Analysts noted that although AbbVie may have avoided a bidding war, there are a number of risks associated with its decision to purchase Cerevel Therapeutics.
This was because AbbVie finalized the purchase prior to critical data on the drug developer's experimental schizophrenia treatment.
AbbVie, a company based in North Chicago, Illinois, announced late on Wednesday that it will acquire Cerevel for $8.7 billion, acquiring a portfolio of medications under investigation for a variety of neurological disorders, including emraclidine for schizophrenia.
Analysts at Stifel stated in a note that purchasing Cerevel bravely avoided a potential bidding war after the data.
Analysts noted that because Cerevel is still testing emraclidine in mid-stage studies, the deal is not "de-risked" because there is still a chance the treatment will fail in trials.
However, given that Cerevel hasn't provided much data for their lead asset, emraclidine, AbbVie would be taking on development risk with this deal, according to Wells Fargo analyst Mohit Bansal.
Concerns are heightened by the fact that emraclidine clinical trials for schizophrenia have historically had a higher failure rate than those for most other diseases, and rival company Karuna Therapeutics has a two-year advantage over Cerevel.
However, investors and analysts suggested that the reward might be substantial.
With a plethora of new competitors for its popular arthritis medication, Humira, AbbVie has been trying to increase sales and replace revenue.
On a conference call with investors on Thursday, the pharmaceutical company's executives stated that they anticipate emraclidine to remain the only product on the market until the early 2040s.
According to Gabelli Funds portfolio manager Jeff Jonas, Cerevel is an appealing target given his portfolio's two additional experimental neurological medications for Parkinson's and Alzheimer's disease.
