What happened

Minerva Neurosciences (NASDAQ:NERV), a small-cap biotech, is rebounding a bit Monday after a dramatic plunge on Friday. Specifically, the drugmaker's shares are up by 16.4% as of 12:47 p.m. EDT. 

So what

Minerva's shares cratered by 72.5% on Friday in response to the late-stage failure of its lead drug candidate, roluperidone, as a treatment for symptoms associated with schizophrenia. The drug did no better than a placebo on either the study's primary endpoint of reduction in negative symptoms or a key secondary endpoint (improvement in personal and social performance measurements).

A black and white bar chart illustrating a rebound.

Image Source: Getty Images.

That being said, Minerva's brain trust did not immediately throw in the towel on roluperidone. Instead, management argued that the drug missed its primary endpoint due to a larger-than-expected placebo effect at the week 12 benchmark. Under that theory, roluperidone may still merit further study. 

Now what

Minerva's plans for roluperidone's clinical development will likely hinge on the outcome of upcoming discussions with the Food and Drug Administration. The good news is that it's certainly not out of the realm of possibility that the FDA might recommend another trial, perhaps with a modestly different design. 

It is certainly not without precedent for a psych med to grab a regulatory approval after a poor showing in one of its first pivotal trials. Nonetheless, it's still probably best to watch this risky biotech stock from the safety of the sidelines for the time being.   

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.