Health

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

A biotech's first serious approval-related interaction with the FDA is a first big job interview and senior prom rolled into one terrifying, future-altering package. 

This week, it was Acadia’s turn. The San Diego based company’s lead drug, Nuplazid for Parkinson’s associated psychosis, went in front of an FDA review panel of experts Wednesday. It would have been lovely for investors if the meeting had resulted in a crystal clear thumbs-up or -down. But it didn't.

On the plus side, the panelists voted 12-to-2 that the drug's benefits outweigh its risks. The vote is not binding, but usually predicts FDA action. But some "yes" votes came with reservations. There were questions about the drug's effectiveness and safety, which won't won't be answered in full until the FDA rules by a May 1 deadline.

There may be hurdles ahead, including the potential for a "black box" warning -- the FDA's strongest indication a drug can be dangerous -- and for the agency to seek to limit the drug to a narrow group of patients. But Nuplazid's likely approval means Acadia should be able to move past a troubling stretch in which its shares fell as much as 60 percent from a peak last summer. Nuplazid would be the only drug approved for this condition. The Acadia thumb looks to be tilting upwards.  

Acadia's stock was down 41 percent year-to-date before FDA documents evaluating the drug were released on Friday. Shares are up 27 percent since then. 

Comeback?
After a rough start to 2016, Acadia shares have bounced recently.
Source: Bloomberg

Nuplazid approval would be huge for Acadia, the difference between finally making some money or continuing to lose as much as $45 million a quarter. Acadia knows the difficulty of trying to raise cash in a shaky biotech market better than most. It was one of a number of firms that tried to raise money via secondary offering in early 2016, only to be punished by the market for audacity and poor timing. 

One of the company's biggest worries, a cash crunch, is probably less acute now. An approval, even if sales are on the low side of estimates, ought to help Acadia stem its losses. And even better for shareholders, the company might now be a more appealing M&A target. 

Dwindling
Acadia's cash pile is dwindling as it spends heavily on drug development

Even with an approval, the range of potential outcomes is still wide, which should temper investor optimism. In the most bullish case, Nuplazid will become a widely used standard treatment for Parkinson's associated psychosis and will eventually get approved for use in Alzheimer's and/or schizophrenia, conditions for which Acadia is also running Nuplazid trials. In less-bullish scenarios, the drug could come with a restrictive label that substantially limits its use, it could prove to be ineffective in Alzheimer's, or safety issues could scare off patients. The highest estimate among analysts tracked by Bloomberg for Nuplazid sales in 2020 is $2.4 billion. The lowest is $640 million. 

Blockbuster Potential
Analysts expect Acadia's Parkinson's related psychosis drug to pass $1 billion in sales.

There are real safety issues with this drug, which the FDA emphasized in its presentation, including a disproportionate number of serious side effects among the relatively small number of patients on the drug. These issues apparently form the basis of a short thesis; short interest in the company was close to 19 percent as of Monday. Short sellers may hope a black box warning will lead to poor sales. Anti-psychotic drugs with the potential for off-label use tend to have have black boxes; Nuplazid's may be particularly serious. A couple of panelists advocated for a very narrow label to discourage the drug's broader use.

Nuplazid's likely approval in Parkinson's associated psychosis could be a good sign for its eventual approval in treating Alzheimer's related psychosis and agitation. But safety concerns may be more acute for that disease, given the larger patient population size; the bar for approval might be higher. 

Still, the drug's safety issues are balanced by a lack of appropriate treatments on the market, at least for Parkinson's associated psychosis. Off-label use of currently available drugs does not work well for Parkinson's patients. In fact, those drugs tend to offset other medications taken by Parkinson's patients. Nuplazid doesn't -- one reason it got a positive vote from the FDA panel.

At the end of the day, obtaining its first approval as a company in an area where no other drug is available isn't too shabby.  

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net