Acadia Pharmaceuticals (ACAD) shaved more than $3 billion off its market cap Tuesday and ACAD stock plummeted after the Food and Drug Administration found deficiencies in its application for a psychosis drug.
The setback surprised analysts who largely expected the FDA to approve Acadia’s Nuplazid for patients with hallucinations and delusions due to dementia-related psychosis on April 3. Now, the lion’s share of them expect the agency to reject Acadia’s drug.
Despite “immediately and repeatedly” reaching out for additional details, Acadia remained in the dark as to the nature of the deficiencies on Monday, Mizuho Securities analyst Vamil Divan said in a report to clients. Divan expects a one-year delay for the drug.
Other ACAD stock analysts were more bearish. After receiving the notice on March 3 and “a subsequent five days of ghosting,” RBC Capital Markets analyst Gregory Renza now expects the FDA to reject Acadia’s application.
“Though the notification does not reflect a final decision on the sNDA (application), the company will likely receive a CRL (complete response letter), in our view,” he said in his note to clients. A complete response letter rejects an application for drug approval.
ACAD Stock Crashes
On today’s stock market, ACAD stock crashed 45.4% to 25.02.
Acadia said in a written statement it plans to “work with the FDA to learn the nature of the deficiencies and seek to resolve them.”
The news is particularly surprising, SVB Leerink analyst Marc Goodman said, because the company said it was in frequent contact with the FDA regarding its application. As recently as Feb. 18, the agency said it was on track to begin labeling discussions on March 3, he said.
“Thus, it seems something was identified between that date and March 3,” he said in a note. Goodman expects ACAD stock to be in the “penalty box” for the near term.
He had assumed $2 billion in additional peak sales of Nuplazid with the dementia-related psychosis approve. He kept his outperform rating on ACAD stock.
Questions On Effectiveness?
Based on past examples, the FDA notifies companies of deficiencies related to insufficient data on effectiveness, long-term safety issues or manufacturing concerns, RBC’s Renza said.
In this case, Nuplazid is already approved to treat hallucinations and delusions related to Parkinson’s disease. So, Renza says he and the company don’t expect there to be an issue on the manufacturing side. There could be questions on effectiveness, he said.
Renza slashed his price target on ACAD stock to 36 from 60, but retained his outperform rating on shares. Mizuho’s Divan maintained his buy rating on ACAD stock, but cut his price target to 55 from 70.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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