After AbbVie agrees to buy Cerevel, analysts weigh in on who may be next

Commenting on AbbVie’s (ABBV) agreement to acquire Cerevel Therapeutics (CERE), RBC Capital told investors that the deal highlights escalating biotech M&A and should bolster profiles of developmental muscarinic drugs. The firm sees some assets as not fully valued, including Karuna Therapeutics’ (KRTX) KarXT, Neumora Therapeutics’ (NMRA) ‘266, and Neurocrine Biosciences’ (NBIX) ‘568. In its own research note on the deal, Stifel also pointed out Cerevel’s acquisition is “highly validating” for the prospects of the muscarinic class, with implications for Karuna, Neurocrine and Neumora.

ACQUISITION OF CEREVEL: AbbVie and Cerevel Therapeutics announced a definitive agreement under which AbbVie will acquire Cerevel Therapeutics and its neuroscience pipeline of multiple clinical-stage and preclinical candidates with potential across several diseases including schizophrenia, Parkinson’s disease, and mood disorders. Under the terms of the transaction, AbbVie will acquire all outstanding shares of Cerevel for $45 per share in cash. The transaction values Cerevel at a total equity value of approximately $8.7B. The boards of directors of both companies have approved the transaction. This transaction is expected to close in the middle of 2024, subject to Cerevel shareholder approval, regulatory approvals, and other customary closing conditions. The proposed transaction is expected to be accretive to adjusted diluted earnings per share beginning in 2030.

ESCALATING BIOTECH M&A: RBC Capital sees AbbVie’s deal for Cerevel as a continuation of an “encouraging M&A trend” and validation for the muscarinic class. The firm continues to see increasing M&A activity as an important tailwind to the space that can help improve sentiment on the sector into 2024, and says the deal’s focus on neuropsych highlights a number of assets that are not fully valued, including Karuna’s KarXT, Neumora’s ‘266, and Neurocrine’s ‘568. RBC would be a buyer of Karuna and Neumora, though it remains neutral on Neurocrine.

Karuna is developing KarXT, an M1/M4 preferring agonist in schizophrenia, and the drug has recently been submitted to the FDA with a PDUFA date of September 26, 2024. RBC looks to an approval in the second half of 2024 potentially unlock a $1.2B U.S. opportunity, with a rapid launch likely given our very positive key opinion leaders feedback, and would not be surprised to see Karuna as a takeout target itself ahead of the launch.

“HIGHLY VALIDATING” DEAL: AbbVie’s decision to acquire Cerevel makes logical strategic sense, Stifel told investors in a research note following the deal, though the firm finds the timing “fascinating” and the move “bold” ahead of two emraclidine pivotal readouts in the second half of 2024. Stifel is “highly confident” that emraclidine works, and believes it has blockbuster potential in schizophrenia. That said, even efficacious drugs in schizo can fail in a given study about 25% of the time, making this transaction a great win for Cerevel, who no longer takes on the risk of randomness that can plague neuropsych trials, the firm adds.

Stifel notes that the question becomes “why now” for AbbVie, and also why Cerevel and not Karuna. There are multiple possibilities here, the firm says, including boldly buying Cerevel now avoids a possible bidding war post-data; with emraclidine, Cerevel has long-tailed composition-of-matter IP; emraclidine may be differentiated on dosing/safety; and in buying Cerevel before data, AbbVie may mitigate FTC risk. More broadly though, the deal is highly validating for the prospects of the muscarinic class, with implications for Karuna, Neurocrine and Neumora.

PRICE ACTION: In Thursday trading, shares of Karuna dropped over 3%, while Neurocrine and Neumora have gained more than 2% apiece near midday.