Acadia Pharmaceuticals: Buy ACAD Calls in Advance of An Acquisition

ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is a biopharmaceutical company focused on the development and commercialization of medicines to address unmet medical needs in neurological and related central nervous system disorders. It has a pipeline of product candidates led by NUPLAZID (pimavanserin), which is in Phase III development as a treatment for Parkinson’s disease psychosis.

Acadia Pharmaceuticals in My Scope

Acadia Pharmaceuticals caught my attention some minutes ago when it gained 1.90% to set a new 52-Week high of $37.70. I am usually interested in stocks that are setting new highs because the kind of bullish momentum that makes option trading profitable is always on their side.

On a closer look, I observed that shares of Acadia have created six new highs in the last one month. In addition, the stock has gained 9% within the last month even as it trades above its 50 and 200-day moving averages.

Another interesting point that keeps the stock in my sights is that it has positive analyst vibes as Zacks has a “Buy” rating on the stock. More so, Wall Street analysts issued 2 “Strong Buy” ratings, 5 “Buy” ratings and 1 “Hold” recommendation. In addition, Motley Fool individual investors voted 271 to 74 that Acadia Pharmaceuticals will beat the market.

The Key Reason Acadia Pharmaceuticals is Hot

ACAD

The chart above shows how the shares of Acadia have traded in the last one year. The stock has gained an impressive 141.04% from a 52-Week low of $15.64 in April to the current 52-Week high of $37.70. The main reason shares of Acadia have been soaring is the huge potential that its blockbuster Nuplazid possesses. Nuplazid is on track to become the first the drug approved for Parkinson’s disease-related psychosis in the United States.

Nuplazid was given a breakthrough drug status by the FDA, to suggest that the drug has the potential to rake in billions of dollars in revenue. Indeed, Nuplazid could deliver impressive revenue, considering the fact that the market for treating PDP is very high with a patient population of one million and the possibility that Nuplazid could be applied to psychosis from other neurological diseases such as Alzheimer’s, Lewy Body Dementia, depression, and mania.

Given the huge market potential that Nuplazid has, Acadia could turn out to be a major acquisition target as it continues to deliver encouraging results from clinical trials. In fact, I won’t be surprised if AstraZeneca showed interest in Acadia because it has lost market share for it Seroquel. Hence, an acquisition of Acadia will give the company another blockbuster drug that could be milked for greater revenue down the road.

AbbVie is another company that might show interest in acquiring Acadia. AbbVie’s Duopa recently won the FDA approval for the treatment of patients with motor fluctuations common in the advanced stages of Parkinson’s disease. The synergy of marketing Duopa and Nuplazid to the same market might be tempting enough to encourage the acquisition of Acadia Pharmaceuticals.

How to Trade ACAD Options

I am optimistic about the prospects of Acadia Pharmaceuticals going forward and I recommend that you buy ACAD call options. I recommend buying the ACAD Jun 2015 37.000 call (ACAD150619C00037000) option at an asking price of $4.90.

— Daily Option Alerts

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