This Stock Should Get Better in the Long Run
Terry is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
ACADIA Pharmaceuticals (NASDAQ: ACAD) has been on a solid run since early last year and it has continued to climb to new highs this year as well. The move that started it all happened in late 2012. On Nov. 27, 2012, ACADIA had announced that their drug, Pimavanserin, had met both primary and secondary endpoints. This trial completed was the pivotal phase 3 trial for Parkinson disease Psychosis.
So, as if investors didn't have enough to be happy about, news got even better in 2013. On April 11, ACADIA announced that it no longer needed to run another phase 3 trial for Pimavanserin. This was very good news as the company would have had to wait longer to file for approval, and another trial would have possibly taken another two years to conduct.
The FDA had stated that the positive pivotal phase 3 study 0-20, plus the other safety studies would be adequate enough for approval. While that remains as good news, the downside is that ACADIA is not planning to file its NDA for Pimavanserin until late 2014. The good part about Pimavanserin is that it can also be used to target against Alzheimers disease psychosis.
The company currently boasts a market cap of $948.2 million, and trades way above its 52-week low of $1.30. Just in 2013 alone, ACADIA is trading up 165% year to date. That doesn't mean investors shouldn't consider investing in the company. Long-term there is more opportunity in this name as the company still has a huge pipeline of other drug candidates.
Results that started it all
The phase 3 trial was to test safety and efficacy endpoints of patients with Parkinsons. In terms of safety, there were only a few patients who experienced moderate to mild adverse events. In the worse case scenario, 11.7% of patients ended up with Urinary Tract Infection as a side effect of Pimavanserin. The key lesson here is that patients needed this drug, and the study was safe. The patients didn't mind the side effects, so much that 90% of them wanted to roll over to the next planned phase 3 study.
The efficacy seen was amazing, and that's why ACADIA had gone up so much over the past few months. The efficacy scale used to measure Parkinson's disease is called SAPS-PD, a 9 item scale. The Pimavanserin arm achieved a 5.79 point improvement at day 43, compared to placebo only achieving a 2.73 point difference. These results showed that ACADIA achieved its primary endpoint by achieving a significant number over the placebo.
A drug like this, with significant outcome, would be a huge boost to Parkinson's disease patients. Why an investor should take a look at this company is because the market is huge for this indication. The market for Parkinson's is expected to grow according to the National Parkinson's Foundation.
There is a huge opportunity with this name as there are about one million patients in the United states with Parkinson's disease. Worldwide, it is an even bigger number with about six million people with Parkinson's. I think with this in mind, ACADIA is a good investment for any long-term buyer.
I think that ACADIA's drug could be huge, and there are two big pharma companies that may want to add this drug to their pipeline. Two of the companies that would consider buying out ACADIA are Pfizer (NYSE: PFE) and Merck (NYSE: MRK). I think both these companies need a new additional capital after suffering huge blows last year.
Pfizer is having a lot of problems with the pipeline. Pfizer has a market cap of $236.7 billion, and the company has had sales of $57.6 billion over the last 12 months. Despite that, Pfizer needs a new blockbuster drug to keep its revenue in good shape. I think that Pfizer acquiring ACADIA Pharmaceuticals would be a good fit.
One thing that I believe will push Pfizer to seek acquisitions is that the company is losing its patent on Lipitor. Lipitor is used to treat patients with Cholesterol problems. The patent for Lipitor expired on Nov. 30, 2012, and now, it seems that the company will need to find a new drug to bring in huge income once again. Lipitor, at its peak in 2010, earned Pfizer $10.7 billion. Pimavanserin being acquired, and being sold to millions of Parkinson's patients, could fill that gap.
Merck has had some problems as well over the past few years. Merck, like Pfizer, is also facing intense competition from generic drug makers with its top selling drug losing its patent. Merck's drug, that went off patent in August last year, is called Singulair. Singulair is used to treat patients with asthma and allergies. So, what did the loss of Singular mean for the company? Well, Merck reported that in the last quarter of 2012, Singulair had lost 67% of its revenue, only making $480 million in sales.
Merck also has been facing substantial problems with the FDA in getting pipeline drugs approved. In June last year, Merck had been seeking FDA approval for a drug that is used to treats patients with soft tissue sarcoma, known as Ridaforolimus. The FDA rejected the drug claiming that the efficacy was not enough to counter the severe side effects of the drug. For these reasons, I think that Merck needs to add something to its pipeline after its most recent failures to keep the company going. If ACADIA is acquired by Merck, it could be a huge boost in revenue.
ACADIA has released some amazing results for Parkinson's disease psychosis. With the huge amount of patients that can be treated with Pimavanserin, I don't doubt that some big pharma company will put a bid for ACADIA. Not only will they get Pimavanserin, but they will also obtain a pipeline of other drugs. As mentioned before, Pimavanserin can be expanded to Alzheimer's patients as well. This biotech is poised to rise higher in the coming months,and I would say that ACADIA is still a good long-term buy for investors who are patient enough to see its full potential.
Can Merck beat the patent cliff?
This titan of the pharmaceutical industry stumbled into 2013 and continues to battle patent expirations and pipeline problems. Is Merck still a solid dividend play, or should investors be looking elsewhere? In a new premium research report on Merck, The Fool tackles all of the company's moving parts, its major market opportunities, and reasons to both buy and sell. To find out more click here to claim your copy today.
Terry Chrisomalis has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!