While a number of companies in the biotechnology space staged a strong start to the week, some others didn’t fare so well. One that falls into the latter category is Acadia Pharmaceuticals (NASDAQ:ACAD).

On Wednesday morning, Acadia was trading for in and around $20 a share. By the close of play on Wednesday, this had dipped to $15 a share – a nearly 25% depreciation across the session and the company’s sharpest selloff in recent history.

So what happened?

Well, for the majority of the day yesterday, the company was trading relatively flat but, at around 3 PM EDT, mainstream news media outlet CNN put out a report detailing the suggestion that the FDA will be re-examining the safety of a drug called Nuplazid, which was approved by the FDA back in 2016 as an asset designed for the treatment of psychosis in patients with Parkinson’s disease.

First up, and as a bit of background, it’s worth noting that psychosis is common in Parkinson’s disease, particularly in its later stages. The symptoms range from comparatively minor illusions, vivid dreams, and occasional, non-disturbing visual hallucinations to frank and outright psychosis and it is associated with poor quality of life for patients and the carers.

As things stand, there were very little treatment options available to these patients since the current standard of care psychosis therapies (i.e., those that would be given to patients suffering from the type of psychosis that is not related to Parkinson’s disease) have the potential to conflict with the medication that Parkinson’s disease patients receive regularly – both from a safety and efficacy perspective.

Nuplazid is what is called is an atypical antipsychotic, meaning that it has a mechanism of action that doesn’t fall in line with standard MOA in the space and that, by proxy, can be used to tackle the psychosis side of this population without interfering in the safety and efficacy of standard of care Parkinson’s disease treatments.

At least, that was what everybody thought – until now.

As per the above, CNN is now reporting that the FDA wants to take another look at the drug and, specifically, the safety side of the asset, in an attempt to ascertain whether or not it really can be as safe and effective as first thought when the asset hit shelves back in April 2016.

So what’s the problem?

Well, anything specific right now would be speculation since the CNN report was based purely on a comment made by FDA Commissioner Scott Gottlieb last week during a budget hearing with Congress.

Basically, a reporter asked him what the agency intends to do about the drug, with the question brought on by (so far, colloquial) reports of patient deaths and adverse effects in portions of the population that are taking the drug regularly.

Gottlieb’s response?

That the FDA would “take another look” at Nuplazid against the backdrop of the colloquial reports.

What’s worth mentioning here is that this doesn’t necessarily imply a bleak future for the asset. It was, after all, approved by the agency initially and as anybody in this space will already be aware, the FDA doesn’t approve a drug, especially one in an indication such as psychosis, without fully convincing itself that it can be safe and effective in its target population.

for the agency to then pull back on the drug that it has previously approved would be something of a black mark on its own reputation. This, of course, is a two-way street. For this exact same reason, the FDA wouldn’t reassess an asset lightly, which in and of itself suggests that there may be some real concerns here as relates to what happens to the strip going forward.

Essentially, markets can do nothing but wait and see how the reassessment (if, indeed, there is one ongoing, which all suggestions point to right now) matures.

This uncertainty, of course, has translated to the above-outlined market weakness for Acadia  and it is unlikely we will see the company recover the lost strength near-term until we get some sort of clarity as to exactly what’s going on behind the scenes both at the company, in the healthcare setting and at the US regulatory agency.

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