BofA analyst removes Sell rating on Acadia Pharma

Analyst William T. Ho upgraded shares to "Neutral" from "Sell," noting the stock's Monday close of $3.26 fell below his $3.50 price target. The stock has lost 82 percent of its value in the past year, recently bottoming at a record low of $3.18 in the wake of the unexpected failure of a midstage study of Acadia's schizophrenia drug candidate ACP-104.

While acknowledging its cheap valuation, Ho urged investors to remain in the sidelines regarding Acadia shares. He said that the San Diego-based company may find a drug development partner for pimavanserin, which is being developed for schizophrenia and Parkinson's, or even a buyer at some point, but doesn't think those possibilities will happen soon.

"Outside of a sudden pimavanserin partnership, we see few near-term catalysts to support the stock," Ho wrote in a note to investors. "At this point, even a partnership may not generate terms that appear significantly attractive to investors."

He thinks Acadia shares won't likely improve in the latter half of the year and may even decline as the company burns through cash reserves.

Representatives at Acadia could not immediately be reached for comment Tuesday.

Nevertheless, Lehman Brothers analyst Jim Birchenough maintained his "Overweight" rating on Acadia, saying the stock's cheap price is a good entry point for investors. Additional opportunities exist for pimavanserin, he added, believing the company is currently undervalued by the market.

"We see significant further upside potential on partnership opportunity for pimavanserin in schizophrenia and progress with the Phase III Parkinson's disease psychosis program for pimavanserin," he said in a note to clients Monday.

Currently, most of Acadia's revenue is linked to partnerships with Irvine, Calif.-based Allergan Inc., which will expire in March 2009. The companies have been collaborating on a range of treatments for nerve pain and eye conditions, including glaucoma.