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Stifel on ACAD: Price target $71Based on our recent discussion with a CNS regulatory specialist and our research, we continue to believe pimavanserin is likely to attain FDA approval for Dementia-Related Psychosis. Since receiving standard (not priority) review for its sNDA, ACAD shares have been under pressure, and much of the recent investment conversation centers around regulatory risk. There are multiple legitimate questions with the pimavanserin DRP package, related to trial design, evidence of "acute" benefit, patient selection, and safety, the latter related to atypicals as a class. But the specialist's perspective aligns with our optimistic view: (1) FDA has historically held a favorable view of "relapse prevention", or "maintenance" designs, (2) he cited a recent [9/11/20] medical meeting presentation, which includes FDA authors, that's encouraging re:pimavanserin safety and (3) he views no priority review as less meaningful; this can be decided for a number of reasons, generally at an agency level above the division. Key Points The overarching questions surrounding DRP approval (or not)... Investors have interpreted the lack of priority review for the pimavanserin DRP sNDA as a bad sign (we agree it was odd), which in turn has refocused the ACAD investment debate onto regulatory risks. The stock peaked at ~$59 and is now at ~$40. As we've discussed, the sNDA raises a number of regulatory issues: (1) How does FDA view a "maintenance" trial as a key pre-approval study? (2) Is there enough evidence of pimavanserin "acute" antipsychotic benefit in DRP/ Alzheimer's Psychosis? (3) The DRP population is much bigger than that of PDP, so how will FDA think about pimavanserin black box, mortality risk, and the atyipical class contraindication? We caught up with a regulatory specialist, who, while four years removed from FDA, previously worked on psychiatry drug reviews/analyses and offered his perspective on the questions above. How should we perceive a lack of priority review? Pimavanserin has breakthrough therapy designation and ACAD management was expecting priority review, so the receipt of "standard review" was surprising, and it's hard to blame it on the pandemic when simultaneously the Aducanumab review is accelerated. That said, this regulatory specialist doesn't think the lack of priority review, while surprising to him as well, means all that much. For one thing he noted that priority reviews are generally decided above the individual division (at the office or commissioner level), so the decisionmaker(s) for review timelines are generally much less in the weeds on whatever nuanced regulatory issues are in question. Second, while we have seen other priority reviews recently at FDA, the specialist did highlight another recent "standard review" at the psychiatry division for JNJ's Esketamine sNDA for label expansion in MDD patients with suicidality. Just like pimavanserin, Esketamine is already on the market and had received Breakthrough for the second indication/population, leading the specialist to wonder (albeit speculatively) whether label expansion filings are being treated differently since the drug is already available. Note: the Esketamine sNDA was submitted on 10/2/2019 and approved on 8/3/20. In the specialist's opinion, the agency has a favorable view of "relapse prevention" trials, which is in agreement with other research we've done (within). The specialist believes FDA realizes that psychiatry populations are heterogeneous, not everyone responds to the same drug, and within the context of this, "relapse prevention", or "maintenance" studies, are viewed as a way to mimic real-life treatment practice: put all appropriate patients on drug, keep responders on therapy, and examine whether the response is maintained over time. He noted that FDA often encourages sponsors in psychiatry to consider this design and he's surprised that it isn't utilized more (these studies have a higher probability-of-success), though he noted that some companies are turned off by the fact that maintenance studies take longer to complete. We asked one other follow up: does it matter that at the interim, the pimavanserin effect size in PDP [the existing indication] was considerably larger than that in the Alzheimer's patient subset? Given that there was a consistent benefit [HR in ADP=0.56] the specialist doesn't think this should matter, and he also noted that the high responder rate in the "acute" portion of the DRP study (60%+) should be reaffirming to the overall result, especially in light of the ADP ph2. A recent presentation at the Movement Disorders Society meeting should be viewed as encouraging. Candidly we had missed this, but just two weeks ago a group of clinicians, researchers and three FDA employees--including David Graham as lead author--presented a poster titled "All-cause mortality in pimavanserin and atypical antipsychotic users with Parkinson's Disease and Medicare". Mr. Graham works in the pharmacovigalence group at FDA and is known for being outspoken on safety issues (initial fame came during the Vioxx days). The pimavanserin poster [pictures within] includes an analysis of ~21K exposures [~3K pimavanserin, ~18K other atypicals] that demonstrated a lower mortality rate on pimavanserin during the first ~6 months of therapy and no clear difference from the standard-of-care thereafter. The regulatory specialist interpreted this public presentation as a positive sign, as he believes this work aligns with the types of safety analyses FDA would be doing during the sNDA review. Investment Thesis We rate ACAD shares Buy. Acadia is a biotechnology company focused on the development and commercialization of its lead product pimavanserin (brand name NUPLAZID) in CNS diseases, including Parkinson’s and Dementia Related Psychosis. The commercial rollout of pimavanserin in Parkinson’s Disease Psychosis (PDP) has been decent, but, in our view, hasn’t lived up to Wall Street expectations because of pimavanserin’s modest efficacy profile and the availability of generic atypical antipsychotics, which, to many physicians, represent a viable alternative. We believe pimavanserin is to be differentiated via its tolerability profile, and we think that pricing power, along with increasing share of new diagnoses, may lead to approximately $600 million in PDP sales by 2022. Meanwhile, positive results in Acadia's Dementia-Related Psychosis Relapse Prevention study should increase the drug's sales potential significantly, assuming approval. We recently upgraded the stock on the premise that: (1) DRP is a much larger market than PDP, (2) safety issues with antipsychotics in Alzheimer's are more significant, justifying strong uptake of pimavanserin in this population and (3) other indications, such as MDD, offer optionality for the stock. We view DRP as having blockbuster potential, even at a penetration level that's below what pimavanserin has attained in PDP to date, which, based on our doc checks, could be conservative. Target Price Methodology/Risks We derive a $71 target price for Acadia based on a DCF analysis. Our DCF analysis, aligned with peer company NBIX, employs a 9.5% discount rate and a 1% terminal growth rate. We assume a 100% odds-of-success for pimavanserin in Parkinson’s Disease Psychosis, a 50% odds-of-success for Major Depressive Disorder and 85% probability-of-approval for Dementia-Related Psychosis, respectively. Other pipeline programs, such as schizophrenia, are not included in our valuation. We use a share count that probability weights the dilutive impact of various options, based on various ACAD pipeline scenarios and our estimate of their potential stock implications. There are many risks to an investment in ACAD, including clinical, regulatory, commercial risks, as well as the risk of a dilutive equity offering. We believe any of the above risks could impact the stock significantly. |
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Msg # | Subject | Author | Recs | Date Posted |
17100 | Re: Stifel on ACAD: Price target $71 | divadog2 | 3 | 9/25/2020 10:08:06 AM |
17101 | Re: Stifel on ACAD: Price target $71 | LINK | 1 | 9/25/2020 11:02:53 AM |
17103 | Re: Stifel on ACAD: Price target $71 | gains_52 | 2 | 9/25/2020 1:06:53 PM |
17119 | Re: Stifel on ACAD: Price target $71 | longusa | 7 | 10/13/2020 5:10:30 PM |