Acadia Pharmaceuticals Inc. (ACAD) surged over $40 for the first time since last November on a report that AstraZeneca plc (ADR) (AZN) may be interested in acquiring the company.
As explained in an article late last year, I believe that Acadia’s recently approved drug, Nuplazid, to treat Parkinson’s disease psychosis, a worldwide patient population that could very well exceed 1 million, has the potential to achieve peak worldwide sales upwards of $10 billion.
It has all the benefits of competing anti-psychotics without the unwanted side effects, and it is being tested to treat larger indications like Alzheimer’s disease, psychosis and Schizophrenia.
Because of its efficacy and safety profile, it has great off-label potential to treat patients who lack options, along with incredible mergers and acquisitions appeal within the space.
Big Pharma Could Battle for ACAD Stock
I have a feeling that Acadia Pharmaceuticals’ management knows it has a gem with Nuplazid. Not only is it the first-ever approved drug to treat PDP, with a safety profile that is second to none, but the anti-psychotic market might have the highest off-label usage of any other treatment arena.
With Nuplazid’s safety, efficacy, Breakthrough Therapy designation and Fast Track FDA accolades, management likely knows that it has some massive selling points to pharmacies, physicians and hospitals.
As a result, it might be the most attractive biotech to big pharma in the market right now.
AstraZeneca makes a lot of sense, probably why the company was mentioned in the Daily Mail’s report. It owned one of the better selling anti-psychotic drugs of the last decade, in Seroquel, a drug that reached sales of nearly $6 billion back in 2011 before it lost patent protection. Therefore, AZN knows its way around the market, and has the infrastructure to launch Nuplazid with few hiccups.
However, AstraZeneca is not alone in having experience in this space. The Japanese-based company Otsuka Holdings Co., Ltd. (OTSKF) and Bristol-Myers Squibb Co (BMY) are more than qualified to launch Nuplazid, co-developing and marketing the successful drug Abilify, whose sales peaked at nearly $6.5 billion in 2013. However, Abilify, like Seroquel, has faced generic competition amid patent expiration.
That said, AstraZeneca, Otsuka and Bristol-Myers are the obvious choices, but if big pharma sees Nuplazid replicating or even surpassing the success of Seroquel and Abilify, then the list of potential suitors could span to any company with the cash to afford ACAD. This includes Pfizer Inc. (PFE), a company that just recently bought Anacor Pharmaceuticals Inc (ANAC) for $4.5 billion and is desperate for growth.
That, or Biogen Inc (BIIB) could take a swing at Acadia. Biogen wants to become a market leader outside of MS and it has clinical programs in the treatment of Alzheimer’s and Parkinson’s disease. By acquiring Acadia, Biogen could get a head start in developing the connection with physicians and hospitals in this arena, while most likely giving its stock a much-needed boost.
Furthermore, AbbVie Inc (ABBV) might be interested in ACAD stock. While it may be tricky following the acquisition of Pharmacyclics, AbbVie already has the sales team and marketing infrastructure in place due to Duopa. Finally, Gilead Sciences, Inc. (GILD) is a legitimate possibility with a boatload of cash and a desperate need to find its next big growth driver.
What Stops the Acadia Acquisition?
All things considered, I just named seven companies who can not only afford Acadia Pharmaceuticals, but also legitimately need what Nuplazid can offer. The big question is whether big pharma values ACAD stock the same way that Acadia Pharmaceuticals management does. I think that’s the big disconnect right now.
Acadia Pharmaceuticals has a market capitalization over $5 billion, and most likely believes that Nuplazid can achieve the same success, or greater than Seroquel or Abilify. If so, it is worth far more than $5, even $10 billion, and it is hard to know whether big pharma will realize that value right now.
Regardless, if big pharma does not want to pay now, ACAD is prepared to market Nuplazid alone, and it will succeed. So ultimately, whether it is now or two years from now, big pharma will pay up, and ACAD stock owners will be rewarded.
It’s just a question of when, not if.
As of this writing, Brian Nichols owns shares of Acadia Pharmaceuticals.
