ACADIA Seeks Renewal After Regulatory Setback

ACADIA Seeks Renewal After Regulatory Setback

Price $17.69                      Recent Add                       October 14, 2021

  • 2.9% is the best yield in the gold royalty sector.

• NUPLAZID is slated to be approved for uses outside of Parkinson-related psychosis.
• Drug pipeline of traditionally under-addressed CNS disorders, including those without an existing treatment.
• New patients have increased compared to pre-pandemic numbers despite long-term care occupancy and doctors’ visits still down since before the pandemic.

Investment Thesis

Acadia Pharmaceuticals (ACAD) is a biopharma company focused on developing and commercializing traditionally under-addressed central nervous system (CNS) disorders.

While their product scope is currently limited, they have the potential to hold 3 novel – and exclusive – treatments for various CNS disorders well into the 2030s. Additionally, ACAD has several drugs outside of NUPLAZID in various stages of development. For this reason, we believe ACAD is a good – albeit high-risk – choice for capital appreciation.

Products

Currently, the only marketed product ACAD has is NUPLAZID for Parkinson’s Disease-related psychosis. Less than 50% of diagnosed patients experiencing psychosis undergo treatment, and NUPLAZID is the only approved treatment option specifically for the condition. NUPLAZID fills a space between traditional antipsychotics with many adverse effects and damage control treatments after the fact.

The drug has a promising future with multiple trials to expand its uses to depression, schizophrenia, dementia, and other treatment-resistant mental conditions.

Pipeline

NUPLAZID (named pimavanserin) is also undergoing late-stage trials for treatment involving dementia and schizophrenia. The dementia-related psychosis treatment would be a massive success for both ACAD and those living with dementia. There are currently few treatments for dementia-related psychosis despite as many as 75% of dementia patients experiencing it at one point or another. Despite its previous delays, ACAD does expect approval within the 5-year investment horizon.

The patent on NUPLAZID is not set to expire until the 2030s, giving ACAD much time to undergo further FDA approvals and trials. The schizophrenia trial is an important one, with over 700,000 patients in the US with treatment-resistant symptoms – currently, there is no FDA approved drug for treatment-resistant schizophrenia.

Trofindetide was acquired as an “orphan” drug and is undergoing phase 3 trials for Rett Syndrome. Unfortunately, there are no approved Rett Syndrome treatments in the United States today, despite its debilitating effects.

Q2 Corporate Presentation

Additionally, ACAD has early-stage trials for candidates to treat inflammatory pain from surgery, osteoarthritis, and other muscular degenerative conditions. Finally, there is a need in the medical community for a more effective and safer non-opioid painkiller. Opioids, while extremely effective, carry a significant risk of addiction. Roughly 25% of osteoarthritis patients have prescribed opioids, leaving a large addressable market for an effective treatment for those that only opioids help.

Risk

ACAD faces the risks every other pharma company faces; research and development costs and trial expenses that do not pan out. In addition, in the past, ACAD has experienced regulatory setbacks concerning NUPLAZID, where the FDA identified “deficiencies” in its application.

ACAD currently operates at a net loss. We believe that NUPLAZID’s results are promising enough to warrant an investment; it is always possible to reach sales high enough to generate profits. Should this be the case, ACAD could experience significant financial hardship.

ACAD currently holds the patent for NUPLAZID into the 2030s. Still, it is important to note the timeline because it is the only drug ACAD markets and one of the only drugs it is heavily researching. Therefore, we believe that when NUPLAZID reaches the territory where biosimilars and generics will be released, they will need to have other drugs in their portfolio.

Metrics

ACAD had a net sales increase of 5% year over year in Q2 2021. With COVID-19 still heavy on people’s minds, there has been a sustained decrease (~-15% since 4Q19) in doctors’ visits. However, existing patients maintained a high continuation rate, and new patient starts have increased to levels seen before the pandemic. Therefore, ACAD believes as things return to normalcy, the number of patients taking the drug will steeply increase.

Equally, since NUPLAZID is for CNS disorders that usually affect older individuals, the increase in long-term care occupancy is a good sign for product growth. Currently, long-term care facility occupancy is at 71%, up from the pandemic low of 68%. (pre-pandemic occupancy was 82%). In spite of this, NUPLAZID has seen an 8% growth in long-term care prescriptions. 

ACADIA Pharma (ACAD)

FY2021

E2022

E2023

Price-to-Sales

5.5

4.7

3.7

Revenue ($ Millions)

490.2

582.1

738.4

Estimated Next 12 Months

Market Cap ($ Billions)

Price-to-Sales

Price-to-Earnings

ACADIA Pharma (ACAD)

2.7

4.8

Neg

Biogen (BIIB)

42.6

3.9

13.91

Regeneron Pharma (REGN)

58.8

4.4

11.14

Gilead Sciences (GILD)

85.3

3.5

9.91

Neurocrine Bioscience (NBIX)

9.9

7.2

29.40

Eli Lilly (LLY)

223.8

8.1

28.05

SAGE Therapeutics (SAGE)

2.6

37.4

Neg