ACADIA Pharmaceuticals Inc

ACADIA Pharmaceuticals Inc (NASDAQ-GS: ACAD) is a US-listed biopharmaceutical Company. The Company develops and commercialize therapy for hallucinations and delusions related to Parkinson’s disease psychosis.

Investment Highlights - ACADIA Pharmaceuticals Inc – Expensive at USD 20.64

• The Company needs to manage its operating expenses unless it results in further deterioration in financial performance in the coming years.
• In the last nine months, the Company delivered a negative return of ~63.79% and delivered lower returns compared to the benchmark Index.
• As per valuation metrics, the EV/Sales multiple of ACADIA Pharmaceuticals Inc is currently higher as compared to the corresponding multiple of the Biotechnology & Medical Research industry, reflecting overstretched valuations.
• From the technical standpoint, shares were trading below the support level of 20-day simple moving average prices (GBX 25.98), which reflects a downtrend in the stock and can move down further.

Key Risks

• Any change in regulations and government policies could affect the overall business of the Company.
• The covid-19 outbreak has resulted in disruptions in clinical trials which will have a negative impact on the Company’s performance.

Recent News

On 5 April 2021, ACADIA Pharmaceuticals announced that it has received a CRL (Complete Response Letter) from FDA (U.S. Food and Drug Administration) related to sNDA (supplemental New Drug Application) for NUPLAZID®  for treatment of dementia-related psychosis. The issued CRL indicates that application cannot be approved in present form.

Financial Highlights – FY2020 (31 December 2020) (released on 24 February 2021)

(Source: Annual Report, Company Website) 

• For the financial year 2020, driven by higher product sales for the period, the total revenue increased by 30% to $441,755.
• Due to higher operating expenses for the period, the Company reported a decline in profitability margins. The Company has reported an increase in operating loss and net loss in the financial year 2020.
• The cash balance as on 31 December 2020 increased to $326,028 (31 December 2019: $189,680).

One Year Share Price Chart

(Source: Refinitiv, Thomson Reuters)

Conclusion

The Company has shown a decline in financial performance in the financial year 2020. Despite the higher revenue, the profitability margins declined significantly. The Company needs to manage its operating expenses more effectively. ACADIA Pharmaceuticals has a strong liquidity position with a well-positioned balance sheet. In financial year 2021, the Company expects net sales from NUPLAZID to be in between $510 million to $550 million. The Company’s operations were impacted by the outbreak of the covid-19 pandemic and have been focusing on strengthening its balance sheet and return with capital discipline and reducing its costs. The stock made a 52-week low and high of USD 20.36 and USD 58.72, respectively.

Based on the factors highlighted above, we believe the stock of ACADIA Pharmaceuticals Inc is “Expensive” at the closing price of USD 20.64 (as on 6 April 2021), with support from few catalysts needs to be evaluated at a later stage such as strategic actions taken to expand pipeline.

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