AbbVie's $8.7 bln bet on Cerevel is risky but smart, analysts say

Karuna Therapeutics

07/12/2023 18:30

By Bhanvi Satija and Khushi Mandowara
       Dec 7 (Reuters) - AbbVie's  ABBV.N  decision to buy
Cerevel Therapeutics  CERE.O  before key data on the drug
developer's experimental schizophrenia treatment may have helped
it avoid a potential bidding war but comes with several risks,
analysts said.
    North Chicago, Illinois-based AbbVie said late Wednesday it
would buy Cerevel for $8.7 billion, gaining a portfolio of drugs
being tested for a range of neurological conditions, including
emraclidine for schizophrenia. 
    "Boldly buying Cerevel now avoids a possible bidding war
post-data," Stifel analysts wrote in a note. 
    Cerevel is still testing emraclidine in mid-stage studies,
meaning the deal is not "de-risked" since the treatment could
fail in trials, analysts said. 
    "With this deal, however, AbbVie would be taking on
development risk given that Cerevel has not shown much data for
their lead asset, emraclidine," Wells Fargo analyst Mohit Bansal
said.
    Adding to concerns, schizophrenia drug trials have had a 
historically higher chance of failure compared to most other
disease spaces, and Cerevel's rival Karuna Therapeutics  KRTX.O 
has a two-year lead on emraclidine. 
    But the payoff could be high, analysts and investors said. 
    "They (Abbvie) wanted to get ahead of the data because it
may have made the asset more expensive," said Evan Seigerman,
BMO Capital Markets analyst. 
    "If the data was good, it would have made the process even
more competitive," he said. At least two other investors and
analysts shared similar views. 
    AbbVie has been looking to bolster sales and replace revenue
as its blockbuster arthritis drug Humira faces a raft of new
competition. 
    The drugmaker expects emraclidine to retain market
exclusivity until early 2040s, its executives told investors on
a conference call on Thursday. 
    With a portfolio that has two other experimental
neurological drugs for Alzheimer's and Parkinson's disease,
Cerevel makes an attractive target, Jeff Jonas, a portfolio
manager at Gabelli Funds, said. 
     "I think it's a very logical deal. AbbVie's already in
schizophrenia and Parkinson's, and to a certain extent, into
Alzheimer's. This is building their long term pipelines since
all these things are still two plus years away from market,"
Jonas added.  

    
    

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AbbVie to focus on smaller deals after buying spree   
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Cerevel options trading surge before AbbVie deal news raises
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 (Reporting by Bhanvi Satija and Khushi Mandowara in Bengaluru;
Writing by Manas Mishra; Editing by Krishna Chandra Eluri)
 ((Manas.Mishra@thomsonreuters.com;
www.twitter.com/Manaswrites15;))