What happened

Acadia Pharmaceuticals (NASDAQ:ACAD), a company developing novel treatments for disorders of the central nervous system, saw its shares fall by a noteworthy 17.7% last month, according to S&P Global Market Intelligence.

What's going on? The company's fourth-quarter sales of its drug for Parkinson's disease psychosis, Nuplazid, came in slightly below consensus for the three-month period, triggering a mass exodus among shareholders.

A man in business attire drawing an upward-sloping sales curve

Image source: Getty Images.

So what

Acadia's stock has shed more than a third of its value since Nuplazid's approval by the Food and Drug Administration roughly two years ago. The underlying reason is that early shareholders seemed to believe that Nuplazid would go supernova, from a sales standpoint, right out of the gate.

While the drug is performing admirably, with a projected run rate of between $255 million and $270 million for 2018, these sales forecasts are well below the $3 billion or more that some investors and analysts were touting prior to FDA approval.

Now what

The silver lining is that Nuplazid has been far from the total flop some analysts were predicting early on. In fact, the drug's sales are expected to reach a healthy $443 million in 2019.

The downside, however, is that even this stately annual haul still equates to Acadia's shares trading at a forward price-to-sales ratio in excess of 7. That's among the highest in the biopharmaceutical space -- suggesting that Acadia's stock remains on the expensive side.

When is it time to buy? My view is that Acadia won't be in bargain territory until it either loses another 20% (at a minimum), or the company addresses its long-term financing needs by striking a front-loaded licensing deal for Nuplazid's other potential indications. As things stand now, Acadia will probably have to resort to a massive secondary offering in early 2019 to pay for Nuplazid's other clinical trials.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.