Biopharma company Acadia Pharmaceuticals (NASDAQ:ACAD) saw its stock price rise by more than 164% in 2019, outperforming both the Virtus LifeSci Biotech Clinical Trials ETF (up 64%) and the S&P 500 (up 29%). The company's stock received a boost from making progress toward profitability, positive data from clinical trial results, and continued revenue growth of its lead drug Nuplazid (pimavanserin) -- a treatment for hallucinations and delusions associated with Parkinson's disease psychosis (PDP).

The stock is currently down 13% year-to-date and continues to outpace the broader market and the Virtus sector ETF. The recent market conditions driven by the coronavirus outbreak and plummeting oil prices make it an attractive buying opportunity for investors. 

To understand whether this stock is a great long-term investment at this price, let's briefly review the company's recent earnings, Nuplazid's growth prospects, and Acadia's strategic goals for 2020. 

Drugs

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Acadia Pharmaceuticals: Q4 highlights

Acadia closed the year strong by exceeding Wall Street estimates in both top- and bottom-line results. It reported fourth-quarter revenue of $98.3 million, $1.64 million higher than analyst expectations, and a net loss of $0.34 per share, which beat the consensus by $0.03.

Metric

Q4 2019

Q4 2018

Change

Total revenue

$98.3 million

$59.6 million

65%

Research & Development

$57.5 million

$48.2 million

19%

Net loss

($53.0 million)

($65.5 million)

N/A

EPS

($0.34)

($0.50)

32%

Source: Acadia Pharmaceuticals 

The comparative numbers demonstrate the company's commitment to R&D investment and continued revenue growth. It saw a 19% improvement in net loss year over year, showing that it's making significant progress on the path toward profitability. 

Revenue by the quarter 

Metric

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Revenue

$63.0 million

$83.2 million

$94.6 million

$98.3 million

YoY Change (2018)

29%

46%

62%

65%

Source: Acadia Pharmaceuticals 

Each quarter saw an increase in year-over-year net sales, topping the results from 2018. The key driver here was sales of Nuplazid, which is Acadia's main source of revenue. With success in future treatments, this growth is expected to continue year over year, driving the stock higher and offering more profits to investors.  

Where's the stock headed?

There is potential for this stock to rise higher. The company saw a rapid acceleration in performance from continued revenue growth and positive clinical trial data. The stock is currently trading around $37, analysts are bullish and expect it to be trading in a range of $41 to $75, with the average price target being $57.19.   

YCharts

ACAD data by YCharts

The two key catalysts behind its stock price increases came from achievements in its phase 3 clinical trial results in September and December. 

  • In September, Acadia announced that its phase 3 trial evaluating Nuplazid for the treatment of dementia-related Psychosis (DRP) met a primary endpoint (target), "demonstrating a highly statistically significant longer time to relapse of psychosis" compared to placebo. 
  • In December, the company announced that the trial of Nuplazid had met primary and secondary endpoints in this pivotal phase 3 study in patients with DRP. 
    • Primary: Significantly reduced the risk of relapse of psychosis by 2.8-fold
    • Secondary: Significantly reduced the risk of discontinuing the drug by 2.2-fold 

If the drug application is approved by the U.S. Food and Drug Administration (FDA) later this year, Nuplazid for treatment of DRP will generate more profit for Acadia -- and likely stock-price growth for investors. 

Nuplazid's growth opportunity

Nuplazid is the first and the only FDA-approved treatment for hallucinations associated with PDP. Nuplazid's success in PDP has led Acadia to study its use for other indications, including DRP, major depressive disorder (MDD), negative symptoms of schizophrenia, and Rett syndrome, a rare neurological disease.

DRP offers the most opportunity for investors in Acadia. It is similar to PDP in many ways: 

  • There's a high unmet need for treatment
  • If approved, Acadia's would be the first and only treatment
  • There is a large elderly population with the condition
  • DRP is burdensome to caregivers 

The population living with DRP (1.2 million patients) is 10 times larger than the population of those with PDP, which presents a massive opportunity. Physicians recognize the association between dementia and psychosis more so than in Parkinson's disease, therefore allowing for an expanded audience of providers -- including psychiatrists and geriatric general practitioners -- who will be willing to prescribe Nuplazid for its new indication, should it be approved. 

A year of transformation

In 2019, Acadia generated $339.1 million in net product sales, a 52% increase year over year.  Here's a look into Acadia's strategy for continuing that growth in 2020. 

  • Net sales of Nuplazid for PDP and potentially DRP are expected to grow, with management forecasting $440 million to $470 million revenue for 2020; the midpoint of this range represents sales growth of 34% year over year. 
  • If approved, Nuplazid for DRP patients will drive market expansion.
  • R&D growth is expected to continue, with drugs in the pipeline being developed for multiple diseases.

Acadia's future looks bright, and investors should take note of the timeline of key catalysts of data results and potential approvals. 

Disease

Current Stage

Projected Data/ Submission/Other 

Potential Approval

DRP

sNDA (supplemental new drug application) submission 

Summer 2020 (Submission)

Year-End (YE) 2020

MDD

Phase 3 

4Q 2020 (Data)

YE 2021/2022

Rett syndrome

Phase 3

2021 (Data)

2022

Negative symptoms of schizophrenia

Phase 2-2nd study 

Study begins summer 2020

YE 2023

Source: Acadia Pharmaceuticals -- YE = Year Ending 

Acadia's potential first-mover advantage in DRP plus further developments in other indications can drive the company toward profitability. Bullish analysts expect the company to turn a profit near the end of 2021, but a more reasonable estimate is near the end of 2022.  

This stock is worth the long-term hold for the next two years (or more) because the company has no generic competition in PDP and patents for some forms of Nuplazid aren't set to start expiring until between 2022 and 2028. Healthcare investors looking for long-term growth should consider Acadia Pharmaceuticals for their portfolio.