Why Shares of ACADIA Pharmaceuticals Inc. Jumped Today

Image source: ACADIA Pharmaceuticals.

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What: Shares of ACADIA Pharmaceuticals Inc., a biopharma focused on diseases of the central nervous system, were up more than 12% as of 3:30 p.m. ET on rumors that AstraZeneca PLC (ADR) is eyeing the company as a potential acquisition candidate.

So what:According to a report from theDaily Mail last Friday, pharma giant AstraZeneca is said to be one of the companies that is interested in placing a bid on ACADIA Pharmaceuticals. The report claims that Acadia would not even consider an offer of less than $60 per share, which is 50% higher than what shares are currently fetching.

We don't yet know if this rumor is true or not since neither company has released any information. However, since the number of ACADIA shares that have been sold short has been on the rise over the last few months, it's possible that the rumor is scaring off some of these the company's bears, contributing to today's spike.

ACAD Short InterestYCharts

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Now what: AstraZeneca does have a recent history of buying small biopharma companies in an effort to reignite its top-line growth. Just last year it spent $2.7 billion to acquire ZS Pharma, a company developing a treatment for hyperkalemia. Unfortunately, that treatment's future recentlycame into question

Regardless, while the idea of a buyout is always exciting, ACADIA's investors should do their best to stay focused on how well the company's newParkinson's psychosis drug, Nuplazid, performs on the market.

I think that ACADIA bulls have plenty of reasons to believe that Nuplazid has a real shot at being a winner.In clinical trials, Nuplazid was able to help reduce many of the symptoms of Parkinson's psychosis. In addition, patients who took Nuplazid did not experience problems with their motor control, which is a common side effect of antipsychotics. That could greatly help to reduce the burden placed on patients' caregivers, which is one of the biggest challenges in treating the disease.

Image source: ACADIA presentations.

It is estimated that 40% of patients who have Parkinson's develop psychosis, and with 1 million patients in the U.S. alone suffering from the disease, Nuplazid has a big market opportunity ahead of it. That's especially true when you consider there are no other approved therapies available, so Nuplazid has the market all to itself.

Nuplazid was just launched for sale on May 31, so investors will get their first look at how well the drug is performing out of the gate during the company's second-quarter earnings report.

Until we get confirmation otherwise, investors should do their best to ignore today's move and stay focused on the long-term potential of Nuplazid.

The article Why Shares of ACADIA Pharmaceuticals Inc. Jumped Today

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