citi: ACADIA Pharmaceuticals Inc (ACAD) Target price
4Q08 Results Uneventful; Lowering TP to $1, maintain HOLD
* What is new - Acadia reported non-eventful 4Q08 financial
results: collaborative revenues of $0.3M, were same as our
estimate of $0.2M and compared to Street consensus estimate
of $1.08M. ACAD reported 4Q08 EPS of ($0.38) compared to
our estimate of ($0.31) and consensus of ($0.37).
* Pimavanserin Update - Data from its first Parkinson's
Disease Psychosis (PDP) Phase III trial is expected in
3Q09. This trial is powered at the 90% level for each
treatment arm vs. placebo. Powering assumptions were based
on the Ph2 efficacy margin and data variability.
* Cash on hand to last into 1H 2010 - ACAD reiterated its
prior guidance that it expects cash to last into 1H 2010.
We have fine tuned our model and project lower operating
expense in 2009. As such our 2009 EPS goes to ($0.81) from
($0.89) and our 2010 EPS estimate goes to ($0.51) from
($0.76).
* Conclusion(s) - We maintain our Hold rating, but lower
our 12 month target price to $1 (from $3 previously), which
represents a 1x our estimated year-end cash/share position.
Since ACAD faces serious clinical and regulatory hurdles
for its only drug (Pimavancerin), the company should not be
able to attain profitability in the near term. As such, we
do not believe that ACAD merits a premium over its
projected year end cash level. 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 3Q09.
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 $1, which represents a 1x our estimated year-end
cash/share position. Since ACAD faces serious clinical and regulatory hurdles
for its only drug (Pimavancerin), the company should not be able to attain
profitability in the near term. As such, we do not believe that ACAD merits a
premium over its projected year end cash level. 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
the future. 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. |
