Well, it’s official: AbbVie just gave the Big Pharma world an absolute clinic on “How to Spend $9bln the Wrong Way”. How so? Well it all comes down to AbbVie’s experimental schizophrenia drug, emraclidine, which flopped so spectacularly that it sent shares plummeting over 12% on Monday. 

(Source: Yahoo Finance) 

In short,  AbbVie wasn’t just hoping for a win with emraclidine, they were banking on it like a broke college kid playing the lottery. The drug was supposed to be their next blockbuster, a once-daily, oral treatment for adults with schizophrenia that would rake in billions. Instead, AbbVie managed to turn it into the equivalent of a really expensive sugar pill.

For instance, their two Phase 2 trials didn’t just miss the mark—they missed it by a country mile. Emraclidine failed to show any statistically significant improvement over a placebo, which in pharma speak means it didn’t do squat. So, yeah, nearly $9 billion later, and all AbbVie has to show for it is a massive L and a whole lot of questions about their judgment.

(Source: Giphy) 

What’s more is that the $40 billion market value AbbVie held so dear was sent straight to the abyss on the news, becoming one of the  biggest single-day stock crashes in recent Big Pharma history. Meaning, if you’re an AbbVie investor, this is the kind of news that sends you face-first into a bottle of whiskey by noon.

On the other hand though, while AbbVie was busy licking its wounds, Bristol Myers Squibb ($BMY) was out there living its best life. Shares of BMY surged 11% on the faceplant because, guess what? They sell Cobenfy, a competing schizophrenia drug that now has one less rival to worry about. 

(Source: IBD) 

Now with that said, Bristol Myers’ brilliance (or luck, depending on how you look at it) wasn’t an accident. They scooped up Cobenfy earlier this year in a $14 billion acquisition of Karuna Therapeutics. And now, with AbbVie’s emraclidine officially down for the count, Bristol’s $14 billion looks like a genius move while AbbVie’s $9 billion gamble has turned out to be a complete dumpster fire. 

So how did AbbVie manage to flush $9 billion down the drain? Well, AbbVie shelled out nearly $9 billion to acquire Cerevel Therapeutics last year, in the hopes that emraclidine would become the next big thing in schizophrenia treatment. The idea was to tap into the lucrative market for newer antipsychotics that avoid the nasty side effects of older meds like weight gain and sedation.

(Source: Reuters) 

Fast forward to Monday’s crash-and-burn moment, and it turns out that AbbVie’s shiny new toy was more of a lemon. Not only did emraclidine fail to outperform a placebo, but it also took two clinical trials and about 750 patients with it. This had Wall Street shook as analysts had been hyping this drug like it was the second coming of Pfizer’s COVID vaccine. Instead, they’ve been left wondering what’s next for AbbVie's CNS pipeline. And let’s be clear: AbbVie needs a win right now, especially with Humira—their cash cow—hemorrhaging market share left, right, and twice on Sunday.

(Source: Bioshare) 

Surprisingly though, according to our homeboys at StockTwits, retail investors are out here acting like this is just a minor hiccup. Retail bullish sentiment for AbbVie actually increased to 71/100, according to Stocktwits, because apparently, retail traders are the stock market’s eternal optimists—or maybe just gluttons for punishment.

(Source: StockTwits) 

Now sure, maybe they’re banking on AbbVie’s other neuroscience assets—like their Parkinson’s drug tavapadon, which recently did succeed in clinical trials—to pull a miracle. Or maybe they’re just really into watching slow-motion car crashes. Either way, AbbVie’s chief scientific officer, Roopal Thakkar, is in full damage control mode, saying the company will “analyze the data to determine next steps.” Translation: They’re frantically trying to figure out how to slap some lipstick on this pig and convince investors that everything’s fine.

In the end though, AbbVie is certainly not dead yet. They've still got a few irons in the fire, like their recent $1.4 billion acquisition of Aliada, a company working on some fancy blood-brain barrier tech for CNS diseases. But with emraclidine now officially in the trash heap, analysts are already speculating that AbbVie might need to go shopping for another major acquisition to fill the gaping hole in their pipeline. Cash = Burn. 

(Source: Giphy) 

But, but, but… regardless, the real question is whether AbbVie can pull itself out of this mess, or if this is just the beginning of a longer, more painful slump. One thing’s for sure, though—Bristol Myers is out here grinning like the cat that got the cream, while AbbVie’s still trying to figure out which end is up.

In the meantime, keep an eye on both of these stocks as the market continues to digest the failed trial. And as always, stay safe and stay frosty, friends! Until next time…

PS: Our official "Monday Madness" trade alert spiked 27% yesterday, and from what our system’s showing, this stock’s tiny float could SQUEEZE harder than fresh lemonade this morning at the market open. If you're tired of all the FOMO, click here to join Stocks.News Premium and unlock the ticker, plus get 2-3 trade alerts every week.

Stocks.News does not hold positions in companies mentioned in the article.