Neumora Therapeutics said Monday the Food and Drug Administration put its schizophrenia drug on hold after rabbits who received it experienced convulsions. In response, the biotech stock plunged.
The company had already tested its drug, dubbed NMRA-266, in two other animals — likely mice and nonhuman primates, William Blair analyst Myles Minter said in a client note. Neumora had already begun a Phase 1 study in roughly 30 people. But, due to side effects in rabbits, the FDA temporarily shut down Neumora's study in people.
Analysts noted NMRA-266 is an early-stage program and that the main driver for Neumora remains navacaprant, its potential treatment for depression. Still, RBC Capital Markets analyst Brian Abrahams says, the depression treatment space has gotten a lot of attention recently with the takeovers of Cerevel Therapeutics and Karuna Therapeutics.
"That said, given the early stage and long path, we had not ascribed significant value to (NMRA-266), and continue to believe lead drug navacaprant — their core value driver — has a good probability of success and remains fundamentally undervalued into Phase 3 data," he said in a report. "Any major pullback should present a compelling buying opportunity."
On today's stock market, Neumora stock tumbled 17.5% to close at 11.19. That's its lowest point since December.
Biotech Stock Hits 2024 Low
Neumora previously expected to have initial data from human studies of NMRA-266 sometime in the middle of this year. The company rescinded that guidance following the FDA's hold.
Notably, Neumora says it's working on next-generation schizophrenia and antipsychotic treatments acquired in a licensing agreement with Vanderbilt University. These compounds are roughly 12 to 15 months behind NMRA-266, Abrahams said.
"Our sense is that their properties may enable exploration in additional (disease areas), though we believe it will also be important to fully understand the reasons for NMRA-266's toxicity and why the backups would not share it," he said.
Abrahams kept his outperform rating on the biotech stock, but cut his price target to 29 from 31.
Neumora Stock Rides Acquisition Wave
Neumora stock had risen earlier this year following acquisitions in the mental health space. Bristol Myers Squibb bought Karuna for $14 billion, and AbbVie is buying Cerevel for $8.7 billion.
The biotech stock recently undercut its 50-day moving average, however, IBD MarketSurge shows.
William Blair's Minter kept his outperform rating on Neumora stock. Like RBC's Abrahams, he noted the biggest feather in Neumora's cap is its potential depression treatment.
"We remain optimistic about the potential for the novel KORA class in treating challenging symptoms of major depressive disorder including anhedonia," he said. "However, neuropsychiatry drug development carries the usual clinical risk."
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