AbbVie and Bristol-Myers Squibb: Emraclidine Failure Solidifies Cobenfy Market Position

We’re maintaining our fair value estimate for AbbVie at $176 and slightly raising our fair value for Bristol-Myers Squibb to $66 from $63 following two pivotal study failures for AbbVie’s schizophrenia drug candidate emraclidine, which was the centerpiece of the recent $8.7 billion Cerevel acquisition. Cerevel had previously shown a strong efficacy and safety profile for emraclidine in a smaller phase 1b study in schizophrenia, creating the potential for differentiation from Bristol’s recently approved schizophrenia drug Cobenfy. However, both phase 2 studies of emraclidine, Empower-1, and Empower-2, failed to show any statistically significant improvement in the key efficacy endpoint after six weeks of treatment. If data had been positive, AbbVie had expected it to be sufficient to file for regulatory approval. We think AbbVie’s immunology and oncology portfolios continue to support its wide moat. At the same time, Bristol’s Cobenfy approval adds to the firm’s wide moat established with its strong oncology and cardiovascular foundation. Following the emraclidine trial failures, AbbVie shares have fallen close to our fair value estimate, while Bristol shares still look slightly undervalued.