-line with our
base discount rate valuation chart, is a proper discount rate for ACAD given
that the company is enrolling one phase III trial in PDP. There is
significant downside risk if trials were to fail.
R i s k s
We believe a Speculative (S) risk rating for ACAD is appropriate given the
price volatility and risks associated with conducting Phase III trials.
We believe the most important near- to medium-term upside risks to our target
price consist of:
> Partnership/Acquisition - Acadia is seeking a partner for Pimavanserin. The
signing of a partnership with a large-scale company could result in
significant appreciation of the stock.
> Clinical success - The stock could experience appreciation if any of its
trials for Pimavanserin are positive.
We believe the most important near-to-medium downside risks to our target
price consist of:
> Clinical Risk - Although Pimavanserin did not demonstrate worsening of
motoric tolerability during the Phase II PD trial, this may not hold up
during a larger and longer Phase III trial.
> Partnership Risk - If a partnership is not announced in the next quarter,
it may indicate the company is unable to attract a strong partner for
Pimavanserin. This would generate downward pressure on the stock.
> Secondary Offering - We believe ACAD will need to raise additional cash in
2009 and 2010. If the company is unable to access the capital markets they
may not be able to finance their clinical development programs or a
commercial infrastructure.
Appendix A-1
Analyst Certification
Each research analyst(s) principally responsible for the preparation and
content of all or any identified portion of this .... |
