ACADIA Pharmaceuticals Inc. (ACAD): What’s Next For This Biotech?

One company in particular that has been discussed often is AstraZeneca plc (ADR) (NYSE:AZN), a very large $65 billion company. The reason it has been mentioned is because it owns Seroquel – but is facing generic threats. The acquisition of Acadia could reignite AstraZeneca plc (ADR) (NYSE:AZN)’s antipsychotic line of products, and seems to be a good match.

Then, there is Acadia’s partnership with Allergan, Inc. (NYSE:AGN). However, this partnership is for the development of Acadia’s early stage products, as Allergan, Inc. (NYSE:AGN) is a company focused on the development of therapeutics for glaucoma and chronic pain. Thus, Allergan, Inc. (NYSE:AGN) may not have the resources to effectively launch and market Pimavanserin.

If Acadia is acquired, there’s little doubt in my mind that it will be under $2 billion. Pimavanserin has too much upside and when combined with large pharma’s sales force and manufacturing process, the profit margin for Pimavanserin could be north of 30%. As a result, a $2 billion acquisition would return a profit fairly quickly.

Conclusion

With all things considered, Acadia has been a great stock – but does not have upcoming catalysts. In fact, the only notable catalyst might be an acquisition, and it’s never a good idea to buy a stock on the speculation of an acquisition alone.

Thankfully, as we look long-term ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) has great upside potential. In my opinion, the best way to play Acadia over the next year is to hold a small position, and to take gains off the table if you already own.

Currently, I say there is a 50/50 chance of the company being acquired, although it’s hard to know when it might occur. Therefore, by keeping a small position you are still exposed if an acquisition is announced, and if not, you can buy back on any potential dip during the next 16 months.

The article What’s Next For This Biotech? originally appeared on Fool.com and is written by Sherrie Stone.

Sherrie Stone has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Sherrie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.