AbbVie shares tumble after schizophrenia drug disappoints

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Shares in AbbVie tumbled after the drugmaker revealed that an experimental treatment for schizophrenia, the main drug purchased as part of an $8.7bn acquisition last year, failed to meet its goals in clinical trials.

The Chicago-based drugmaker said on Monday its novel schizophrenia drug Emraclidine failed to show “a statistically significant reduction” in psychotic symptoms after six weeks, compared with the placebo group, in a phase-two trial on 752 schizophrenia patients.

The announcement sent AbbVie shares down more than 12 per cent during Monday afternoon trading on Wall Street, wiping more than $40bn off the market value of the group and pushing its market capitalisation below $310bn.

The announcement is a blow to AbbVie, which last year paid $8.7bn for Cerevel Therapeutics in order to get its hands on Emraclidine, in an effort to compete with a similar drug produced by Bristol Myers Squibb, which was recently approved by the US Food and Drug Administration.

An estimated 2.8mn US adults suffer from schizophrenia, which is associated with psychotic episodes and social withdrawal, but novel treatments for the psychiatric disorder have been in short supply.

In quick succession last December, BMS announced its $14bn acquisition of Karuna Therapeutics and AbbVie announced its takeover of Cerevel, in a bullish sign for the historically tricky field of psychiatry.

Shares in BMS were up more than 11 per cent on Monday afternoon, as investors concluded Emraclidine’s failure would provide a boost to BMS’s Cobenfy schizophrenia drug. In September, the latter became the first novel treatment for the psychiatric disorder in decades. BMS’s market value stood at $122bn.

Roopal Thakkar, AbbVie’s chief scientific officer, said the drugmaker was “disappointed with the results” and that it would continue to analyse the data to determine next steps. “We are confident that our innovative pipeline will continue to bring meaningful therapies to patients, and we remain committed to finding better treatments for people living with psychiatric and neurological disorders,” Thakkar said.

Psychiatry has proven to be a difficult field for pharmaceutical groups, with many giving up entirely because of the complexity of the brain and the unreliability of animal models in predicting the effectiveness of drugs on humans.

The approval of BMS’s Cobenfy in September had been interpreted as a positive sign for Emraclidine, as they both function by targeting muscarinic receptors. The receptors help to modulate the overproduction of the feel-good hormone dopamine, which is linked to schizophrenia symptoms.

Evan Seigerman, an analyst at BMO Capital Markets, said in a note that the trial failure was a “difficult outcome” for AbbVie. Despite a separate Parkinson’s drug purchased as part of the Cerevel acquisition succeeding in late-stage trials, he said that “today’s readout does not reflect well on the company’s [$8.7bn Cerevel] takeout”.

“While negative for [AbbVie], this points to an even clearer win for Bristol with the acquisition of Karuna for [$14bn],” Seigerman continued.

Guggenheim Securities analyst Vamil Divan said in a note that despite the trial failure, which will put the projected $1.5bn of sales from Emraclidine in 2033 under threat, “the initial stock sell-off also feels overdone”.

“The company remains free of significant patent expirations until Vraylar’s expected loss of exclusivity in Sept 2029, but we expect renewed focus from investors now on AbbVie’s ability to bring in additional growth drivers,” Divan said.