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A Critical Couple of Months for Acadia Pharmaceuticals

By Todd Campbell – Sep 22, 2016 at 4:40PM

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The launch of its Parkinson's disease psychosis drug is in its early stages, and key data from an Alzheimer's disease trial is on tap.

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ACADIA Pharmaceuticals' (ACAD 2.74%) investors have a lot of news to look forward to over the coming months. The company recently launched Nuplazid, a Parkinson's disease psychosis therapy, and Q3 results should provide insight into how quickly it's gaining traction with doctors. ACADIA Pharmaceuticals also plans to release data from a mid-stage trial evaluating Nuplazid in Alzeimer's disease psychosis soon, and if that trial is a success, it could significantly expand Nuplazid's addressable target market.

Is ACADIA Pharmaceuticals about to deliver investors a couple of big wins? Let's take a closer look.

Why Nuplazid matters

Parkinson's disease psychosis, or PDP, affects about 40% of the 1 million patients who suffer from Parkinson's disease, and despite its PDP's prevalence, doctors have found few ways to successfully treat it. Historically, doctors use anti-psychotic medications off-label; however, those medications can interfere with commonly used Parkinson's disease drugs, and they're often contraindicated for use in elderly patients. 

While anti-psychotics can successfully tamp down hallucinations and delusions associated with PDP, they do so by blocking dopamine receptors. That's a big problem for patients, because the motor symptoms of Parkinson's disease are often treated with Levodopa, which boosts dopamine activity.

Doctors can try control PDP by reducing Levodopa doses, but that can lead to Parkinson's progressing more quickly and patients moving into institutional care sooner than they might have otherwise.

Clearly, PDP treatment options are far from ideal, and because of that, Nuplazid could gain widespread adoption. Unlike anti-psychotics, Nuplazid doesn't target dopamine receptors, and in trials, Nuplazid successfully reduced the number of psychotic events experienced by patients.

Losses for now

Rather than license away its rights to Duplazid, ACADIA Pharmaceuticals has decided to go it alone. The company is knee-deep in an expensive product launch, and negotiations with payers could mean it takes a while before this company turns a profit. 

Operating costs were $72 million in Q2, and since most Duplazid prescriptions during its first month on the market were filled with free samples, Nuplazid revenue totaled only $97,000 in the quarter. 

Management has set a price of $23,500 per year for the drug, but it can take between three and nine months for Medicare Part D and private insurers to decide on reimbursement. The sooner ACADIA Pharmaceuticals can cut deals with payers, the sooner it can begin generating meaningful enough revenue to get itself into the black. 

Targeting Alzheimer's disease

ACADIA Pharmaceuticals is scheduled to update investors on Nuplazid's potential to treat patients suffering from Alzheimer's disease psychosis soon, and if results are solid, it could significantly expand Nuplazid's addressable target market. An estimated 25% to 50% of the 5 million Americans suffering from Alzheimer's disease suffer hallucinations and delusions. 

The company's enrolled roughly 200 people in its phase 2 Alzheimer's disease psychosis trial, and the trial's endpoints include measuring psychosis, agitation/aggression, and sleep/nighttime behavior. ACADIA Pharmaceuticals plans to release top-line results from the trial before the end of 2016.

Looking ahead

Nuplazid is the only FDA-approved therapy for PDP, and if it's eventually approved for use in Alzheimer's disease, it will be the only FDA-approved therapy for psychosis in that patient population, too.

A monopoly position in these two big indications means Nuplazid peak sales potential is big, but there's not a lot of evidence (yet) that Nuplazid is catching on with doctors, or that negotiations with payers are bearing fruit. Further, there's no guarantee that the company's Alzheimer's disease trial will pan out. 

Overall, ACADIA Pharmaceuticals' success is highly dependent on Nuplazid, and while a stock offering earlier this year gives management some financial wiggle room, there's still a lot of risk associated with owning this stock. For that reason, investors should be watching this company closely over the coming months to see if Nuplazid prescriptions are ramping, and whether or not there's a potential for its use in Alzheimer's disease patients.

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. Like this article? Follow him on Twitter where he goes by the handle @ebcapital to see more articles like this.

The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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