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Why Acadia Pharmaceuticals Spiked Today

What happened

Acadia Pharmaceuticals(NASDAQ: ACAD) stock was up more than 14.3% as of 12:03 p.m. ET on Wednesday thanks to a sheaf of documents released by the Food and Drug Administration (FDA) about the company’s submission requesting a new indication for its Parkinson’s-disease-associated psychosis therapy, Nuplazid.

Last year, the FDA ruled that there wasn’t sufficient evidence in favor of Nuplazid’s efficacy for the new indication, which is for psychosis in patients with Alzheimer’s disease, so the company submitted a pair of new analyses. The newly released documents appear to show that regulators are at least willing to entertain a formal public evaluation of the merit of the two analyses, which is what’s driving the rise in the share price.

So what

Nuplazid is Acadia’s only approved drug, and it helped the company to bring in trailing-12-month revenue of more than $493 million. But the company still isn’t profitable, so there’s pressure for it to squeeze more money out of the drug’s sunk research and development costs by trying to commercialize Nuplazid for additional indications.

If regulators ultimately decide not to bite the second time around, it’ll be another major setback. Nonetheless, revenue from the current set of indications for Nuplazid is still growing, so it won’t be a life-or-death situation for the company either way.

Now what

Acadia’s resubmitted application will go before a non-binding FDA advisory committee on June 17. Then, on Aug. 3, the FDA’s binding committee will hold the final vote.

If the advisory committee votes to approve the drug, it’ll catalyze further growth, but the binding committee’s vote will result in a far larger move — and not necessarily upward.

Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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