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Actionable news in ACAD: ACADIA Pharmaceuticals Inc.,

Where Acadia Will Go After FDA Approval

Summary

After the bell Friday, the FDA announced that they will approve ACADIA Pharmaceuticals' first commercialized compound Nuplazid which has the potential to be a blockbuster.

The approval came with a black-box warning, which was expected. This will be the first treatment for psychosis associated with Parkinson's disease and is in trials for other indications.

The stock is up ~65% since it was added to the Biotech Forum portfolio in February. FDA approval could goose these returns further and the company could make an attractive buyout target.

Even the stock has rallied strongly, approval de-risks the pipeline and further upside should lay ahead. Original analysis now updated and provided below.

The markets continue to slide downward as equities continue to be locked in a "profit recession" with year-over-year earnings within the S&P 500 falling for the fourth straight quarter and at the fastest pace since 2009. Anemic global demand and a domestic economy that was barely over stall speed in Q1 is leading to myriad high profile quarterly misses including at Apple (NASDAQ:AAPL) that posted its first year-over-year quarterly revenue decline in 13 years.

Biotech gave back part of its recent gains last week even as the majority of large cap concerns in the industry like AbbVie (NYSE:ABBV), Bristol-Myers Squibb (NYSE:BMY) and Amgen (NASDAQ:AMGN) posted better than expected results and there seems to be an uptick in M&A activity with mid-cap Medivation (NASDAQ:MDVN) seeming to trigger a bidding war that may have pushed its final price tag past the $10 billion mark.

One stock bucking the trend is ACADIA Pharmaceuticals (NASDAQ:ACAD), whose shares are up more than 65% since being included in the Biotech Forum portfolio in mid-February. After the bell on Friday, the FDA announced that it will approve Nuplazid. This is the company's first commercialized product and the first treatment approved specifically for the psychosis associated with Parkinson's Disease. This disease claims some 50,000 new victims a year in the United States, which has a total Parkinson's population of some one million individuals. Some 40% of this population suffers from this psychosis.

The drug was approved with a so-called black-box warning for an increased risk of death associated with its use in older people. This is pretty much the same risk outlined for other off-label compounds that are being used to alleviate this condition. None of them have the same effectiveness or safety as Nuplazid. Analysts don't believe this warning will impact sales to any great degree. Nuplazid will be priced around $13,500 annually and should rake in $1 billion a...


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