What happened

Shares of Minerva Neurosciences (NASDAQ:NERV) fell by as much as 86% Friday after the company reported disappointing late-stage results for its lead drug candidate. In a phase 3 trial, roluperidone proved statistically no better than a placebo in treating negative symptoms of schizophrenia. The drug candidate failed to meet both the primary and secondary endpoints of the study. 

Minerva Neurosciences has three candidates in its pipeline, although only roluperidone and seltorexant have advanced to clinical trials. The outcome of this study is devastating for the development-stage company, although there's an outside chance that roluperidone's prospects can be salvaged. The small-cap stock closed the trading day down 72.5%.

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So what

The phase 3 trial compared two doses of roluperidone (32 mg and 64 mg) to placebo in reducing negative symptoms of schizophrenia over a 12-week period. The primary endpoint was achieving a reduction in the PANSS Marder Negative Symptoms Factor Score (NSFS); the secondary endpoint was an improvement in the Personal and Social Performance (PSP) Scale Total Score. 

But the study showed no statistically significant difference between either the low or high dose and placebo over the 12-week trial. Given that a statistically significant improvement is the gold standard of trial design and outcomes, investors must acknowledge that the experimental asset failed with respect to the design of the study. 

While the company noted that individuals receiving the placebo showed an unusually large improvement in symptoms, the non-pharmaceutical factors driving that result could have also been present among people in the roluperidone cohorts. Therefore, investors must be careful with assuming the large effect from placebo alone doomed the trial.

Now what

Although roluperidone has lost some of its luster, there's a chance it still has value. Minerva Neurosciences reported that both the low and high doses achieved statistically significant differences in NSFS (the primary endpoint) from placebo at week 4, while the high dose replicated the performance at week 8. The high dose also demonstrated statistically significant improvement in PSP (the secondary endpoint) from placebo at week 4 and week 8. 

What does it mean? Investors can't be sure, but in the original development strategy, the initial 12-week study was to have been followed by an open-label, 40-week study. All individuals from the placebo arm were expected to be given either the low dose or high dose of the experimental therapy and followed for 40 weeks total. If roluperidone can deliver significant improvements in symptoms over longer periods of time, then perhaps it has a future. 

For now, investors need to be cautious and resist the urge to sift through the data for encouraging tidbits. Minerva Neurosciences might choose to abandon the 40-week study once it completes an analysis of the 12-week study data. Considering the company's lack of pipeline depth, investors should probably avoid this stock.

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.