Acadia's FDA Boost Is Just The Beginning, Piper Jaffray Says In Upgrade

The Food and Drug Administration assigned ACADIA Pharmaceuticals Inc. ACAD’s Nuplazid a positive safety profile Thursday, sending shares soaring 27 percent. The run is just getting started, according to Piper Jaffray. 

The Analyst 

Piper Jaffray analyst Danielle Brill upgraded Acadia from Neutral to Overweight and increased the price target from $16 to $25.

The Thesis

Brill said she expected the FDA’s conclusion, but considered the announcement notable. (See her track record here.) 

“Now that the FDA has publicly supported Nuplazid's safety and efficacy profile for PDP, we expect Rx growth to accelerate at a much faster pace than the small signals we've seen over the past several weeks,” the analyst said. 

Noting a “restored growth trajectory,” Brill said she anticipates a guidance beat with 2018 sales of $235 million.

Piper Jaffray raised its peak Nuplazid sales estimates from $600 million to $750 million and said the stock reflects only the renewed Parkinson’s disease psychosis  opportunity and not the prospects for major depressive disorder.

“Now that the safety overhang is officially cleared, we think risk-reward ahead of MDD data in Q4 is too compelling to stay on the sidelines,” Brill said, noting low downside risk for the stock and more than 30-percent upside risk. 

Following a Phase 3 trial in dementia-related psychosis, Acadia could cash in on another $1-billion opportunity, the analyst said. The adjunct schizophrenia trial could contribute additional upside, although Piper Jaffray has low expectations, she said. 

Price Action

Acadia shares were up more than 3 percent at $19.69 at the time of publication Friday.

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