On Wednesday, ACADIA Pharmaceuticals (ACAD) delivered Q2’s financials. Lower-than-expected expenses resulted in a beat to the bottom-line, with EPS of -$0.27 coming in ahead of the estimates by $0.03. However, the company missed on the top-line by $9.72 million, as revenue increased by 4.7% year-over-year to reach $115.22 million.
While normally the results would be investors’ primary focus, in ACADIA’s case, as J.P. Morgan’s Cory Kasimov notes, the “story clearly comes down to the regulatory path for Nuplazid in DRP.”
Recall, earlier in the year, ACADIA received a CRL (complete response letter) from the FDA after the regulatory body notified the company it had found deficiencies in the supplemental New Drug Application (sNDA) for its potential treatment for patients with dementia-related psychosis (DRP).
Following a Type A meeting with the FDA, along with presenting the quarter’s earnings, ACADIA gave an update on the path forward for the drug. Thing is, Kasimov was left “confused” by the update.
“On the one hand,” the 5-star analyst said, “The FDA advised the company that the best path forward is to conduct an additional clinical study in each individual subgroup for which they want to seek approval.” This is in-line with Kasimov’s expectations following the CRL. On the other hand, the FDA also indicated it had not closed the door on a follow-up meeting to consider a possible resubmission without the need for extra studies after ACAD presented additional analyses in the meeting.
“These two paths are clearly at odds with one another,” says Kasimov. “While still surprised by the initial CRL, we’re also skeptical that the FDA will now acquiesce and accommodate a faster path to market.” However, the analyst goes on to add the “optionality may offer a favorable risk/reward at current levels…”
Additionally, other catalysts such as the Phase 3 LAVENDER results for trofinetide in Rett Syndrome in 4Q21 and top-line results from the Ph2 study of ACP-044 in postoperative pain, also expected by the fourth quarter, could help shape sentiment in the months ahead.
All in all, there’s no change to Kasimov’s rating, which stays an Overweight (i.e., Buy) although the price target is reduced from $42 to $34. Nevertheless, there’s still upside potential of 70% from current levels. (To watch Kasimov’s track record, click here)
Going by the Street’s average target, shares will gain a decent 34% over the next 12 months. Based on 6 Buys vs. 7 Holds, this stock currently has a Moderate Buy consensus rating. (See ACADIA stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
