Why Acadia Pharmaceuticals (ACAD) Will Get More Than $44 From Pfizer (PFE)

- January 4, 2017


Acadia Pharmaceuticals (NASDAQ:ACAD) is currently higher by 9% after Twitter chatter suggests that Pfizer (NYSE:PFE) was in talks to buy the biotech for $44/share. Buyout talks have often centered around Acadia, but it has been a while since ACAD stock saw such a big intraday move behind acquisition chatter.

The reaction implies higher M&A expectations from the market, a reflection that investors believe the vague rumors to be more true than not. While it is very possible that Pfizer buys Acadia Pharmaceuticals for $44/share, we believe the buyout price will be much higher, and could mirror the buyout competition we saw for Medivation last year, which Pfizer ultimately won.

The reason rests on Nuplazid’s potential for label expansion and also off label usage. Last weekend BNL Finance reported that Nuplazid is already being used for treatment of Lewy body dementia, a disease that is similar to PDP with a much higher degree of occurrence.

Like PDP before Nuplazid, there are no approved treatments for Lewy body dementia (and ADP for that matter). We believe it won’t take long for acquirers to realize Nuplazid’s potential to dominate this market for the three most common neurodegenerative conditions. Ultimately, if successful, and with the right marketing approach, Nuplazid could achieve annual sales of $3-$5 billion, conservatively.

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All things considered, there have been reports in the past that Acadia’s largest shareholders, like Baker Bros, won’t accept anything under $6, $7, even $10 billion. Up until this point, Acadia Pharmaceuticals has not sold international rights to Nuplazid; it has not sold itself short for immediate gratification in exchange for a share of U.S. Nuplazid sales. Acadia management and its largest shareholders have been very patient, and if Pfizer wants Nuplazid, my belief is that it will have to pay for it.

Why ACAD stock will be the next Medivation

Its no secret that interest for Medivation was high, and Pfizer eventually way overpaid because it was desperate for growth. Pfizer could end up acquiring Acadia because it still needs growth. However, there are many companies who might show interest in Acadia Pharmaceuticals, especially if a company like Pfizer forces their hand into a bidding war.

Gilead Sciences (NASDAQ:GILD) is one of our favorite scenarios. Not only does Gilead have the money, but also the knowledge to successfully market acquired drugs in new markets. Fact is no one markets drugs better than Gilead.

Teva Pharmaceutical Industries (NYSE:TEVA) is intriguing. Teva has a strong focus on neurology and their primary Parkinson’s drug, Azilect, will lose patent protection soon. Therefore, Teva already has an experienced sales staff in place. Teva and Acadia would be a great fit.

Otsuka Holdings Co., Ltd. (OTSKF) and Bristol-Myers Squibb Co (NYSE:BMY) co-develop Ability. Thus, both companies know the antipsychotic market well, and could easily integrate Nuplazid with their existing sales force.

Finally, there is AbbVie (NASDAQ:ABBV). In this instance, AbbVie is not the best fit, but like so many large biotechs and big pharma, it has major concerns for its best-selling drug, Humira. AbbVie’s need for growth forced it to pay $21 billion for Pharmacyclics. Yes, Pharmacyclics’s drug Imbruvica is a great product, but AbbVie gets just 50% of sales from the drug.

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  1. […] probably started on Twitter, that Pfizer (PFE) was in talks to acquire Acadia Pharmaceuticals (ACAD) drove Acadia’s stock more than 12 percent […]

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