Why Piper Jaffray Is Upgrading Acadia Pharmaceuticals After A 25% Decline

• ACADIA Pharmaceuticals Inc. ACAD shares are down by more than 25 percent since July 27 as compared to a 10.5 percent decline in the NBI.
• Piper Jaffray analyst Charles C. Duncan upgraded the company from Neutral to Overweight, with a price target of $48.
• Reduced execution risk following the company’s collaboration with BASF Pharma means the stock is undervalued, Duncan said.

Analyst Charles Duncan attributed the recent decline in ACADIA Pharmaceuticals’ shares to market volatility and increased perceived uncertainty following updates on the company’s Q2 earnings call.

Uncertainty related to additional funding for commercialization of NUPLAZID, regulatory reaction to long-term safety data and delayed enrollment of the ADP trial are the main risks associated with ACADIA Pharmaceuticals.

While the PDP NDA filing is on track for this year and recent long-term safety data from the -015 study are consistent with an “advantage over current anti-psychotics often used off-label in this population,” the reaction of regulatory bodies to the safety data remains uncertain, Duncan wrote.

ACADIA Pharmaceuticals’ recent manufacturing collaboration with BASF Pharma has reduced execution risk. As per the terms of the agreement, BASF will manufacture and supply the active ingredient of NUPLAZID for commercial use, the Piper Jaffray report mentioned.

Duncan believes the delays and risks, when viewed in context of the larger potential for the NUPLAZID program, are not significant. “We believe shares are undervalued and this represents a good entry point.”