Acadia Pharmaceuticals Rights Deal and Bullish Outlook Sends Shares Surging 16%. Here’s What to Expect.

In a stunning two-day rally, shares of Acadia Pharmaceuticals (US:ACAD) have seen a 16% surge following the announcement of the company’s acquisition of expanded commercial rights for the groundbreaking Rett syndrome drug, trofinetide. This growth was further fueled by upgraded projections for the fiscal year, painting a promising future for the company.

Management’s pre-announcement of the 2023 Daybue sales sent shockwaves through the market, projecting sales of $21-23 million, shattering the modest consensus of $2.3 million. Furthermore, their guidance for 2023 predicts a remarkable $45-55 million, compared to the humble consensus forecast of $7.3 million.

These developments coupled with Acadia’s acquisition of ex-North American rights to trofinetide and global rights to NNZ-2591 for Rett and Fragile X syndromes from Neuren Pharmaceuticals propelled the stock’s value upward.

Rett syndrome, a rare genetic disorder primarily affecting females, has found a beacon of hope in trofinetide. Marketed under the brand name Daybue, the drug has shown encouraging early results. Over 90% of the eligible patients converted from clinical trial, and its sales have been well distributed across high-volume institutions, community-based centers, and Centers of Excellence.

Sales Get Necessity Boost

The management attributes the above-consensus sales to accelerated adoption driven by disease education and medical necessity. They reported an encouraging mix of patient demographics with young female patients representing the primary beneficiaries.

Acadia’s acquisition of additional rights to trofinetide, together with the acquisition of global rights to NNZ-2591, signifies strategic expansion. This move provides the company with robust growth opportunities, adding another promising drug to their portfolio. The terms of the agreement involve an upfront payment of $100 million, potential milestone payments, and future royalties.

With Daybue’s remarkable initial sales and promising guidance for the next quarter, Acadia is making a significant impact in the field of rare neuro diseases. The company is now preparing to engage with regulatory authorities, including those in Europe, to secure trofinetide’s approval. Meanwhile, Neuren has completed a Phase 1 trial for NNZ-2591, paving the way for Phase 2.

The leap in Acadia’s stock price reflects investors’ optimism in the company’s trajectory. As the firm strengthens its grip on the Rett syndrome and Fragile X syndrome markets with Daybue and NNZ-2591, it is poised to transform the lives of countless patients around the world.

Broker Thought

TD Cowen analyst Ritu Baral said that she continues to be surprised by Daybue’s early sales and expects the product to continue to outperform expectations. Baral said there is likely to be even further additional upside to their 12-month target price valuation that was bumped from $28 to $35 a share following the update.

The analyst thinks there is still potential for Daybue to be successful in other markets outside the US further down the line and maintains an ‘outperform’ call on the stock.

Fintel’s consensus valuation of $25.27 tells us that before the announcement, the market thinks the stock was trading around fair value. We expect the consensus target to trickle higher with the updated guidance in the coming weeks.

One area of concern:

While the news has brought a positive movement on the stock, research on the Fintel on ACAD’s insider trading data revealed five net insiders have sold stock in the last 90 days. The analysis includes every unplanned, open-market insider sale made.

These insiders have sold stock equating to 0.7% of the total share capital on issue with the bulk of sales occurring in June and July. These insiders likely sold stock following its recovery rally in the first half of 2023 after losing a significant amount of value in recent years.

The chart below shows the planned vs unplanned trades by insiders of the stock. You can find other stocks that have higher insider sentiment on Fintel’s quant leaderboard.

The optimism around Acadia’s stock has pushed year-to-date returns above 80%. The journey, however, is far from over. As the company navigates the complexities of commercial launch, pricing strategy, and regulatory hurdles, the world watches in anticipation, hopeful for a future where Rett syndrome and Fragile X syndrome are no longer without viable treatments.

This article originally appeared on Fintel

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