2023-09-27 17:14:30 ET
Acadia Pharmaceuticals (NASDAQ: ACAD) stock price did well on Wednesday even as American equities retreated. The biotech stock jumped to a high of $26.15, much higher than this week’s low of $22.95. Despite the comeback, the shares remain 25% below the highest point this year.
New military contract
ACADIA Pharmaceuticals is a fast-growing biotech company that has achieved significant success in the past few months. It owns NUPLAZID, a drug used in the lucrative Parkinson’s disease industry. The drug had over $142 million in sales in the last quarter.
Most recently, the company launched DAYBUE, a drug that has become popular among physicians. In August, the company noted that over 400 prescribers had selected the drug for patients of all ages. The total addressable market for Daybue is between 11k and 17k while the annual cost for the drug is about $375k. Therefore, it is estimated that the peak annual revenue for the drug will be between $1.2 billion and $1.9 billion.
ACADIA also has several drugs at various stages in its pipeline. For example, its ACP-101 drug for Prader-Willi Syndrome will start soon.
ACADIA Pharmaceuticals has other good things going on. Unlike other biotech companies, it has a strong balance sheet, helping it to carry on with R&D profitably. It has over $375 million in cash and short-term investments and no debt.
Meanwhile, ACADIA has moved into military contracts. The company received a major order by the Department of Veteran Affairs . The contract is worth about $330 million and will last in the next five years. This is a major development that could help to support the company for a while.
To be clear. ACADIA seems like an overvalued company based on conventional metrics. It has a market cap of over $4.1 billion compared with its TTM revenue of over $550 million. It is also a loss-making company. However, based on its current drugs and its pipeline, the valuation starts to make sense.
ACADIA stock price forecast
The daily chart shows that the Acadia Pharmaceuticals share price has been in a bearish trend in the past few weeks. It has dropped by more than 24% from the highest point this year. Along the way, it has formed a descending channel that resembles a falling wedge. It remains above the 200-day moving average while the Relative Strength Index (RSI) has drifted upward.
Therefore, I suspect that the ACAD stock price will continue rising as buyers target the next key resistance point at $30.27. The stop-loss of this trade will be at $23.55.
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