On Tuesday, UBS has adjusted its price target for Acadia Pharmaceuticals, listed on NASDAQ:ACAD, to $33.00, down from the previous $35.00, while maintaining a Buy rating on the stock. This adjustment follows the news that Acadia's drug Nuplazid failed a Phase 3 trial in treating schizophrenia negative symptoms (NSS), causing the company's shares to fall approximately 17% intraday.
The firm noted that the market's reaction to the trial's outcome was unexpected, given that the previous failure of the ADVANCE-1 NSS study did not significantly impact Acadia's stock price. UBS expressed surprise at the extent of the sell-off, considering they had not anticipated Nuplazid's NSS indication to be a major driver of the stock's value.
Despite the setback with Nuplazid's NSS study, UBS believes that the stock is being unduly penalized. The firm's analysts pointed out that many investors did not see much value in the NSS indication, suggesting that the current lower stock price could present an opportunity for the stock to outperform in the future.
Management commentary suggests that Daybue, another of Acadia's products, is expected to recover beginning from February onwards. UBS predicts that this recovery could help bolster the company's stock performance from its current levels.
Furthermore, UBS has removed NSS from their financial model for Acadia, which resulted in a $2 decrease in their price target. This new target is supported by a discounted cash flow (DCF) framework.
The firm also emphasized that the long intellectual property (IP) life of Nuplazid outweighs the loss of NSS as a potential market opportunity, providing a silver lining despite the recent trial results.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.