1. The Move
Acadia Pharmaceuticals rose an astounding 80 bags in just four and a half years:
The actual all-time high was very recent, in December 2019, but I find it more useful to study the situation between 2010 low and 2015 high.
2. Business Description
ACADIA is a biopharmaceutical company focused on the development and commercialization of innovative medicines to address unmet medical needs in central nervous system disorders. ACADIA has developed and commercialized the first and only medicine approved for the treatment of hallucinations and delusions associated with Parkinson’s disease psychosis. ACADIA also has ongoing clinical development efforts in additional areas with significant unmet needs, including dementia-related psychosis, major depressive disorder, the negative symptoms of schizophrenia, and Rett syndrome. Further information about ACADIA can be found at www.acadia-pharm.com.
3. Fundamental Situation at Bottom & Top
4. Brief Story
Biotechs play by a different set of rules and we can almost forget everything we know about fundamental analysis when we’re about to analyze a biotech company.
Anyway, at the bottom, Acadia Pharmaceuticals was valued at just $25 M, which was below its Net Cash position of $37 M. Before 2010 the company used to have annual revenue between $11 M in 2005 and $1.6 M in 2008, but in 2010 it recorded revenue of $42.1 M due to this:
«We have incurred substantial operating losses since our inception due in large part to expenditures for our research and development activities. In October 2010, we entered into an agreement with Biovail Laboratories International SRL, a subsidiary of Biovail Corporation, pursuant to which we regained all rights to pimavanserin and concluded our earlier collaboration agreement. In connection with concluding this collaboration, we recorded $34.7 million in revenues during the fourth quarter of 2010, which resulted in us reporting net income for the fourth quarter and year ended December 31, 2010. However, we will no longer recognize revenues from the Biovail collaboration and we expect to continue to incur operating losses for at least the next several years as we pursue the clinical development of our product candidates. As of December 31, 2010, we had an accumulated deficit of $324.1 million.»
Even though this was a one-time event, it was relevant from a fundamental standpoint, because a $25 M company that had Net Cash of $37 M had an influx of $34.7 M. Incredibly, the stock went down on the news, to the all-time lows:
Trends have their particular ways to reverse…
At the lows, Acadia Pharmaceuticals was worth $25 M and a few years later it was worth $5,230 M, even though it still had no Sales and in 2015 it had a Net Loss of $164 M.
We can only explain this huge move by a series of catalysts.
First, it was that agreement with Biovail.
Second, in 27th of November, 2012, Acadia had the following catalyst:
«Yesterday morning we finally got to see the much-anticipated data for Acadia Pharmaceuticals’ (NASDAQ:ACAD) Phase III trial, which tested its flagship drug pimavanserin for the treatment of Parkinson’s disease psychosis.
Reacting to the news, shares of ACAD rallied into the stratosphere and tacked on an incredible 136% by the closing bell — bringing the stock from $2.28 to $5.43 in a single trading session.»
Third, on April, 4th, 2013, the company announced this:
- ACADIA Pharmaceuticals Announces Expedited Path to NDA Filing for Pimavanserin Following Meeting with FDA
The stock rose 64% on that day, to $13.1.
From that point, I believe the upward trend was an extension of those catalysts and the anticipation of real revenues and profits…
Biotechnology companies are a very different animal from other stocks, as they can be worth several billion dollars even if they have no revenues and have substantial Net Losses. Eventually, Acadia Pharmaceuticals started having real revenues, with $17.3 M in 2016, 124.9 M in 2017, $223.8 M in 2018 and $338 M expected for 2019. However, it has been recording substantial costs too, and Losses, which are estimated to be $238 M in 2019.
So, in this case, strong Revenue growth didn’t bring the company to Profits, it actually increased losses.
Anyway, it was an 80 bagger!