AbbVie under pressure as schizophrenia drug fails two trials

Shares of AbbVie (ABBV) are sliding on Monday after the company’s drug candidate for schizophrenia failed to meet the key goal in two mid-stage studies. Truist says that Abbvie’s “pain” is Bristol Myers (BMY) “gain,” as the latter’s schizophrenia drug Cobenfy – which was approved this past September – is now poised to have less commercial competition.

FAILS TO MEET ENDPOINT: AbbVie’s two Phase 2 EMPOWER trials investigating emraclidine as a once-daily, oral monotherapy treatment for adults with schizophrenia who are experiencing an acute exacerbation of psychotic symptoms, did not meet their primary endpoint of showing a statistically significant reduction – improvement – in the change from baseline in the Positive and Negative Syndrome Scale total score compared to the placebo group at week 6. Emraclidine was well-tolerated with a safety profile comparable to that observed in the Phase 1b trial. Emraclidine is a potential novel M4-selective positive allosteric modulator in development for schizophrenia and Alzheimer’s disease psychosis as a once-daily medication without the need for titration.

LESS COMMERCIAL COMPETITION: Truist sees the news as a negative for AbbVie and a positive for Bristol Myers, whose schizophrenia drug Cobenfy was approved this past September and now is poised to have less commercial competition. Both AbbVie’s emraclidine and Bristol’s Cobenfy were acquired from acquisitions of Cereval and Karuna, respectively, notes the firm, which expects AbbVie shares to be weak after the company announced its two Phase 2 trials – EMPOWER-1 and -2 – evaluating emraclidine in schizophrenia did not meet their primary endpoint versus placebo. The firm has Buy ratings on both stocks.

Leerink voiced a similar opinion, saying this outcome is “a clear positive” for Bristol Myers because its recently approved schizophrenia treatment Cobenfy will not face competition from emraclidine. Leerink has a Market Perform rating on AbbVie’s shares.

Keeping an Overweight rating on AbbVie following the trials results, Barclays acknowledges that emraclidine’s failure removes a “compelling mid-to-late-stage driver” for the company. However, the firm still likes the shares into 2025, citing AbbVie’s commercial portfolio upside and “differentiated” earnings growth versus peers. With that said, today’s update “represents negative optics” after the company’s $9B acquisition of Cerevel and removes emraclidine as a mid-to-long-term blockbuster revenue driver and potentially central piece of the neuroscience franchise, contends Barclays.

Meanwhile, JPMorgan told investors that it expects AbbVie shares to trade off by about 10% on the news, which it notes would be “well above” what AbbVie paid for Cereval, but adds that “the Street had viewed emraclidine as an exciting asset for the company.” Meanwhile, the firm expects Bristol Myers shares to be up 10%-15% with Cobenfy now alone in the space for the foreseeable future. The firm has Overweight ratings on both stocks.

PRICE ACTION: In morning trading, shares of AbbVie have dropped over 12% to $174.80, while Bristol Myers has gained more than 11% to $60.34.