Why Merrill Lynch Sees Acadia Rising Another 60%

By Chris Lange Updated Jan 13, 11:27AM EST · Published Mar 28, 11:35AM EDT

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Why Merrill Lynch Sees Acadia Rising Another 60% — © Thinkstock

Shares of Acadia Pharmaceuticals Inc. (NASDAQ: ACAD) surged early on Monday morning. This company is under the spotlight by the U.S. Food and Drug Administration’s Psychopharmacologic Drugs Advisory Committee, which is set to review data included in Acadia’s New Drug Application (NDA) for Nuplazid (pimavanserin) for the treatment of with Parkinson’s disease psychosis (PDP). Merrill Lynch gave its opinion as well and why this company could rise another 60%.

Although the Advisory Committee Meeting is scheduled for March 29, shares rose ahead of the meeting. Ultimately this committee will decide whether Nuplazid would be approved to treat psychosis in Parkinson’s patients.

Should Nuplazid gain the committee’s approval, its sales could exceed $1 billion, according to some analysts.

Looking even further ahead, the Prescription Drug User Fee Act (PDUFA) action date for completion of the FDA review of the Nuplazid NDA is May 1. The FDA has granted the Nuplazid NDA Priority Review status and designated it for the treatment of psychosis associated with Parkinson’s disease as a Breakthrough Therapy.

Merrill Lynch speculated on the committee’s vote as well:

We expect a positive vote given 1) Nuplazid does not interfere with underlying PD meds and 2) No approved therapies in PDP. We expect clinical meaningfulness of data will be a key topic of discussion for panel.

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On Friday ahead of this meeting, FDA posted briefing documents that discuss the NDA for Nuplazid in PDP. The three draft voting questions focus on efficacy and safety, and whether benefits of Nuplazid outweigh risks of treatment.

While the FDA’s tone was not one of unequivocal support, Merrill Lynch believes awareness of undermet need will drive support. The firm views Nuplazid’s lack of interaction with drugs used to treat motor symptoms of PD as its key advantage versus off label use of antipsychotics to treat psychotic symptoms. Merrill Lynch believes Nuplazid’s safety profile will be discussed in detail and could result in a black-box warning. The brokerage firm’s physician discussions indicate this would not deter use, given that antipsychotics also carry black-box warnings. As a result Merrill Lynch reiterated a Buy rating with a $40 price objective for Acadia.

Shares of Acadia were last seen up over 20% at $24.51, with a consensus analyst price target of $44.80 and a 52-week trading range of $16.64 to $51.99.

About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.