What happened

After the biotech giant's disappointing update on an important experimental cancer drug, shares of AbbVie (NYSE:ABBV) fell as much as 12% in early morning trading on Thursday. Shares were down 11% as of 10:35 a.m. EDT.

So what

The drug in question is called rovalpituzumab tesirine, which goes by the nickname Rova-T. AbbVie shared a little bit of data from a phase 2 trial today that was studying Rova-T as a third-line treatment for relapsed/refractory small-cell lung cancer.

While the press release was light on details, AbbVie did say that the data from the trial was not strong enough for the company to seek accelerated approval. This news is a major blow for investors because Rova-T is widely believed to hold blockbuster potential.

Businessman in shadow with his hand on his forehead while in front of a laptop

Image source: Getty Images.

Here's the commentary that AbbVie's chief scientific officer Dr. Mike Severino offered investors:

We continue to believe Rova-T has potential for patients with small cell lung cancer and other DLL3-expressing cancers. Although the results from the study were not what we hoped for, we look forward to receiving data from the ongoing Phase 3 studies in the first- and second-line settings and remain committed to developing Rova-T for the treatment of patients with small cell lung cancer.

Given the update, it isn't hard to figure out why shares are tumbling today.

Now what

AbbVie spent $5.8 billion to acquire Stemcentrx in 2016 mostly because it wanted to add Rova-T to its pipeline. If Rova-T winds up as a clinical failure, then money will have been wasted.

Rova-T is also viewed by investors as a key drug that will reduce the company's reliance on the megablockbuster drug Humira in the years ahead. Humira currently accounts for about two-thirds of AbbVie's total sales so it's critical for the company to develop other blockbuster drugs to better diversify its revenue stream.

Thankfully, Rova-T is still being studied in two phase 3 studies that are investigating the drug a first- and second-line treatment for lung cancer. What's more, the safety data from this phase 2 study was consistent with previous studies, which is good news.

AbbVie plans to share much more data with investors from this phase 2 study at the 2018 American Society of Clinical Oncology meeting in June. Bulls and bears alike will certainly want to listen in for clues as to what's next for this important compound.

Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.