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ACADIA Pharmaceuticals (ACAD 0.90%) and Sarepta Therapeutics (SRPT -1.45%) are both cash-burning biotech stocks that offer huge upside if everything goes according to plan. However, shareholders in each company face a real risk of being wiped out if something goes awry. That's why it's essential for investors in stocks like these to do plenty of homework before they even consider making a purchase.

With that in mind, let's pit these two high-risk, high-reward companies against each other to see if we can determine which stock is the better buy.

The case for ACADIA Pharmaceuticals

ACADIA Pharmaceuticals' stock has been a rocket ship over the last five years thanks to investor optimism about its drug Nuplazid for Parkinson's disease psychosis (PDP), a disease that causes patients to experience delusions and hallucinations. Caring for patients with PDP is incredibly difficult because of the lack of treatment options. This leads many patients with PDP to be sent to nursing homes, greatly increasing the cost of their care.

However, the FDA approved Nuplazid on Aug. 29, and the drug promises to help ease that burden -- and therein lies the opportunity for investors. 

Image source: ACADIA.

Roughly 40% of the 1 million Americans with Parkinson's disease will develop PDP, so Nuplazid has a large addressable market. Because management knows that Nuplazid is the only game in town, they have given it an aggressive wholesale price of $23,400 annually. If ACADIA can convince a large portion of patients and providers to use Nuplazid, the drug could easily turn into a blockbuster.  

Of course, just because a drug finds its way to market doesn't mean it's an automatic success. ACADIA now has to convince payers, providers, and patients that Nuplazid's clinical benefits exceed its costs, which is not an easy thing to do.

ACADIA's market cap is approaching $4 billion, so there's a lot of optimism being priced in. If the company fails to gain traction, then shares would likely tumble, so there's no doubt that ACADIA's stock is quite risky today.

The case for Sarepta Therapeutics

Rare-disease-focused Sarepta Therapeutics has set its sights on Duchenne muscular dystrophy (DMD), a deadly muscle-wasting disease with no cure. Although there have been several recent attempts to bring drugs to market that help treat this awful disease, they have all failed to win over regulators, making Sarepta essentially the last company standing. If Sarepta can get the green light from the FDA on its DMD treatment, called eteplirsen, then it should have the market to itself, which could potentially be worth billions in future sales.

Of course, that's a huge "if," as Sarepta's recent regulatory history has been far from perfect. During eteplirsen's advisory committee meeting, there were a lot of negative comments about the methodology that was used to collect data during clinical trials. The FDA has also delayed its go/no-go decision date twice, most recently sending out a request for additional data from the drug's ongoing confirmatory study. We currently don't even have an updated Prescription Drug User Fee Act decision date for eteplirsen, so shareholders are in a holding pattern.  

Despite all of that, there are reasons to be bullish on Sarepta today. The FDA is aware of the huge unmet medical need for DMD, and the agency knows that patients and providers are desperate for a treatment. If regulators approve the drug, then shares would likely skyrocket, especially since they are currently down more than 50% from their all-time high.

The better buy

While both of these companies offer substantial upside if everything goes according to plan, I think ACADIA is the smarter buy right now. Nuplazid has already cleared the most important regulatory hurdles, and it's not competing against any other drugs. That should ensure it has automatic demand, which should increase its chances of seeing market success.

Sarepta, on the other hand, still has its huge binary decision ahead of it. While my hunch is that the FDA will wind up giving eteplirsen the green light, it's impossible to handicap the odds. That means the company's stock will likely rise or fall dramatically once a decision is in hand, making Sarepta's stock about as high-risk as it gets. My fingers are crossed that this works out well for shareholders, but the investor in me knows that ACADIA is the better buy today.