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Selling The News In Acadia Pharmaceuticals

Selling The News In Acadia Pharmaceuticals

Buy the rumor, sell the news is an adage many traders vouch by. With the market operating on a forward-looking basis, any imminent event or rumor could send traders piling into the stock only to liquidate when the news is released or the rumor is confirmed. By doing so, they make a neat profit.

ACADIA Pharmaceuticals Inc. (NASDAQ: ACAD) spiked sharply in after-hours Wednesday. After ending the regular session at $39.14 on Wednesday, the stock rose 6.9 percent within 10 minutes of the market close before the buying interest moderated.

News Behind The Pop

The company announced the initiation of a phase III study, dubbed HARMONY, to assess pimavanserin in various dementia-related psychosis. Additionally, the FDA has granted the Breakthrough Therapy Designation to pimavanserin for treating dementia-related psychosis.

See also: Attention Biotech Investors, Here's Your PDUFA Primer For October

Cynical Feuerstein

Following the announcement, STATNews' Adam Feuerstein tweeted, "Do we need any more proof that Breakthrough Therapy Designation has become a farce? Not after today's $ACAD grant."

He followed up with another tweet, where he commended the company for the Breakthrough Designation.

A third tweet mentioned the shutting down of the phase II study. Feuerstein said the news remained buried at the bottom of the press release.

Strength Continues Into Pre-Market Session

In Thursday's pre-market trading, the stock hit a high of $42.09, with the session's low at $40.50 reached just ahead of the market open. The pre-market high marked the highest level since June 2016, when it peaked at $42.49.

After the pre-market high, the stock moved steadily lower, with the sell-off extending into the regular session. Since late morning trading, however, the stock has been on a consolidation move, locked in a range.

The intra-day high of the stock in the regular session was $41.20, which is a new high for the year and just above the previous high of $40.83 set on Feb. 23.

The decline despite the twin positive news could be traced back to the huge run-up in the stock since it hit a low of $25.06 on June 8. From the June 8 low, the stock has advanced about 54 percent ahead of today's session, with the rally in anticipation of positive tidings on its pimavarserin.

Traders apparently are selling the stock on the news after bidding it up over the past four months in anticipation of positive news.

Commenting on the news flow, Leerink analyst Paul Matteis said the receipt of BTD could create excitement for the stock ahead of the CTAD meeting. Given the discontinuation of the AD agitation study, Matteis said the next major dementia readout for pimavanserin may not occur until 2020.

At last check, shares of Acadia were down 3 percent at $37.15.

Joel Elconin contributed to the article

Related Link: As Celgene Outperforms, Are Challenges To Its Pipeline Being Overlooked?


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