Wall Street Analysts Left Shocked by AbbVie’s ‘Complete’ Failure of Schizophrenia Medication

Recently, AbbVie made headlines with a nearly billion acquisition, positioning itself as a key player in a new generation of antipsychotic medications anticipated by Wall Street to yield substantial sales. However, on Monday, the firm faced a setback.

The standout asset from AbbVie’s acquisition of Cerevel Therapeutics, an experimental drug known as emraclidine, has reportedly failed in two clinical trials. These mid-stage trials, which promised to deliver critical insights into the drug’s efficacy for treating schizophrenia symptoms, revealed that emraclidine’s performance was not appreciably better than a placebo.

This unexpected “flat out” failure, described by one analyst, shocked investors. AbbVie’s stock plummeted by over 12% on Monday, translating to a loss of roughly billion in market capitalization. This marks one of the most significant single-day declines in stock price among large pharmaceutical firms in recent quarters.

On the contrary, shares of Bristol Myers Squibb, which offers a competing medication, saw an upturn of about 12%. Bristol Myers acquired the drug, marketed as Cobenfy, through a billion acquisition of Karuna Therapeutics earlier this year.

According to Olivia Brayer, an analyst at Cantor Fitzgerald monitoring Bristol Myers, AbbVie’s acquisition has “just gone up in flames.” Stifel analyst Paul Matteis discussed how emraclidine’s failure is “outright surprising” and is likely to “significantly enhance” Bristol Myers’ competitive stance with Cobenfy.

Both Cobenfy and emraclidine belong to a new class of antipsychotic drugs aimed at enhancing “muscarinic receptors,” which are proteins that modify brain chemistry. Unlike earlier antipsychotics that primarily affect dopamine directly—an essential signaling chemical whose imbalance can lead to disorders—muscarinic drugs interact with dopamine indirectly.

Several mid- to late-stage trials have confirmed that Cobenfy effectively alleviates schizophrenia symptoms promptly while sidestepping some adverse effects commonly linked to older medications, such as weight gain and sedation. An earlier, less extensive study indicated that emraclidine displayed “clinically meaningful antipsychotic activity” at two different doses.

Roopal Thakkar, AbbVie’s chief scientific officer, mentioned that the company intends to continue analyzing the new data to assess future options for emraclidine. AbbVie also obtained several other experimental drug initiatives through the Cerevel deal, including a project for Parkinson’s disease that unexpectedly succeeded in late-stage trials this spring.

Despite this, the recent failures are likely to overshadow the acquisition. Raymond James analyst Sean McCutcheon observed that “Bristol Bet on the Right Horse,” while RBC Capital Markets’ Brian Abrahams suggested that AbbVie may need to explore further external deals to offset the recent failure.

Analysts foresee broader consequences for schizophrenia drug development, particularly regarding other companies researching muscarinic compounds.

Neurocrine Biosciences experienced a stock price drop of over 20% in late August following mixed results from its schizophrenia study. However, Neurocrine’s shares rose on Monday, potentially indicating that investors no longer view emraclidine as a competitor, according to Jefferies analyst Akash Tewari.

Shares of another company, Neumora Therapeutics, fluctuated after AbbVie’s announcement. Earlier this spring, a trial of Neumora’s muscarinic drug was halted due to safety concerns arising from new animal test findings.

Graig Suvannavejh from Mizuho Securities speculated that Neumora may abandon that drug and concentrate on advancing a backup candidate for human testing next year. However, he expressed that after emraclidine’s setbacks, Neumora “might revisit” the status of its muscarinic initiative, weighing it against its already extensive and diverse [central nervous system] pipeline.

“Despite today’s developments, we remain quite optimistic about the muscarinic class for schizophrenia,” Suvannavejh noted in his client correspondence, emphasizing that AbbVie’s results illustrate “clinical trial execution risk” rather than an intrinsic risk associated with the functionality of muscarinic drugs.