As I wrote in my previous post this morning, I like the upward momentum in the biotech sector resulting from the race for a coronavirus vaccine and treatment and the cash flows into the sector from investors and big drug companies such as Pfizer (PFE.) That has pushed the iShares NASDAQ Biotechnology ETF (IBB) up to an all time high with decent future headroom remaining in the sector. My big worry, however, is that while the race for a coronavirus vaccine is pushing the sector higher, not every company working on a vaccine will successful produce one. And that will leave a lot of biotech now in the vaccine race to open to a big break lower on the disappointment.
What I’d like to find right now is a biotech on the verge of reporting significant positive news from its own clinical trials–and thus positioned to be a beneficiary of the cash flows into the sector–but that is focused on drug candidates outside the coronavirus area.
A biotech like Acadia Pharmaceuticals (ACAD), which I’ll be adding to my12-18 month Jubak Picks Portfolio tomorrow June 3. The shares closed at $46.90 today June 2, down 2.33%. My one-year target price is $60 a share.
Acadia is focused on drugs to address central nervous system disorders. It’s first drug, Nuplazid is on the market and recorded $90 million in sales in the first quarter. In the May 7 conference call on first quarter earnings the company forecast a 28% yer over year growth in Nuplazid sales. The company lowered its full year sales forecast to $420 million to $450 million from the prior $440 million to $470 million range as the coronavirus pandemic has led to a decrease in visits to physicians.
But as with all development stage biotech companies what’s important to investors in Acadia is what’s coming (potentially) down the pipeline.
First off, there’s the company’s submission to the U.S. Food & Drug Administration that would expand the approval for Nuplazid to all dementia-related psychosis. That market for DRP is about 10 times that of Nuplazid’s current label. The company will submit Nuplazid for approval across multiple dementia subtypes this summer with a potential approval and launch by the and of 2020. The FDA has granted Nuplazid Priority Review status so that schedule is certainly possible. Th company is also working to have Nuplazid included in the guidelines of the Movement Disorders Society. Nuplazid would be the first FDA-approved treatment for dementia-related psychosis.
Acadia also has recently combined two Phase 3 studies for Pimavanserin for the adjunctive treatment of major depressive disorder into a single study with results expected in the third quarter of 2020. That would lead to an FDA filing in the second quarter of 2021. 17 million patients in the United States have major depressive disorder and 2.5 million at treated with an adjunctive therapy.
Acadia is still a relatively small biotech with a market cap of just $7.31 billion as of June 3.
That’s a good level for initial investments in a biotech with Acadia’s pipeline.
Overtime someone mentions a government plan to control drug prices the sector spasms. Just don’t see any real likelihood of action on a plan before the elections.
Just wondering about the biotech sector. I think one of the outcomes of COVID will be national health care plan, perhaps single payor vs full on Brit style. Thoughts on up side for health care stocks if that comes to pass.