M&A is a metaphysics, with heaven on one side and hell on the other, tempting prominent names to enter. The latest to enter "hell" is AbbVie. On November 11, AbbVie announced that emraclidine, the "ace project" acquired by acquiring Cerevel for $8.7 billion at the end of last year, failed to reach the expected endpoint in two Phase II studies for schizophrenia, which cast a shadow on its future. As soon as the news came out, AbbVie's stock price plummeted 12.57%, and its market value evaporated by more than $40 billion overnight.

Once, this merger and acquisition was a "model" in the industry. From the first acquisition invitation to the final acquisition of Cerevil, AbbVie took less than two months. Fast, accurate, and ruthless, it foreshadowed AbbVie's determination to deal with the patent cliff. But now, everything is coming to nothing. This once again allows us to see the "variables" of pharmaceutical research and development, and more importantly, reminds us that haste makes waste. Because, in the world of new drug development, no one can monopolize or predetermine the results. It is understandable that AbbVie quickly acquired Cerevel. After all, the latter's core pipeline is emraclidine, a selective positive allosteric modulator of muscarinic receptor M4, which is a potential breakthrough player in the field of schizophrenia. With a large patient population and clinical needs for new therapies, schizophrenia has naturally become a gold mine for big pharmaceutical companies. And emraclidine happens to be a proven direction.

One of the main theories about the cause of schizophrenia is the imbalance of acetylcholine and dopamine. The activation of muscarinic receptors prevents the release of acetylcholine, so it may bring the characteristics of "increased efficacy and low toxicity" compared with other therapeutic drugs. As early as 1990, potential therapies that stimulate muscarinic receptors in the central nervous system were hotly studied. At that time, many studies have shown that stimulating muscarinic receptors, especially M1 and M4 receptors, can alleviate psychotic symptoms and cognitive impairment.

Unfortunately, muscarinic receptor agonists are also difficult to avoid the problem of high toxicity. Although the pioneer xanomeline has good effects, the discontinuation rate exceeds 50%, and it was eventually abandoned. However, the medical community has never stopped researching and developing muscarinic receptors, and some pharmaceutical companies have also broken through based on their unique insights. For example, Karuna took the lead, and Cerevel is expected to give another insight.

Cerevel believes that the reason why traditional muscarinic receptor agonists have high toxicity and side effects is that they activate too many receptor subtypes, so the emraclidine it designed only targets the muscarinic receptor M4 subtype. According to the company's Phase 1b trial Part B experiment, 52 schizophrenia patients had good overall tolerance, and there were no treatment-related serious adverse events or treatment-related subject discontinuation. It is for this reason that Cerevel also won the favor of AbbVie and was eventually sold at a high premium.

As mentioned above, the two Phase II studies announced by AbbVie this time, EMPOWER-1 and EMPOWER-2, were not satisfactory. Both studies evaluated efficacy and safety. The only difference was the dosage. EMPOWER-1 set up two dosage groups, 10mg and 30mg, while EMPOWER-2 set up two dosage groups, 15mg and 30mg.

The results showed that neither study reached the primary endpoint. Specifically, in the EMPOWER-1 study, the mean PANSS total scores of the 10mg group, 30mg group and placebo group were -14.7, -16.5 and -13.5, respectively. The PANSS total scores of the two treatment groups improved to a certain extent, but not significantly and without statistical significance.

The EMPOWER-2 study was even worse. The mean PANSS total scores of the 15mg group, 30mg group and placebo group were -18.5, -14.2 and -16.1, respectively. The improvement of the PANSS total score of the 30mg group compared with the baseline was worse than that of the placebo group.

This also reflects the cruelty of gambling on innovative drugs: high-expectation early clinical trials can often be traps. Emraclidine's performance was much worse than that of the Phase 1b trial published by Cerevel: at that time, emraclidine 30mg QD achieved a PANSS score improvement of 19.5 points, while in the Phase 2 clinical trial, the improvement score of the 30mg group was only around 16 points. But more importantly, the high placebo response made AbbVie suffer a loss. The so-called high placebo response refers to the significant symptom improvement or disease remission after patients received placebo treatment in clinical trials.

It can be seen that in the Phase 1b trial, the placebo group patients improved by 6.8 points after 6 weeks, but in the Phase 2 clinical trial, the placebo group improved by 13.5 points and 16.1 points, respectively, which is comparable to therapeutic drugs. This also caused AbbVie to overturn. High placebo response has always been the "killer weapon" of neuroscience drugs under development. AbbVie has also done sufficient due diligence on this and believes that the separation of Phase 1b clinical data is high enough because of the high certainty. Unfortunately, variables and risks came unexpectedly in the Phase 2 clinical trial. This also further reminds MNCs that hope to "hunt" in the field of neuroscience.

As mentioned above, it took AbbVie less than two months from the first acquisition offer to the final acquisition of Cerevil. Behind this, it is hard to say whether it is decisive or arbitrary. In mid-October last year, AbbVie took the initiative to find Cerevil and offered to acquire the company at a price of US$35 per share. That night, it submitted a written, non-binding letter of intent to Cerevil representatives. This caught Cerevil off guard. Before this, Cerevil had not considered the sale. In response, the company contacted MNCs including Pfizer to discuss mergers and acquisitions.

However, due to the delayed disclosure of core data, other MNCs rejected Cerevil. The buyers contacted by Cerevil all said that they were not interested in potential strategic transactions before the results of clinical trials came out in 2024. AbbVie is very optimistic about Cerevil. No one was interested, and Cerevil turned around and told AbbVie that the offer was too low to communicate further. The next day, AbbVie generously expressed its willingness to consider raising the offer and asked to arrange a meeting between the CEOs of both parties first. A week later, the CEO meeting was held as scheduled. The day after the meeting, AbbVie took the initiative to raise the offer to $40 per share, 14% higher than the previous offer.

Although AbbVie was the only buyer, Cerevil still raised the price. Cerevil still hoped that AbbVie would raise the price to $45 per share. At first, AbbVie also symbolically counter-offered to $41.5 per share. After being rejected by Cerevil, AbbVie expressed its willingness to raise the offer to $45 per share on November 17, provided that the transaction was announced before Christmas. AbbVie guaranteed that it would acquire Cerevil at a price of $45 per share, and promised to be able to obtain regulatory approval for each transaction. If regulatory approval cannot be obtained, it is willing to increase the reverse termination fee, which is about $650 million. Seeing such a sincere buyer, Cerevil decisively sold itself, and Bain Capital, the founding investment institution behind it, is about to reap a 10-fold return in 5 years.

But just one year later, emraclidine failed in clinical trials, leaving AbbVie with only "suffocation". Not only did the valuation of 8.7 billion US dollars shrink dramatically, but AbbVie's stock price also suffered a heavy blow, plummeting 12.57%, and its market value evaporated by more than 40 billion US dollars overnight. The research and development of innovative drugs is itself a very uncertain thing. Who makes it and who buys it is certainly important, but even top researchers cannot violate the objective laws of the industry; top multinational pharmaceutical companies cannot guarantee the success rate of each project and each transaction. From Gilead to Sanofi, they have suffered a lot, proving that even for MNCs, whether they can successfully acquire more depends on luck. In such a hurry, AbbVie stepped into the pit, which was unexpected, but it may also be reasonable.

https://mp.weixin.qq.com/