UPDATE 2-Acadia, Biovail plan more study on Parkinson's drug

* To use data from failed study to plan new trial

* New late-stage trial expected to start in H1 2010

* To pursue adjunctive therapy with drug for schizophrenia

* Acadia to implement cost-saving measures this month

* Acadia shares up 22 pct (Adds analyst comments, details, stock movement)

By Esha Dey

BANGALORE, Oct 6 (Reuters) - Acadia Pharmaceuticals Inc (ACAD.O: 行情) and its partner Biovail Corp (BVF.TO: 行情) have decided to conduct a third late-stage trial for pimavanserin, their experimental drug for psychosis related to Parkinson's disease that failed in a late-stage trial last month, the companies said.

Acadia shares rose as much as 22 percent in morning trade as investors were encouraged by the news that signalled that the companies were not giving up on the drug.

"What is reassuring (Acadia) investors here is that Acadia's partner does see some potential in the drug still," Needham & Co analyst Alan Carr said.

The companies have agreed to use the findings from the failed study along with the data from a second, ongoing late-stage study, to arrive at an enhanced study design that may be used in the third late-stage trial.

Parkinson's disease is a degenerative disorder of the central nervous system that often impairs motor skills and speech.

Acadia said it plans to implement cost-saving measures during October to streamline operations, adding that its current cash, investment securities and collaboration payments will be sufficient to fund operations into the first half of 2011.

"My guess is that after cutting expenses they will have up to two years of cash; that's a nice buffer," Needham's Carr said.

As of June 30, the company had about $66.2 million in cash, cash equivalents and investment securities, according to a regulatory filing.

NEW TRIAL

Acadia and Biovail will start planning for the new trial using a 40 milligram dose of pimavanserin. Biovail will be responsible for the cost of the trial that is expected to start in the first half of 2010.

Pimavanserin, which failed to significantly cut psychotic episodes associated with Parkinson's, such as hallucinations and delusions, compared with a dummy drug in the first late-stage trial, is a small molecule that can be taken orally as a tablet once a day.

Acadia and Biovail, which have a collaboration to develop pimavanserin in Alzheimers disease psychosis (ADP) and Parkinsons disease psychosis (PDP), also said that they plan to pursue adjunctive therapy with the drug for schizophrenia.

The companies currently plan to focus their efforts on the PDP and schizophrenia programs, but said were also moving forward with planning for an initial study in ADP.

Acadia shares were up 22 percent at $2.02 in morning trade on Nasdaq, while Biovail shares were trading almost flat at C$15.73 on the Toronto Stock Exchange. (Reporting by Esha Dey in Bangalore; Editing by Aradhana Aravindan, Himani Sarkar)