Shares of the San Diego company were tumbling 16.33% to $21.41 in trading Monday.
Acadia said it had received a complete response letter, or CRL, from the FDA regarding the company's supplemental new drug application.
The letter, Acadia said, cited "a lack of statistical significance" in some of the subgroups of dementia, and insufficient numbers of patients with certain less common dementia subtypes as lack of substantial evidence of effectiveness to support approval.
Acadia said the two points of concern were not specified requirements for the Harmony trial, where pimavanserin, sold under the name Nuplazid, fulfilled the prerequisites agreed upon with the FDA's Division of Psychiatry to get a dementia-related psychosis indication for the drug.
The Harmony trial is a Phase 3, double-blind, placebo-controlled study evaluating the efficacy of pimavanserin compared with a placebo.
CEO Steve Davis said in a statement that Acadia "stands behind the robustly positive results" of the study.
"Over the entire course of the review, the Division did not raise any concerns regarding the agreed upon study design, including the issues raised in the CRL," Davis said. "We will immediately request a Type A meeting to work with the FDA to address the CRL and determine an expeditious path forward for the approval of pimavanserin in DRP."
A Type A meeting is described as a meeting that is "immediately necessary for an otherwise stalled drug development program to proceed."
The company said the results of the study indicated that pimavanserin met its primary endpoint, demonstrating that it "significantly reduced the risk of relapse of psychosis by 2.8 fold compared with the placebo.
Pimavanserin also met the key secondary endpoint in the study, significantly reducing the risk of discontinuation for any reason by 2.2 fold compared with placebo, Acadia said.
Last month, Acadia said the FDA had identified "deficiencies" regarding the application for pimavanserin that precluded any labeling discussions, prompting analysts to slash their share price targets.
In July 2020, Acadia said a Phase III study of pimavanserin as an adjunctive treatment for major depressive disorder “didn’t achieve statistical significance on the primary endpoint.”