Acadia Pharmaceuticals (NASDAQ:ACAD) announced its 3Q financial results Monday, reiterating the expectation for top-line pimavanserin data by the end of the month and reporting the first use of its At-The-Market share issuance. The Phase 3 -020 trial evaluates pimavanserin as a treatment for Parkinson’s Disease Psychosis (PDP), and management has continually guided for data before the end of November. Interest in the compound spurred ACAD to rise more than 40% in the last three months, and already on Tuesday shares have climbed 15%. Despite the run-up, ACAD investors should remain aware of the $13M in equity financing that still overhangs this volatile stock, part of a $20M At-The-Market (ATM) registration initiated in March. The company utilized $7M of the available offering during the third quarter, and maintains that cash and investments of $23.1M should last into the second half of 2013, although it’s likely the company will continue selling equities in the near-term to increase capital reserves.
As shares swing north ahead of the data release, Acadia should be covertly selling shares left and right. Presumably, Acadia utilized the ATM offering near its 52-week highs at the end of September, as the agreement requires the company to issue shares at current market prices. While management says they have yet to use the ATM this quarter, if ACAD continues climbing into the data release it only makes sense to take advantage of appreciating prices. It wouldn’t be a surprise for ACAD to exhaust the ATM entirely considering the downside risk that accompanies the pimavanserin data and the company’s need for more cash without a partnership; that’s $13M in dilution of which shareholders will be completely uninformed. It’s a little unnerving but won’t have much impact on near-term price action; ACAD has an enthusiastic following and a continued run-up to previous highs isn’t out of the question. As the -020 data release approaches and catalyst traders jump in, share price will be ruled by technicals. Current resistance sits near $2.60, and if ACAD can break through with volume, it may surge all the way to previous highs around $3.00 within the month. As with most run-up trades however, we suggest taking profits early and often. Pimavanserin has been through the gauntlet of clinical trials – failing the previous -012 study – and even though it’s current trials have been redesigned to more appropriately evaluate the compound, the risks should pimavanserin fall short are substantial.