What to do with negative research outcomes (results) of PhD research experiment?

Your friend might not want to hear this, but there's nothing you can do except for start over - with a different experiment. Research fails - and should ! If there isn't a risk of failure, you're not out on the cutting edge doing research.

But in most failures, there's a grain of something to build on ("from the ashes of disaster come the roses of success"). Maybe the student is too demoralized right now to see it, but almost always there's some clue in the failure that leads to a different research question worth asking.

I think there is a case to be done to report negative results, since it gives at least a blueprint of what does not work.

However, as Suresh mentions, usually a PhD is measure on its contribution to expand knowledge. If your friend is already 5 years into his PhD however, I think there is some adviser's fault, since he should have had some kind of insight that this thing was not working and a different course might have been wiser.

A defensible null result (that is being able to definitively say that something isn't there as opposed to not being able to say anything either way) is a result and does advance the frontier of knowledge.

This should be obvious.

If that kind of thing can't be published in your friend's discipline then there is something seriously wrong with the culture of that discipline.

To be sure, null results are generally not sexy and can't expect to get into a first rank journal unless there was a widespread expectation that this was a shoo-in, but it is still real science.