Treating Parkinson's Disease Psychosis

ACADIA Pharmaceuticals (NASDAQ: ACAD  ) is a $2 billion market cap biopharmaceutical company that is focusing on therapies for psychosis attributed to Parkinson's and Alzheimer's disease. Parkinson's disease is the second most common neurodegenerative disease, with 1 million sufferers in the U.S. and 50,000 new cases diagnosed each year.

Approximately $2 billion a year is spent on drug therapy for managing Parkinson's disease, although there are no approved treatments for psychosis related to degenerative diseases of the central nervous system. Doctors often have to go "off label" to try manage such symptoms, often at the expense at managing the physical aspects of the disease. There are also significant morbidity and mortality factors to consider in elderly patients with dementia-related psychosis.

ACADIA Pharmaceuticals reported that 60% of patients with Parkinson's suffer from Parkinson's Disease Psychosis, or PDP. ACADIA Pharmaceuticals' primary therapy for PDP is pimavanserin, which is in phase 3 development.

Research opportunities
Few companies have viable therapies far enough along the drug development chain for potential commercial release. International Stem Cell, a barely $20 million market cap company, is investigating stem-cell-based therapies for Parkinson's, but the company lacks the resources to be a viable competitor; it is currently burning over $0.5 million a month, with just $1.8 million in cash for the most recent quarter.

The Michael J. Fox Foundation has funded a number of research proposals involving public companies, including ACADIA Pharmaceuticals. Alnylam Pharmaceuticals (NASDAQ: ALNY  ) received funding from the foundation in 2007 for a study with the University of British Columbia in developing RNA-based therapies that would interfere with protein production and disease pathology. The four-year study completed last year, but as of yet there have been no potential therapies that have emerged.

The foundation also helped to fund an Amylin Pharmaceuticals proposal in 2009. Amylin's Byetta therapy, used for the treatment of type 2 diabetes, was also found to modify the progression of Parkinson's disease. Research is still ongoing, although motor and cognitive improvements were reported with treatment. Amylin Pharmaceuticals was jointly acquired by Bristol-Myers Squibb (NYSE: BMY  ) and AstraZeneca (NYSE: AZN  ) in 2012. Although Bristol-Myers Squibb recently announced that it was shifting its research focus to deal almost exclusively to cancer therapies, and is likely dropping its neuroscience program, which has two Alzheimer's therapies currently in phase 1.

Going "off label"
Current "off label" management options for psychosis include Abilify, a drug by Otsuka America Pharmaceutical. Abilify is an antidepressant that can be used to manage psychosis, although results can be mixed and may even worsen the symptoms of the disease. Zonegran, by Eisai, improved motor functions in a clinical study run in Japan; the mechanism of its effects have not yet been deduced, however. Forest Laboratories' (NYSE: FRX  ) Namenda offered improved cognitive ability to Parkinson's disease sufferers against a placebo treatment, although secondary benefits were not reached. Body builder favorite Creatine was also suggested as a management option, although the National Institutes of Health recently stopped a study testing this because it did not offer benefits for people with Parkinson's disease. Unfortunately, none of the aforementioned therapies have FDA approval for Parkinson's disease treatment.

Pimavanserin
The recent clinical study published in the Lancet offered a significant boost toward ACADIA Pharmaceutical's NDA application for pimavanserin. CEO Uli Hacksell noted the "excellent progess" that has been made toward the application process. The drug was reported to have a small adverse effect on heartbeat, causing a "7 to 9 millisecond" increase in the time for ventricular depolarization and repolarization; in a healthy adult male, this typically takes less than 430 milliseconds to complete. If this polarization event pushes above 450 milliseconds, serious health risks and possible death can occur. However, the company was keen to emphasize that the FDA was aware of the safety profile of the drug and did not dissuade it from making an NDA application.

The company is also expecting the information gathered in the NDA application for the FDA to be sufficient for a European drug application, although Hackell admitted "that Europe is still an unknown before we have tested it."

Valuation
Applying a pharmaceutical industry average P/E of 16 to Acadia Pharmaceuticals translates to an EPS of around $1.55 a share at current prices, or nearly $140 million a year in net income. Applying a 3 times multiple of net income to revenue, as found with AstraZeneca or Eli Lilly, would equate to an annual revenue of just $420 million. On the basis of this evaluation, ACADIA Pharmaceutical is currently priced at about half its potential value if pimavanserin turned into a $1 billion per year treatment.

The company has the reserves to see it through pimavanserin approval. It has $196 million in cash and used about $10 million in its third quarter; of this, $7.3 million was spent on R&D. This company's stock is one worth watching.

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Read/Post Comments (3) | Recommend This Article (5)

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 December 09, 2013, at 1:21 PM, biobetter wrote:

    Your title is treating parkinsons's psychosis yet you fail to even mention the 2 most commonly used drugs. Just so you know they are Seroquel and Clozaril. Btw each of those drugs delays QT more than Pimavanserin. Also Abilify is not an antidepressant but is the best selling antipsychotic that also helps some depressions. Why you would mention a stem drug, diabetic drug and an otc drug without mentioning the 2 most commonly used therapies only highlites the poor diligence you used in writing this silly hit piece.

  • Report this Comment On December 09, 2013, at 5:41 PM, fallond wrote:

    Both Seroquel and Clozaril are 'off label' treatments: Clozaril (clozapine) treats schizophrenia. Seroquel targets depression and bipolar disorder.

    Seroquel has shown little efficacy in the treatment of PDP.

    Clozaril has proven efficacy in the treatment in PDP, but is not FDA approved for such treatment. In 2005 it had sales of $200 million, but the patent expired in 2007. Side effects (weight gain and cardiovascular factors) are an issue for the drug, in addition to black label warnings. While the drug deserves mention, it's not a rival to ACADIA. The original manufacturer, Novartis, made no mention of the drug in its 2012 annual report.

  • Report this Comment On December 09, 2013, at 11:51 PM, auctioneer wrote:

    One of the most interesting things about Acadia is the chances of one of the BIG pharma companies wanting their pipeline of new drugs, of which Pimavanserin is the closest to market and the most lucerative, for their own. The double of current value of which is stated would probably be only the starting place for a takeover bid.

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