What happened

Shares of the Swiss biotech AC Immune (NASDAQ:ACIU) lost over 42% of their value in pre-market trading Wednesday morning. The biotech's stock is crashing today in response to the news that its experimental Alzheimer's disease (AD) drug semorinemab failed to meet the primary endpoint of a midstage trial dubbed Tauriel. The drug also reportedly missed two key secondary endpoints in the study.

As part of a collaboration agreement, Roche's (OTC:RHHBY) Genentech subsidiary was evaluating the Anti-Tau antibody as a treatment for early (prodromal to mild) AD in this failed trial. Another midstage study (the "Lauriet" study), assessing semorinemab in patients with moderate AD, will continue as planned, according to the two partners. Top-line results from this second-midstage trial are slated for next year. 

Close-up image of a nerve cell.

Image source: Getty Images.

AC Immune's shares have battled back from their pre-market lows since the opening bell but are still down by a hefty 39% as of 9:42 a.m. EDT Wednesday morning.

So what

Alzheimer's disease is easily one of the most valuable untapped drug markets in the world today. The underlying reason is that over 5 million Americans are currently afflicted with this deadly neurodegenerative disorder and there have been no significant breakthroughs on the pharmaceutical front in almost 20 years, at this point.

In fact, there are no AD drugs on the market today capable of even slowing the progression of the disease. AC Immune and Roche were hoping to change this dire outlook, but their anti-Tau antibody showed no clear-cut clinical benefit in the Tauriel study.  

Now what

The good news is that AC Immune has a fairly diverse clinical pipeline and a healthy cash runway that should persist until the first quarter of 2024. So this clinical setback certainly isn't the end of the road for the developmental-stage biotech.

That said, AC Immune's AD pipeline is clearly a high-risk, high-reward proposition for investors. As such, this biotech stock arguably shouldn't be in your portfolio unless you are super comfortable with risk.