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What happened

After releasing encouraging data from an important Phase II clinical trial, shares of Acadia Pharmaceuticals (NASDAQ:ACAD) rose by 14% as of 10:10 a.m. EST on Tuesday.

So what

Acadia released top-line results from its Phase II -019 Study today. This trial was designed to test its drug Nuplazid (pimavanserin) as a hopeful treatment for Alzheimer's disease psychosis.

The results from the six-week, placebo-controlled study showed that Nuplazid met its primary endpoint, which was a statistically significant reduction in psychosis as measured by the Neuropsychiatric Inventory-Nursing Home (NPI-NH) Psychosis score. Patients who used Nuplazid showed a 3.76 point improvement on the test while the placebo group only showed a 1.93 point improvement (p=0.0451). 

Acadia's CEO Steve Davis was quite pleased with the study's results, noting:

Data from the -019 Study provide solid evidence that pimavanserin can improve psychosis in another major neurological disorder and provide strategic momentum for the further development of pimavanserin to address the needs of AD Psychosis patients.

Given the terrific clinical result, it is easy to understand why traders are bidding up shares today.

Now what

The FDA has not yet approved any drug to treat Alzheimer's disease psychosis, so this news is extremely promising for investors and patients alike. Roughly five million Americans suffer from Alzheimer's disease and somewhere between 25% and 50% of them experience symptoms of psychosis. Thus, if Nuplazid can ultimately go on to win a label expansion claim for this indication then it could be quite lucrative. After all, Nuplazid's wholesale price is $23,500 per year, so even capturing a small fraction of the total addressable market could lead to blockbuster sales.

Of course, this data was only from a Phase II trial, so Acadia still has a long road ahead before it can potentially submit for regulatory review. Still, this is terrific news all around, so it is hard to blame the markets for bidding up shares today. 

Brian Feroldi has no position in any stocks mentioned. Like this article? Follow him on Twitter where he goes by the handle @Longtermmindset or connect with him on LinkedIn to see more articles like this.

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