One thing is clear to Uli Hacksell, chief executive of San Diego’s Acadia Pharmaceuticals (NASDAQ: ACAD): the market just doesn’t understand his company.
Just a couple of weeks ago, the life sciences startup got a strong vote of confidence from Canada’s Biovail, which paid $30 million upfront as part of a deal to develop a promising drug now in clinical tests for psychosis related to Parkinson’s disease. The announcement boosted the price of Acadia’s stock, which closed yesterday at $1.69 a share on below-average volume.
Still, many investors remain skeptical. Wall Street has assigned Acadia a market value of about $65 million, just a tad north of its total cash on hand. To the market, Acadia’s development program has little worth. “We don’t think this is logical,” Hacksell told me in a recent telephone interview. “Acadia, in fact, has some great assets.”
How great? The answer is a little more than four months away. That’s when the company expects to see the results of a late-stage trial for pimavanserin, Acadia’s drug candidate for Parkinson’s disease-related psychosis.
There are no approved drugs for the treatment of psychosis in Parkinson’s disease patients and the market is potentially large. An estimated 1.5 million Americans have Parkinson’s disease, and as many as 40 percent of them experience hallucinations or delusions, although the severity varies.
The international trial of 298 patients, which compares the effects of pimavanserin to a placebo, is one of two late-stage trials needed for FDA approval. Hacksell expects the second human test to be completed in the third quarter of 2010. If successful, FDA approval could come in 2011.
Acadia has big plans for pimavanserin. It also is preparing to test the drug as a treatment for psychotic symptoms in Alzheimer’s disease patients – a second substantial disease market. About 4.5 million Americans have Alzheimer’s, and Acadia estimates 25 to 40 percent of them have psychotic symptoms and could benefit from the drug. This, too, is a wide-open opportunity. No medications have been approved to treat Alzheimer’s-related psychosis. Although many patients receive antipsychotic drugs, a 2006 federal study found the medications were risky to patients and had little benefit, as I reported for the Los Angeles Times. But if Acadia can win approval for treating Alzheimer’s, Hacksell said pimavanserin could achieve “blockbuster” sales of $1 billion a year.
That’s one of the opportunities that attracted Biovail. As Xconomy’s Luke Timmerman recently reported, the Canadian biotech agreed to pay as much as $395 in milestone payments related to successful completion of clinical trials, regulatory filings, and other milestones. Acadia also stands to receive sales royalties under the deal.
The deal greatly strengthened Acadia’s cash position. Revenue from the Biovail collaboration and other deals should allow Acadia to fund operations well into 2011. Acadia predicts it will end 2009 with $40 million in the bank, down from $62 million at the end of 2008.
But a chunk of that revenue stream depends on the successful development of pimavanserin, which is by no means assured. Mid-stage trials of the drug in Parkinson’s disease-related psychosis were too small to provide solid evidence that pimavanserin might work.
“I’m cautious on it,” said Alan Carr, a New York-based analyst with Needham & Co., who follows Acadia closely. The science behind the drug makes sense, and results of the mid-stage trial pointed in the right direction, he said. Still, developing drugs for neurological conditions is not easy. “It is difficult to say success is certain,” he said.
Acadia was founded in Vermont in 1993 as Receptor Technologies Inc., a company focused on using a proprietary technology to identify drug targets. In 1997, a group of Scandinavian investors renamed the company and moved it to San Diego to tap into the region’s expertise in biotechnology – and not, Hacksell insists, for the weather. The company still maintains a research subsidiary in Sweden, which is focused on chemistry.
From the beginning Acadia focused its drug development efforts on the central nervous system. It has several partnerships with Irvine, Calif.-based Allergan, including one aimed at developing a pain medication.
Acadia invented pimavanserin specifically to block a serotonin receptor on cells in the brain that appeared to have a role in schizophrenia. The drug showed positive results as a treatment for that psychological illness in a mid-stage trial, but Acadia lacked the funds to move that program forward and focused on Parkinson’s-related psychosis. Pimavanserin’s importance to Acadia grew last June when ACP-104, another drug the company was developing for schizophrenia, failed to show any benefit in a mid-stage trial. Acadia responded with some drastic belt-tightening, slashing its staff to about 60 from 140 to conserve cash.
Still, Hacksell insists Acadia is “not a one trick pony.” Besides its partnership with Allergan, the company recently signed an agreement with Meiji Seika of Japan to develop a new class of drugs for schizophrenia, he said. But none of those programs are as advanced as pimavenserin. “If the trial is a success, they are in a great position,” said analyst Carr. “Obviously, it is going to be pretty challenging otherwise.”
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