Bristol-Myers Squibb stock gains on FDA approval of schizophrenia treatment

Investing.com -- Bristol-Myers Squibb (NYSE:BMY) shares rallied 4.45% in premarket trading Friday following the announcement that the U.S. Food and Drug Administration (FDA) approved the company's new schizophrenia treatment, COBENFY.

The drug, which combines xanomeline and trospium chloride, represents a major breakthrough, with the company claiming it is the first new pharmacological approach to treat schizophrenia in decades.

COBENFY is a muscarinic agonist that targets M1 and M4 receptors, offering a new mechanism of action distinct from current therapies.

Chris Boerner, CEO of Bristol-Myers Squibb, described the approval as a "landmark."

"After more than 30 years, there is now an entirely new pharmacological approach for schizophrenia — one that has the potential to change the treatment paradigm," he said in a statement.

The approval is based on data from the EMERGENT clinical program, which demonstrated "significant reductions of schizophrenia symptoms compared to placebo."

The drug is also said to have a favorable safety profile. Analysts see this as a positive development for COBENFY's market potential.

Barclays (LON:BARC) analysts said the news validates the company's acquisition of Karuna and gives "Bristol another key top-line driver over the
balance of the decade."

They added that the drug's list price of $1,850 per month (~$22,500 annually) suggests potential upside beyond their initial expectations.

Truist analysts emphasized the first-in-class status of COBENFY, noting that it is the first new mechanism of action approved for schizophrenia in over 30 years.

They estimate that the drug could generate $4.2 billion in peak sales, surpassing the consensus estimate of $3.9 billion. The analysts also highlighted Bristol-Myers' future plans to expand COBENFY's indications to include Alzheimer's-related psychosis and bipolar disorder.

Meanwhile, BMO Capital told investors in a note that the news is a "significant positive for BMY shares."

"Today's announcement validates Bristol's $12.7B acquisition of Karuna and allows the company to start changing the narrative around the ongoing triple patent-cliff," said BMO Capital. "Following today's approval we estimate $2.4B in peak sales for COBENFY in Schizophrenia and $3.9B in Alz psychosis, pushing our target to $53/share."