Investors May Want to Use ACADIA Weakness as Opportunity

Trader Fred DeMarco works on the floor of the New York Stock Exchange, Friday, Feb. 28, 2020. Global stock markets are falling further on spreading virus fears. (AP Photo/Richard Drew)

Don’t write off ACADIA Pharmaceuticals (ACAD) just yet.

In early March, the stock gapped from about $45.50 to $20.63.  All after the US FDA rejected its drug to treat hallucinations and delusions associated with dementia-related psychosis (DRP), as noted by the company.

“Despite prior agreements with the Division of Psychiatry regarding the pivotal Phase 3 HARMONY study design targeting a broad DRP patient population analyzed as a single group, the Division, in the CRL, cited a lack of statistical significance in some of the subgroups of dementia, and insufficient numbers of patients with certain less common dementia subtypes as lack of substantial evidence of effectiveness to support approval.”

The company is expected to meet with the US FDA this month to discuss the issues.  In the meantime, it looks like the pullback is a massive overreaction.  We have to consider the company is still seeing strong revenue growth, and has other catalysts nearing.  Its ACP-044 drug for chronic and acute pain will soon begin Phase 2 trials shortly.

With ACAD, we’d use weakness as an opportunity.