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Disappointing Clinical Trial Pummels Acadia

Acadia Pharmaceuticals planned to have the first drug on the market to treat Parkinson’s disease psychosis, which causes hallucinations and delusions for 40 percent of the 1.5 million people living with the disease.

What it didn’t plan for was stronger-than-anticipated placebo effects in patients enrolled in the late-stage trial, results that proved its drug ineffective against a placebo.

Acadia’s stock fell sharply on the news that its drug candidate, pimavanserin, failed to prove effective in the six-week, 300-person study. Shares of Acadia, traded on Nasdaq as ACAD, lost two-thirds of their value Sept. 1 to close at $2. The stock’s 52-week range was 72 cents to $6.60, as of last week.

The story, however, is far from over as Acadia evaluates the data and pushes forward with a second Phase III trial testing pimavanserin in an extended safety study.

“While we obviously are disappointed with the results of this Phase III study, we continue to believe in the potential of pimavanserin based on our clinical experience to date,” Acadia CEO Uli Hacksell told investors Sept. 1.

The Sorrento Valley biotech, which said it had 58 local employees as of June 1, down from 99 in 2008, denied an interview request for this article.

For some cash-strapped biotechs pushing a single late-stage drug, a failed trial can indicate the end of the road.

For Acadia, which recently secured $30 million upfront in a pimavanserin partnership deal with Canadian biotech Biovail, time will tell whether it can continue to attract funding if its drug fails again, or whether it will have enough cash to pursue other indications, such as Alzheimer’s disease psychosis.

Wall Street Is Skeptical

Wall Street, meanwhile, remains less convinced of Acadia’s pimavanserin potential. Upon hearing the news of the failed trial, Citigroup immediately downgraded the stock to sell from hold.

“We believe these negative trial results will make it almost impossible for pimavanserin to secure FDA approval in (Parkinson’s disease psychosis),” wrote Citigroup analyst Lucy Lu.

Citigroup also lowered expectations of the biopharmaceutical company’s revenue stream going forward, as it no longer includes pimavanserin sales in its forecasts.

Lu said she sees Acadia bringing in $8.4 million in 2011 revenue, $7.6 million in 2012 and $2 million in 2013. Those figures were cut from prior expectations of $23.3 million, $46.3 million and $54.2 million, respectively.

Last month, Acadia reported a net loss of $12.7 million, or 34 cents per common share, for the second quarter compared with a net loss of $18.3 million, or 49 cents per common share, for the second quarter of 2008. Revenues totaled $1.8 million for the second quarter compared with $177,000 for the same period of 2008.

Some Hope

Alan Carr, a New York-based analyst with Needham & Co., said it’s unlikely the drug will show better results in follow-up studies, but that doesn’t mean Acadia will have to shelve the drug altogether.

“There’s some possibility they still may be able to develop pimavanserin in another indication,” he said. “It’s a little unclear.”

Earlier studies testing pimavanserin as an add-on to the commonly prescribed anti-psychotic Risperdal demonstrated positive results, including reduced side effects and faster onset, but Acadia failed to attract a partner to finance bigger trials.

“The trial certainly suggested the drug was doing something,” Carr said.

Its Biovail partnership, valued at $395 million if it can meet certain clinical and regulatory benchmarks, includes Alzheimer’s disease psychosis as a potential indication for pimavanserin.

In August, Acadia predicted it will end the year with $40 million in the bank, enough to support its operations at least into the first half of 2011. It ended 2008 with $62 million.

While some analysts don’t see Acadia’s cash situation as dire as other publicly traded biotechs, many that have less than six months’ worth of cash on hand, they question the future of its pimavanserin program, a big potential revenue stream for a company that, as of June 30, said it had an accumulated deficit of $321.8 million.

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