Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why Investors Shouldn't Jump on ACADIA's Bandwagon

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

ACADIA Pharmaceuticals (NASDAQ: ACAD  ) was on fire yesterday, up 24% after presenting data for its antipsychotic pimavanserin at the American Academy of Neurology annual meeting.

The data looked good. Pimavanserin passed its primary endpoint, lowering psychosis symptoms in patients with Parkinson's disease. It even passed its secondary endpoints with flying colors.

There's just one problem. We already knew that. The company released top-line data last November.

Were investors really that worried about the full data revealing some issue? I guess so.

I can't really blame them. Pimavanserin failed two previous clinical trials in Parkinson's disease psychosis because of high placebo effect. A little skepticism was in order.

Admittedly I didn't see it coming, though. After the top-line data were released, I made an underperform call in CAPS with the comment, "No catalyst for awhile. And second phase 3 isn't a sure thing. Placebo effect is hard to beat twice."

That still seems to hold, especially with the full-data presentation -- which I didn't see as a catalyst -- out of the way. ACADIA still has to run another clinical trial to confirm the first result. At this point, the biggest problem with owning ACADIA is time. You're going to have to sit for awhile.

And after you wait, there's the possibility that the second trial doesn't match the first. My guess is the placebo effect increases in the second trial since patients entering the trial will know that the drug works. Fortunately pimavanserin beat placebo by a wide margin -- the p-value for the primary endpoint was 0.001 -- which gives ACADIA a little wiggle room since the p-value can go up as high as 0.05 for the second trial and still be considered statistically significant.

If it can get past a second trial, pimavanserin should be approved and sell well. Atypical antipsychotics such as Johnson & Johnson's (NYSE: JNJ  ) Risperdal, Eli Lilly's (NYSE: LLY  ) Zyprexa, Bristol-Myers Squibb's (NYSE: BMY  ) Abilify, and Pfizer's (NYSE: PFE  ) Geodon are used off-label to treat Parkinson's patients. But the atypical antipsychotics have side effects that can decrease motor function that's already impaired in Parkinson's patients. Pimavanserin doesn't seem to have a meaningful effect on motor function, which should help ACADIA compete with the big boys.

But it's hard to see why investors would buy ACADIA now at these inflated prices. Wait for a pullback to give you a little margin of safety in case the second trial doesn't go as well as the first.

Is Eli Lilly a buy or sell?
With two of its top three drugs poised to lose patent protection this year, is Eli Lilly a dividend stock headed nowhere fast? In a new premium report, The Motley Fool's senior pharmaceuticals analyst breaks down all of Lilly's moving parts, including an in-depth analysis of the company's must-know opportunities and reasons to buy and sell today. To find out more click here to claim your copy today.


Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 22, 2013, at 3:15 PM, DannyHaszard wrote:

    Risperdal reproached.

    Johnson and Johnson are the 'baby care people' and their marketing of Risperdal and other products must be above reproach.

    All the manufacturer's of the SGA (Second generation Antipsychotics) engaged in deceptive promotions and off label marketing.I personally was victimized by Eli Lilly's *viva zyprexa* campaign.

    Fours years of off label prescriptions of Zyprexa for my PTSD gave me life-long diabetes.

    Eli Lilly made $70 billion on Zyprexa!

    --Daniel Haszard 'tell the truth don't be afraid'

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2327658, ~/Articles/ArticleHandler.aspx, 10/1/2016 3:24:40 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 6 hours ago Sponsored by:
DOW 18,308.15 164.70 0.91%
S&P 500 2,168.27 17.14 0.80%
NASD 5,312.00 42.85 0.81%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/30/2016 4:00 PM
ACAD $31.81 Down -0.89 -2.72%
ACADIA Pharmaceuti… CAPS Rating: **
BMY $53.92 Up +0.05 +0.09%
Bristol-Myers Squi… CAPS Rating: ****
JNJ $118.13 Up +0.86 +0.73%
Johnson and Johnso… CAPS Rating: *****
LLY $80.26 Up +0.52 +0.65%
Eli Lilly and Co. CAPS Rating: ***
PFE $33.87 Up +0.55 +1.65%
Pfizer CAPS Rating: ****