Feuerstein's Biotech-Stock Mailbag: Acadia

(Editor's note: Come see Adam Feuerstein at the Money Show in San Francisco. Adam will be speaking to attendees on Friday, Aug. 8, at 2:15 p.m. ("Biotech Investing for Individuals: How to Turn Geeky Science Into Fat Profits"); on a lunch panel on Saturday, Aug. 9, at 12:35 p.m. ("Tech and Biotech: Picks and Pans for 2008 and Beyond"); and on Sunday, Aug. 10, at 8 a.m. ("Biotech Investing for Individuals: How to Turn Geeky Science Into Fat Profits").

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Before I open the Biotech Mailbag this week, I want to make sure you had a chance to dig into my biotech preview for the second half of the year. If not, you can check it out here. The column includes two biotech event calendars listing Food and Drug Administration drug approval decision dates and expected phase III clinical trial results through the end of the year.

Alright, moving on to your emails. The first question, from Christopher L., concerns Acadia Pharmaceuticals (ACAD Quote):

"I was wondering your thoughts on their pipeline, mainly pimavanserin and partnership prospects?"

Acadia announced positive results from the pimavanserin schizophrenia co-therapy trial in March 2007. That milestone popped the stock from $7 to $16, mainly on speculation that Johnson & Johnson (JNJ Quote) or one of the other big players in the schizophrenia drug market would eagerly snap up pimavanserin.

Sixteen months later, there is still no pimavanserin partnership and development of the drug in schizophrenia is stalled. A deal would have been struck by now if there were serious interest. I can't definitively say that the likelihood of Acadia landing a partner (or being taken out entirely) is zero, but I don't believe it wise to invest in this stock based primarily on that thesis.

ACP-104, Acadia's other pipeline drug, blew up in June and is being discontinued; so clearly, there is no value there and nothing more needs to be discussed about it.

Acadia is also developing pimavanserin as a treatment for Parkinson's Disease Pychosis, but the ongoing phase III studies won't have any data to report until mid-to-late 2009. Cash may become an issue, too. The company says there's enough gas in the tank to run the company through the end of 2009, but current operating expense levels, coupled with plans for new pimavanserin studies, suggest that cash may become an issue sooner rather than later.

With the stock around $3.50 and an enterprise value of $16 million, Acadia looks cheap, but that's not necessarily a buy signal in today's tough biotech market.