After receiving Food and Drug Administration approval for its Parkinson's disease psychosis drug, Acadia Pharmaceuticals (ACAD - Get Report) is an attractive target for strategic buyers and could go for as much as $6 billion, analysts say.
The drug, Nuplazid, is used to treat delusions and hallucinations in patients with psychosis caused by Parkinson's disease, a progressive disease that affects the nervous system and is known for causing tremors. Acadia is expected to report earnings today after market close. The consensus earnings per share forecast is a loss of 4 cents per share.
Still, Nuplazid, was described by San Diego-based Acadia as "paradigm-shifting" in a call with analysts Monday morning, is the first in a new class of anti-psychotic drugs called selective serotonin inverse agonist, or SSIAs. The company has yet to set a price for the drug, but noted on the call that it has trained 132 sales people to market the drug to doctors.
"It's certainly a company that is very uncommon in biotech," analyst Charles Duncan of Piper Jaffray said in a phone interview. "It really is a brand new class of drugs."
Having a drug ready for market, and one that's the first among SSIAs, is, in part, what makes Acadia so attractive to strategic buyers.
"This is an asset that would fit into a fair amount of portfolios, especially large pharmas with neurology focus," analyst Ritu Baral of Cowen & Co. said.
Baral's colleague, Ken Cacciatore, said Acadia could sell for as much as $6 billion to a company such as Teva Pharmaceutical Industries (TEVA), an Israeli drug maker.
Duncan said a price point of $44 per share, or nearly $5 billion, is a more reasonable one for Acadia to sell for.
It is "Tough to speculate but Biogen has the balance sheet capacity to acquire a company of that size (even assuming huge premium), and Acadia seems on the surface to fit within its strategic focus on neurodegenerative disorders," said Jack Mohr, Director of Research of Jim Cramer's Action Alerts PLUS Trust Portfolio, which owns BIIB.
Biogen's "most immediate need is for growth, though, so to the extent Acadia has a pipeline which can generate sales relatively quickly, it could make sense. What Biogen doesn't need is another low-probability, high-risk, early-stage shot on goal," he added.
For Acadia, going forward there are two things that could help it gain value: "data in another indication trial and increased visibility on their strategy," said Piper's Duncan.
Cowen's Baral agreed.
"Obviously, there is strong focus for novel antipsychotics. At the same time, you have to be cognizant of potential value from Alzheimer's data due at the end of year," Baral said.
She added that this data, which could show that Nuplazid could also treat hallucinations and delusions caused by Alzheimer's disease, could change the valuation of the company.
Though the drug is groundbreaking, Acadia acknowledged during its call that it currently could be used to treat a relatively small group of people.
In announcing approval of Nuplazid, Acadia also cited the National Parkinson Foundation, which estimates that one million people in the United States and four million to six million people worldwide have Parkinson's disease. Approximately 40% of that population have psychosis associated with the disease, which is characterized by the hallucinations and delusions Nuplazid will treat.
Thus, an indication that the drug could be used to treat those with delusions and hallucinations resulting from Alzheimer's disease could increase its marketability and profitability.
"I think there's a good chance the company would want to hold onto the asset until they get clarity on the research," Baral asid. "Acadia is running the launch effort like a company that's in it for the long haul."
According to Piper Jaffray's Duncan, Acadia could be pushed into a sale with a hostile takeover bid.
"I don't necessarily believe the company wants to sell," Duncan said. "They are willing to go to the market and create value."
Both Duncan and Baral, however, emphasized that anything could happen if the company is presented with the right price.
According to Duncan, other companies looking to break into the space from a drug development standpoint include Axovant Sciences (AXON) , which is working on a drug that treats similar psychoses, and Intra-Cellular Therapies (ITCI) , which has talked about pursuing a program, as well.
Acadia officials couldn't be reached for comment.
Teva and Biogen officials also couldn't be reached for comment Wednesday.