Why Acadia Pharmaceuticals Inc. Stock Crashed

By Markets Fool.com

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

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What: Shares of the clinical-stage drugmaker Acadia Pharmaceuticals dropped by over 20% on extremely high volume today. The culprits behind this major downward move are twofold. First, the company announced that it will delay the New Drug Application for its experimentalParkinson's disease psychosis drug nuplazid (pimavanserin) from this quarter to sometime in the second half of the year, citing issues with their ability to manufacture the drug on a commercial scale for the setback.

Perhaps even more concerning, Acadia's longtime CEO Uli Hacksell decided to retire and is stepping down from the board as well. The company's CFOSteve Davis will take over as CEO on an interim basis.

So what: Nuplazid reported strong late-stage results all the way back in 2012. But, despite the drug being granted Breakthrough Therapy status by the Food and Drug Administration, Acadia has been unable to get a regulatory application in front of the agency to review.

In short, they've had over two years to iron out the kinks and simply haven't been able to do so. So even though Acadia's remaining executives tried to downplay the CEO's sudden departure as nothing more than a personal decision, these two events appear to be coupled in investors' minds today.

Now what: Acadia's experimental Parkinson's disease psychosis drug is widely believed to have blockbuster potential, causing shares to soar over the last few years. Nonetheless, nuplazid's regulatory filing has been repeatedly postponed for various reasons, and the CEO's retirement during the most pivotal point in the company's life to date brings up a lot of questions.You may want to exercise caution with this biotech right now -- at least until the smoke clears from these latest events.

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The article Why Acadia Pharmaceuticals Inc. Stock Crashed originally appeared on Fool.com.

George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.