Acadia Pharmaceuticals Daniel Berrios, Xianming Li, Ryan Matsumoto, Sunny Huang, Kojo Osei, Ariana Bhatia
Introduction: ACAD Acadia Pharmaceuticals ACAD Small cap, relatively young, bio pharmaceutical company Price (2/15/15): $37.78 Founded: 1993 Headquarters: San Diego, CA Market Cap: $3.41bil Employees: 95 ACAD stock performance from 2013 to present, image from Yahoo Finance Our Investment Thesis: Despite risks associated with small cap, high volatility stocks, we believe ACAD has a high chance of success, far beyond their peers, given their impending FDA approval for Pimavanserin and their niche position in the Parkinson’s and Alzheimers market.
Healthcare Industry Overview Consolidation Tax Inversion Niche Drugs ● Mergers and acquisitions of ● Companies shift ● Orphan Drug Act of 1983 hospitals/health care incorporation abroad to provides financial incentive systems/physician groups avoid US tax rates for investigating rare ● Incentives ● Taking advantage of lower disease treatments ○ Economies of scale foreign tax rates ● Blockbuster drugs more ○ Hospitals can ● 9 out of 13 deals relating to difficult to develop increase prices tax inversion are in health ● Potential for small market ○ ACA care care monopolies coordination ● US: 35% Ireland 12.5% ● Larger companies have ● Implications ● September 2014: U.S. been acquiring startups to ○ Rising healthcare Treasury curtailed tax move into niche markets costs breaks from international ● Trending towards ○ 3% higher payments deals “nichebuster” rather than to hospitals “blockbuster” drugs
Government Policies / Population Trends Population Trends Affordable Care Act ● Uninsured rate dropped from 18% to ● People ages 65+ 12.9% ○ 12.4% of the U.S. population in ● 11 million+ more people have 2000 insurance ○ 19.0% of the U.S. population in ○ 67% from Medicaid expansion 2030 (projected) ○ 33% from insurance exchanges ● Medicare enrollment ○ Figure expected to grow in future ○ 47.7 million seniors in 2010 ● Implication -> Increased demand for ○ 81.5 million seniors in 2030 prescription drugs for newly insured (projected) ● Implication -> New enrollees, gov’t ● Parkinson’s Disease taxes could decrease profit margins for ○ Average age of onset is 60 insurance companies ○ 1 million Americans ● Lower Medicare reimbursements to ○ Parkinson’s Induced Psychosis hospitals -> Pressure for M&A affects 1 in 5 Parkinson’s patients
Management Team ● CEO (2000): Uli Hacksell ○ 1991 to 1999: Executive positions at Astra (pharmaceutical company) ○ PhD in Medicinal Chemistry from Uppsala University ● Executive Vice President (2014): Stephen R. Davis ○ Chief Financial Officer and Chief Business Officer ○ Previously an executive at Heron Therapeutics, Ardea Biosciences, Neurogen Corporation (CEO) ● Executive Vice President (2006): Roger G. Mills ○ Executive VP of Development, Chief Medical Officer ○ Previously VP of Development at Pfizer Global R&D ○ Key role in development of Sutent at Pfizer, Tamiflu at Gilead Sciences ● Executive Vice President, Chief Commercial Officer (2013): Terrence O. Moore ○ 25 years of experience as senior member of sales and marketing at several pharmaceutical companies ○ Helped build multibillion dollar brands including Prozac, Zyprexa, and Effexor XR ● Executive Vice President, General Counsel and Secretary (2004): Glenn F. Baity ○ Previously a senior associate at Cooley LLP, experience with M&A, financings, corporate governance
Strengths ● Nuplazid (Pimavanserin): ○ Currently working towards Stage IV FDA approval for Parkinson’s disease ○ “Breakthrough Therapy” Designation by FDA ○ Market size for effective Parkinson’s treatment: 1 mil U.S., 4-6 mil globally ○ Potential applications in both Alzheimer's as well as Schizophrenia, both of which stage II approved, working towards stage III ● Stock Sales ○ Early 2014 as well as in 2013 multiple stock sales have resulted in good balance sheet figures ○ $355 million in cash ○ Projected enough for Pimavanserin development and general costs through 2017 ● Robust Pipeline....
Strengths: Pipeline Image from http://www.acadia-pharm.com/pipeline/
Risks ● Future value priced in ○ $2.18 in Oct. 2012, $34.21 as of 2/15/15 ○ Stock’s value entirely dependent on future approval of Pimavanserin and stock price has already risen significantly ○ No earnings currently ● Stock volatility due to trial success & regulatory approval ○ 2009 previous trial failure due to high placebo results and drug deficiencies ○ Stock dove from nearly $16 in 2006 to a low of $0.67 in 2010 ○ Risk capital stock ● Future Competition ○ Models and revenue projections do not acknowledge potential for future competition ○ Widespread assumption that ACAD would dominate Parkinson’s market for at least next 5-7 years
Competitor Environment ● Neurocrine - Two stage three products; none NDA filed; none directly applied to psychotics. Not likely to detract from Nuplazid market share. ● Stemline Therapeutics Inc. - Products focused on cancer treatment. Also not likely to affect Nuplazid sales. In terms of drug similarity: ● AstraZeneca ● Eli Lilly ● Janssen All have similar drugs with black box warnings due to side effects.
Comparables Analysis Summary of Results Key Comparables • Comparables pose a difficult • Price = $37.78 • Market Cap = $3.77B Acadia approach for Acadia and its • Revenue = 0.11M Pharmaceuticals competitors because they are • EPS = -$0.80 (ttm) (ACAD) all early-stage • Return on Assets (Equity) = -17.75% (-29.79%) (ttm) • Earnings somewhat irrelevant • Price = $40.05 • Market Cap = $3.09B because all these companies Neurocrine • Revenue = N/A Biosciences are reinvesting for growth, with • EPS = -$0.81 (ttm) (NBIX) high R&D, but Acadia is • Return on Assets (Equity) = -20.24% (-36.79%) (ttm) moving in the right direction • Price = $16.20 • Looking at management • Market Cap = $209.94M Stemline Therapeutics • Revenue = $0.28M effectiveness comps, such as • EPS = -$2.30 (ttm) (STML) return on assets/equity, can be • Return on Assets (Equity) = -24.59% (-40.11%) (ttm) more telling, and Acadia leads • Price = $17.50 here Dynavax • Market Cap = $460.13M Technologies • Revenue = $11.60M (DVAX) • EPS = -$3.51 (ttm) *As of 2/26/15 • Return on Assets (Equity) = -46.35% (-84.02%) (ttm)
M&A’s, Precedent Transactions Drivers of M&A Potential Effects •Expand market share •Technology Recently, larger companies have more to •96 deals worth more than $5bn completed over spend on research development the past 12 months-- 37% of the overall volume of •Fewer hospital and provider options for corporate transactions. patients •Tax strategies •Given premiums of recent transactions, expect Acadia’s share price to increase if Selected Transactions acquired •Approval of new PDP drug makes Acadia •Kindred Healthcare acquired Gentiva an attractive acquisition target ($7/share, 64% premium) •Potential acquirer: AbbVie •Gilead’s acquisition of YMI BioSciences ($2.95/share, 81% premium)
DCF Analysis Sensitivity Analysis Several numbers from Jefferies Analyst Report
Recommendation Price Target: $62 Sell: Phase 4 FDA approval of Pimavanserin fails or price falls below $20 Time Horizon: 24-36 months
Questions
Recommend
More recommend
