On Tuesday, Canaccord Genuity adjusted its price target for Acadia Pharmaceuticals (NASDAQ:ACAD), reducing it to $33.00 from the previous $40.00, while still recommending a Buy rating on the stock. The adjustment follows the announcement that Acadia's ADVANCE-2 Phase 3 trial for pimavanserin, aimed at treating negative symptoms of schizophrenia (NSS), failed to meet its primary endpoint.
The company made this disclosure after the market closed on Monday, and it is anticipated that the stock may face downward pressure today. The trial's outcome was particularly significant as there are currently no approved products for NSS, and expectations for pimavanserin's success in this area were not high.
Acadia is expected to conduct further analysis of the results, but the possibility that the company might not file a supplemental new drug application for this indication has been suggested.
Despite the trial's setback, Canaccord Genuity maintains its positive outlook on Acadia due to two main factors. First, the firm values the company's current valuation, especially considering it has two approved products, Daybue for Rett syndrome and Nuplazid for Parkinson's disease psychosis, which are already generating significant sales.
Second, the firm sees potential in Acadia's pipeline, which includes ACP-204 for Alzheimer's disease psychosis, ACP-101 for hyperphagia in Prader-Willi syndrome, and NNZ-2591 from the Neuren transaction, assets that are believed to be undervalued at current stock levels.
The analyst emphasized the importance of Acadia's execution on Daybue and Nuplazid, acknowledging that there is some investor skepticism regarding Daybue's long-term market potential due to its side-effect profile.
Nonetheless, Canaccord Genuity remains optimistic about Daybue's prospects, given it is the only approved treatment for Rett syndrome at present. The firm's continued endorsement of the Buy rating is rooted in these considerations, despite the near-term challenges the company may face following the NSS trial results.
InvestingPro Insights
In the wake of Canaccord Genuity's revised price target for Acadia Pharmaceuticals, a closer look at the company's financials through InvestingPro data provides a broader perspective. Acadia's market capitalization stands at $3.25 billion, and while the company is trading at a high Price / Book multiple of 9.21, this reflects investor confidence in its asset value despite recent setbacks. The company's revenue growth has been impressive, with a 40.45% increase over the last twelve months as of Q1 2023, and an even more remarkable quarterly growth rate of 69.27% in Q1 2023.
One of the InvestingPro Tips highlights that Acadia holds more cash than debt on its balance sheet, which is a positive sign for financial stability. Additionally, analysts predict the company will be profitable this year, which could be a turnaround from its current non-profitable status over the last twelve months. For readers interested in more in-depth analysis, there are 7 additional tips listed on InvestingPro to help with investment decisions. Remember to use coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Considering Acadia's strong revenue growth and its potential return to profitability, the company's financial health appears to be solid despite the clinical trial hiccup. These insights could be particularly relevant for investors weighing the near-term challenges against the company's overall financial trajectory and market potential.
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