biotech stocks to buy or sell

When a pharmaceutical company has a setback in a late-stage trial with regards to one of their products, it can trigger extreme distress to its stock. That is what happened with ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) last week.

Acadia’s product known as Enhance evaluates pimavanserin (also called Nuplazid). Last week Acadia applied to use it in collaboration with other medicines in adult schizophrenia patients’ treatment. But it missed its mark. Missing targets in a late-stage trial is never a great thing for any company and right after the news broke, the shares dropped by as much as 14% the past week.

Key Analysis

However, it needs to be mentioned here that the company is currently managing other trials related to Nuplazid as well and investors are now whether those trials will end up falling short of the mark as well. The setback that the company has had could imply that the millions of dollars of worth of sales from this single line of medicines could now be in jeopardy.

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On the other hand, it is also important to note that the PDP indication for Nuplazid has been an excellent market for Acadia. Last year, Acadia managed to generate sales to the tune of $223.8 million from the product alone. It indicated a year on year increase of a highly impressive 79% in sales.

So, the question remains whether this latest late-stage trial setback should spool investors or not. Analysts on Wall Street believe that the growth in sales should continue to be in two digits up until 2020. However, the Acadia stock is currently trading at 8 times it 2020 revenues and if that sort of a valuation is to be justified then the company needs to come up with another product. 

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Trofinetide could be that product, which is currently in the final stages of development and is meant for the treatment of Rett syndrome, That being said, that particular medicine is not going to be in the market for some years yet, provided it clears the trials.

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