What happened

Shares of Acadia Pharmaceuticals (NASDAQ:ACAD), a commercial-stage mid-cap biotech, are down by 16.1% as of 12:00 p.m. EST on extremely heavy volume. The culprit? Sales of the company's Parkinson's disease psychosis drug Nuplazid came in slightly below consensus estimates for the quarter by 1.62%, or $720,000.

Chalkboard chart illustrating a downward trend.

Image Source: Getty Images.

So what

Normally, a low-single-digit miss on revenue wouldn't be a big deal for a mid-cap biotech with a promising outlook like Acadia. Acadia's shares, however, have been trading at a sky-high premium ever since Nuplazid's initial Food and Drug Administration (FDA) approval back in 2016.

The underlying reason is that most investors were clearly expecting the company's only FDA-approved drug to quickly transform into a blockbuster product -- sales in excess of $1 billion per year. As things stand now, however, Nuplazid is on pace to generate only between $255 million to $270 million for all of 2018. That's a decent haul, but far from blockbuster status. 

Now what

To push Nuplazid into blockbuster territory, Acadia will need to successfully expand the drug's label to include other high-value indications like dementia-related psychosis. The good news is that Acadia has initiated a late-stage trial to do just that. The bad news, however, is that this ongoing trial called "Harmony" won't produce top-line data for another two years, according to clinicaltrials.gov. 

Acadia's shares arguably are on the expensive side, even after this latest pullback, so investors may want to wait for a more attractive entry point. Without a sizable uptick in Nuplazid's sales, this stock probably will continue to revert to the mean.