What happened

Shares of the mid-cap biotech Acadia Pharmaceuticals (NASDAQ:ACAD) gained an astounding 63.2% today on nearly 17 times the average daily volume. The spark?

Acadia's shares perked up today in response to the news that pimavanserin (aka Nuplazid) hit its primary endpoint in a Phase 3 trial known as Harmony. The Harmony trial was designed to evaluate pimavanserin as a treatment for dementia-related psychosis. The trial was reportedly stopped early upon the recommendation of the study's independent data monitoring committee. 

Image of a neuron.

Image Source: Getty Images.

So what

After this same drug flamed out in another late-stage trial as an adjunctive therapy for adult schizophrenia earlier this year, Wall Street wasn't particularly optimistic about its chances in dementia-related psychosis. This late-stage win nonetheless gives pimavanserin a good shot at tacking on another high-value indication to its label -- one that could push the drug's sales into megablockbuster territory within a few short years. As such, it's easy to see why Acadia's shareholders cheered this somewhat surprising late-stage win today. 

Now what

With these exceptionally strong late-stage results in hand, Acadia now plans to approach the Food and Drug Administration (FDA) regarding pimavanserin's regulatory pathway for dementia-related psychosis. In brief, Acadia should have the drug's supplemental New Drug Application for this indication submitted to the FDA before the end of the first half of 2020. That projected timeline sets the stage for a possible launch in either late 2020 or early 2021 -- that is, if the FDA does indeed grant this high-value label expansion.