Top Pick of the Day: CTRV

Acadia Pharmaceuticals (ACAD 26.01 +2.20 9.24%) shares, not surprisingly, surged on Wednesday following a positive recommendation from the FDA’s Ad Comm late Tuesday. With Nuplazid now a step closer to reaching commercialization stage, the question is how much is ACAD worth. Analysts believe that the drug could achieve peak sales of $1 billion. Based on this ACAD trades at just under 3.5x sales, which is well below the industry average of around 10x. Even if you assign a conservative multiple of just 6x sales (almost double the current multiple), ACAD has significant upside from current levels. Remember ACAD had been trading at around $50 last summer before the sell-off in the biotech sector began. I will be publishing a detailed valuation report for ACAD next week.

Focus Ticker: ACAD

Valeant Pharmaceuticals International (VRX 27.07 -1.91 -6.59%) continues to be in news. On Wednesday, the stock dropped more than 6% even as the company announced that it has initiated the process to secure an amendment and waiver to its credit facility. The amendment will allow VRX to extend the deadline to file its 10-K to May 31 (from April 29) and its Q1 10-Q to July 31 (from June 14).

The amendment will provide VRX some much needed breathing space. While VRX has sufficient liquidity, there have been concerns about a potential default. But my major concern right now with VRX is whether the company’s new business model sustainable. I continue to remain on the sidelines with VRX and see it as a value trap.

Sector News

Opko Issued CRL for RAYALDEE NDA– Opko Health (OPK) shares dropped more than 10% on Wednesday after the company’s New Drug Application (NDA) for RAYALDEE for the treatment of secondary hyperparathyroidism in patients with stage 3 or 4 chronic kidney disease and vitamin D insufficiency was rejected by the FDA. The FDA issued a Complete Response Letter (CRL). The CRL has been issued due to deficiencies observed during an on-site inspection initiated at the company’s third-party manufacturer on March 14th. I will be reviewing the CRL and OPK in a report later today.