Bristol Myers Squibb stock rocketed Monday after AbbVie's experimental schizophrenia treatment failed in a pair of midstage studies.
The news bolsters Bristol Myers' new schizophrenia treatment, Cobenfy.
Bristol spent $14 billion earlier this year to acquire Karuna Therapeutics for Cobenfy, the drug formerly called KarXT. Cobenfy gained Food and Drug Administration approval in September. It's the first drug in its class.
AbbVie was looking to rival Cobenfy with its drug, emraclidine. But emraclidine failed to make a difference in two Phase 2 studies.
AbbVie tested emraclidine in patients with schizophrenia who experienced an acute exacerbation of psychotic symptoms. After six weeks, patients who received emraclidine didn't show a significant improvement in symptoms compared to the placebo recipients.
Bristol Myers Squibb stock surged 10.5%, ending the regular session at 59.82. Shares have run up markedly since July. After bottoming out at 39.35 on July 5, Bristol Myers stock has soared 52%, as of Monday's close. AbbVie stock plummeted 12.6% to close at 174.43.
Placebo Response Undoes Emraclidine
AbbVie's emraclidine and Bristol's Cobenfy both target muscarinic receptors, which are involved in the parasympathetic nervous system. But they do so differently.
In its two midstage studies, AbbVie looked for a change on the Positive and Negative Symptom Scale, or PANSS, after six weeks. Across two doses, emraclidine outperformed the placebo by 3 points and 1.2 points. In the second study, the placebo beat out emraclidine at the high dose. The low dose led to a 2.4-point improvement over the placebo.
"Management has been indicating they expected placebo response to increase, but this is clearly a surprise," Piper Sandler analyst Christopher Raymond said in a report.
The schizophrenia treatment also underperformed its Phase 1 results. In earlier testing, patients had a 20-point improvement from baseline in their PANSS scores. But in Phase 2 testing that faded to improvements ranging from 14.2 points to 18.5 points.
"The outcome is a clear positive for Bristol Myers Squibb, because its recently approved schizophrenia treatment Cobenfy will not face competition from emraclidine," Leerink Partners analyst David Risinger said in a report.
He kept his market perform rating on AbbVie stock.
Did AbbVie Make A Costly Mistake?
Like Bristol Myers, AbbVie acquired emraclidine's maker, Cerevel Therapeutics for $8.7 billion earlier this year.
But "we acknowledge that an $8.7 billion 'mistake' is likely to weigh on sentiment for some time," Piper Sandler's Raymond said.
AbbVie is still testing emraclidine in patients with dementia-related psychosis. But "we suspect investors are likely to ascribe very little benefit of the doubt to that program," he said.
Raymond has an overweight rating on AbbVie stock.
While Bristol Myers Squibb stock popped to a 14-month high, AbbVie shares skidded to their lowest point since July.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
