What happened

Shares of Intra-Cellular Therapies (NASDAQ:ITCI) were tanking 23.9% as of 11:22 a.m. EDT on Monday. The plunge came after the biotech reported disappointing results from a phase 3 clinical study evaluating lumateperone in treating bipolar depression.

So what

Intra-Cellular Therapies' headline for its news release Monday morning stated that the company was announcing "positive top-line results" from the late-stage study of lumateperone. So why did investors react negatively?

Thumb down and thumb up.

Image source: Getty Images.

The biotech emphasized the results from Study 404, a global phase 3 clinical trial of lumateperone that met its primary endpoint of improving patients' scores on the Montgomery-Asberg Depression Rating Scale (MADRS). However, Intra-Cellular Therapies also mentioned that in another late-stage clinical trial conducted in the U.S. (Study 401), lumateperone didn't perform any better than placebo at treating depression.

This mixed news is problematic for Intra-Cellular because the company probably needs positive results from two clinical studies to support a regulatory filing for lumateperone in treating bipolar depression. Had the drug achieved positive results in both Study 401 and Study 404, Intra-Cellular would have been in great shape to move forward with submitting for FDA approval later this year.

Now, however, the biotech will need to wait for data from a third late-stage study (Study 402) that's evaluating lumateperone as an adjunctive therapy to lithium or valproate. Unfortunately, the results from Study 402 won't be available until next year.

Now what

Intra-Cellular Therapies should have more big news soon. The FDA is scheduled to announce its approval decision for lumateperone in treating schizophrenia in adults by Sept. 27, 2019.

Investors will want to especially watch for how the discussion goes in the advisory committee meeting scheduled for July 31, 2019, that will review the regulatory filing for lumateperone. If the advisory committee recommends approval for Intra-Cellular's lead candidate, it won't guarantee ultimate FDA approval, but it would definitely be a positive indication of the drug's chances.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.