Acadia Pharma Selling Stock Ahead of Key Study Results

SAN DIEGO (TheStreet) -- Acadia Pharmaceuticals (ACAD) CEO Uli Hacksell, speaking about pimavanserin on Monday night's conference call:

We believe that pimavanserin has the potential to be the first safe and effective drug that will treat PDP without compromising motor control, thereby significantly improving the quality of life for patients with Parkinson's disease.

Acadia said top-line results from the pimavanserin phase III study in Parkinson's disease psychosis (PDP) would be announced this month, reiterating it's previous timing guidance.

But if Acadia is optimistic about pimavanserin's chances, why did the company sell stock so cheaply in the September quarter? From Acadia's just-filed 10-Q:

During the three months ended September 30, 2012, the Company raised gross proceeds of $7.0 million from the sale of 3,491,500 shares of common stock, resulting in net proceeds of $6.8 million after issuance costs. There were no issuances under the ATM Agreement prior to the third quarter of 2012.

Acadia set up the $20 million At-The-Market (ATM) equity facility in March. ATMs allow companies, through a broker or investment bank, to sell treasury stock to investors at current market prices. Small companies like ATMs because they're a relatively easy and cheap way to raise cash, but ATMs aren't great for current shareholders because companies do not have to disclose the sale of stock except in regulatory filings, often at the end of each quarter.

The 3.5 million shares sold by Acadia in the quarter were priced, on average, at $2 per share. Presumably, Acadia's stock price will climb considerably higher than $2 if the pimavanserin study is a success, allowing the company to raise a lot more money with less dilution. If Hacksell is so confident in pimavanserin, why did he direct the company to sell cheap stock in the third quarter?

Acadia CFO Tom Aasen offered an explanation on Monday night's call:

Following the third quarter raise, we have not used the ATM further. We feel this amount of capital raised was ideal to provide ACADIA with additional financial flexibility. These added resources will enable us to accelerate our preparations for the second planned pivotal trial in our pimavanserin PDP program that Uli mentioned, and to extend our cash runway. We now expect that our existing cash and anticipated payments from our collaborations will be sufficient to fund our operations into the second half of 2013.

Aasen's reasoning is less than satisfactory. Acadia would have ended the September quarter with $16 million excluding the ATM proceeds -- or enough for at least another three quarters at the current burn. Acadia isn't desperate for cash, so I don't understand the rush raise another $7 million at $2 per share. Likewise, I fail to see how the extra money helps Acadia prepare for the second pivotal trial of pimavanserin any faster. If the pimavanserin study succeeds, Aasen will have no problem raising money at a higher valuation.

The history of companies that sell stock through ATMs ahead of clinical trial catalysts is a bit ugly. Think: Peregrine Pharmaceuticals (PPHM), Zalicus (ZLCS), Oncothyreon (ONTY). I certainly can't say Acadia is guaranteed to join this ignominious list of biotech ATM blowups. Pimavanserin might be fine and the results from the upcoming phase III study spectacularly positive.

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