What happened

Shares of Acadia Pharmaceuticals (ACAD -0.28%) were crashing 35.4% as of 11 a.m. ET on Tuesday. The steep decline came after a Food and Drug Administration (FDA) advisory committee voted 9-3 against recommending approval of pimavanserin in treating Alzheimer's disease psychosis.

This vote was reported on June 17. But the trading of Acadia stock was halted that day because of the FDA advisory committee's deliberations. Trading of the biotech stock didn't resume until today since the stock market was closed on Monday for the federal Juneteenth holiday.

So what

The FDA's Psychopharmacologic Drugs Advisory Committee (PDAC) determined that the data for pimavanserin didn't sufficiently demonstrate that it was effective in treating hallucinations and delusions experienced by patients with Alzheimer's disease psychosis. CEO Steve Davis said that the company was "disappointed" with the advisory committee's vote.

Acadia still has a chance of winning approval. The FDA doesn't have to go along with the PDAC's recommendation. Davis said that Acadia will cooperate closely with the FDA as the agency completes its review.

However, the odds certainly appear to be stacked against Acadia at this point. An FDA rejection would seriously hurt the company's growth prospects. It already markets pimavanserin under the brand name Nuplazid for treating Parkinson's disease psychosis. The addition of a second indication would significantly expand the drug's addressable market.

Now what

The FDA set a PDUFA date of Aug. 4 for its approval decision on pimavanserin in treating Alzheimer's disease psychosis. Acadia's next steps will hinge on the outcome of the agency's review.