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ACADIA Stock: Deep Discount or Trap for Investors? Analysts Weigh In
Stock Analysis & Ideas

ACADIA Stock: Deep Discount or Trap for Investors? Analysts Weigh In

Investing in biotechs can be a risky business. Success hinges mostly on two criteria; promising data from clinical trials or regulatory approval. Get either of these wrong and the push back from the Street can be brutal.

Case in point: ACADIA Pharmaceuticals (ACAD) shares are down 33% following a negative decision made last Friday by the FDA’s Psychopharmacologic Drugs Advisory Committee (PDAC). The panel voted 9-3 against the approval of Nuplazid (pimavanserin) as a therapy for hallucinations and delusions associated with Alzheimer’s disease (ADP).

While the FDA is not required to follow the panel’s decision, in the majority of cases, its own decision usually reflects the one made by the committee.  

Based on the briefing docs – which highlighted limited duration, not enough clinical significance, and issues relating to the design of the trial – and the FDA’s sole focus on efficacy rather than the overall benefit/risk, J.P. Morgan’s Cory Kasimov anticipated an “uphill battle.”

“The ultimate outcome isn’t overly surprising,” the analyst went on to say, before adding, “At this point, we suspect the only chance for Nuplazid in ADP is another trial, which the company has been reluctant to commit to (TBD if that changes).”

Kasimov believes investor focus will now turn to the anticipated mid-year submission of the NDA (new drug application) of trofinetide for the treatment of Rett syndrome. “However,” the 5-star analyst summed up, “with little else expected this year, we suspect it will be difficult for ACAD to outperform our broader coverage universe.”

Accordingly, the analyst downgraded his rating for ACAD from Overweight (i.e., Buy) to Neutral, and lowered his price target from $34 to $19. However, following Tuesday’s meltdown, the new target implies ~46% upside from current levels. (To watch Kasimov’s track record, click here)

So, that’s J.P. Morgan’s view. JMP analyst Jason Butler, on the other hand, remains upbeat on the general outlook for ACAD.

“As expected, the stock is under pressure this morning and at this valuation we view the stock as attractive based on the approved PDP indication alone and our confidence in continued growth,” Butler explained.

Unlike Kasimov, Butler sticks with an Outperform (i.e., Buy) rating although his price target is also reduced from $35 to $23. Nevertheless, should the target be met, investors will be sitting on returns of 76% in a year’s time. (To watch Butler’s track record, click here)

Overall, ACAD gets a Moderate Buy from the analyst consensus. The stock has 16 recent reviews, breaking down to 7 Buys, 8 Holds, and 1 Sell. The shares are selling for $13, and the average price target of $24 indicates a potential upside of ~84% over the next 12 months. (See ACAD stock forecast on TipRanks)

To find good ideas for biotech stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

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.

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