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Baker Brothers Bet Big on Acadia Pharmaceuticals

Posted on December 10th, 2018

The shares of Acadia Pharmaceuticals, Inc. (ACAD) have plunged 40% in 2018. Still, it did not stop the Baker Brothers Advisors L.P. from sharply increasing their holdings in the stock when they had the opportunity. The company filed a $200 million secondary offering on November 26 to raise additional capital as they continue to grow.  The company’s lead drug is NUPLAZID, which is the only drug approved for the treatment of Parkinson disease psychosis.

The stock fell sharply in the Spring after concerns around the safety of their only approved drug NUPLAZID came under fire. The FDA cleared the drug, calling it safe in September. The company received more good news a few weeks later when it reported positive results from a phase 2 clinical trial for the treatment of depression.

The Offering

With investors unimpressed by the positive data, the shares failed to rise. With about $215 million in cash and short-term investments, the company decided it was time to raise capital through a secondary offering on November 26 to sell more stock.  The Baker Brothers, with two seats on the board of directors including one as the chairman, bought a stunning amount of stock on the deal.  Of the 16.1 million shares the company offered to sell, the Baker Brothers bought a total of 11.76 million or roughly 73% of the deal.

A Massive Stake

According to WhaleWisdom’s data, as of November 27, the Baker Brothers owned a total of 39.9 million shares or 32% of the company. That is up from 28.4 million shares or 22.8% of the company as of September 30.  The second largest holder of the stock is Fidelity, with 18.7 million or 15% of the company.  These two holders alone control more than 47% of the total shares, a massive stake between them.

(WhaleWisdom)

Growth Potential

The weak stock performance comes despite what is forecast to be a robust growth profile for the company. Analysts estimate revenue will grow 34% in 2019 to $298 million, and 81% in 2020 to $540 million. Additionally, the company is estimated to see its losses narrow to $1.75 per share in 2019, and $0.09 per share in 2020. It may be one reason why the Baker Brothers are so bullish on the stock.

Additionally, the company currently has many clinical trials it is running for its lead drug candidate. The next potentially significant clinical results may come in January, for the treatment of schizophrenia, according to the website clinicaltrials.org.

With the potential for more positive news on the way, the drug may be on the path to treating more illnesses down the road. That may only lead to more revenue opportunities for the company; it is a bet the Baker Brothers appear to be willing to take.

This entry was posted on Monday, December 10th, 2018 at 9:45 am and is filed under Hedge Fund News, Stock. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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