ACADIA Pharmaceuticals Inc: The Best Performing Biotechs of 2013

With the Nasdaq Biotechnology Index up 65% since the start of the year, it's clear that the biotech sector performed extraordinarily well in 2013-but which stocks were the biggest winners? Several small-cap and mid-cap biotech companies posted returns of 200% or more through the middle of December this year, and, in this series, I review the 15 biggest movers of 2013. Let's continue this review with number 2 on the list, Acadia Pharmaceuticals Inc.  (NASDAQ: ACAD  ) . This biotech continues to impress investors as it ushers its Parkinson's disease treatment pimavanserin through final stage trials. 

Targeting psychosis in Parkinson's and Alzheimer's disease

The once-daily tablet blocks activity of a key receptor, 5-HT2A, associated with brain activity. The phase 3 drug addresses Parkinson's disease psychosis, or PDP, a condition occurring in 60% of to the estimated four to six million Parkinson's patients worldwide.

Sadly, there are no approved treatments for the condition. Instead, in moves that often reduce motor activity for Parkinson's patients, doctors typically lower doses in dopamine replacement therapy or prescribe anti-psychotic medication off-label, which can block dopamine uptake.

Those imperfect solutions mean pimavanserin may prove an attractive option for doctors and patients because it will allow for ongoing dopamine replacement therapy while presenting fewer side effects than currently marketed anti-psychotic drugs, which carry black box warnings against use in elderly patients.

Pimavanserin's success in phase 3 trials, where it showed both efficacy and safety, clears the way for an FDA filing. Acadia is currently completing supportive studies ahead of filing for approval in late 2014.

The drug's ability to regulate this key receptor also suggests an opportunity in other neurological disorders including Alzheimer's disease. Pimavanserin entered phase 2 trials for Alzheimer's disease psychosis, a condition associated with fast-progressing Alzheimer's disease, in November. Similar to PDP, ADP affects elderly and frail patients for whom there are few treatment options. If proven effective, the market for this indication is roughly 25% to 50% of the 5.4 million Alzheimer's patients in the United States.

Acadia is also studying pimavanserin in schizophrenia patients. The company has completed a phase 2 trials for this condition as part of a combination therapy with low dose risperidone, a commonly prescribed anti-psychotic. In that study, the combination therapy showed similar response rates to high dose risperidone alone, with fewer side effects.

Outside of pimavanserin, Acadia has also licensed compounds to Allergan (NYSE: AGN  ) . Acadia has inked three deals with Allergan over the past decade, including adregenetic for chronic pain and muscarinic for glaucoma, the second largest cause of blindness worldwide. However, that partnership may be stalling given Allergan allowed a collaboration to expire in March and appears to be pausing on its two remaining programs as it searches for a partner to help fund future trials.

Fool-worthy final thoughts

Acadia is well capitalized, thanks to a stock offering this past May the company finished September with $196 million in cash and no debt. That suggests plenty of money to get the company to its expected FDA filling date late in 2014 and for funding of its Alzheimer's trial.

The big patient pool and significant unmet need in both Parkinson's and Alzheimer's makes them attractive markets for the company. However studies remain ongoing and there remains risk until the FDA officially gives the nod to pimavanserin. Regardless, a combination of a potential filing late in 2014 and future data from its Alzheimer trial should provide plenty of interesting news to track over the coming couple years.

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