Eli Lilly Scraps Major Cholesterol-Inhibitor Drug; Shares Fall 7.7%
Image Source: Lilly.com
Today Eli Lilly (LLY) announced that it had discontinued development of a drug intended to inhibit cholesterol esterase transfer protein (CETP). The drug, known as evacetrapib, was in a phase 3 clinical trial to treat patients with high risk of cardiovascular disease. The phase III study, known as the ACCELERATE trial, recruited up to 12,095 patients who were randomized to receive two different drugs.
One group of patients received Lilly's drug evacetrapib and the other group of patients received a placebo compound instead. The primary outcome measure was to be determined as time to first occurrence of a cardiovascular event. Such cardiovascular events could have been:
- cardiovascular death
- myocardial infraction
- stroke
- coronary revascularization
- hospitalization for unstable angina
The phase 3 trial was stopped early by a committee known as the independent data monitoring committee -- IDMC. The IDMC concluded that after analyzing periodic data the trial should be stopped early. According to the data, there was no indication that the study could reach its its endpoint, with no evidence of efficacy. The only good news that came out of from the trial was that the drug had no safety issues. Eli Lilly will present the data at an upcoming scientific presentation to show in detail the final results.
The share price of Eli Lilly closed the day down 7.7%, which is a major hit for the stock. Analysts were expecting possible peak sales of this drug to be upwards of $5 billion. This company states that this wasn't a huge setback, but we claim the opposite as it was a huge potential loss in revenue. Various drugs in the same family either were pulled for safety reasons or for lack of efficacy, and at this point Lilly is finally throwing in the towel.
Disclosure: None.
Pulling this drug was obviously an expensive process for Eli Lilly, but the dangers and costs in delaying the pulling of drugs at this stage of development can be much more costly. The 7.7% hit on the stock is only a small part of the story. The costs in developing a drug through stage 3 run in the millions. Lilly said it would book a fourth-quarter charge of up to $90 million pre-tax, tied to research and development expenses. This is a good example of why biopharm and healthcare drug companies are volatile places to stash your money. Buyer beware. To play the safer route and reduce exposure to Eli Lilly, you could try your hand with iShares Core S&P 500 ETF (IVV). Eli Lilly accounts for a mere 0.4% of IVV’s total holdings.
Hi Terry, what's your take on what Jim Cramer had to say? He says it's a buy.
The thing is that the pipeline is still if. Meaning there is a chance if the Diabetes is successful, and the Alzheimer's still needs to prove itself with final phase 3 results. There is not doubt though this was a $5 billion setback for sure. Which is probably why analysts had set their targets higher.
That's not to say its not a possible buy. But that all depends on the future Alzheimer results which is hard indication to target. If Eli Lilly gets it diabetes right then it still has a chance as well. Too many "Ifs" still involved.
Why on earth did Cramer say that?
Here's the exact quote: "Cramer said it is down 'an extraordinary amount.'
The stock plunged on Monday after the pharmaceutical powerhouse halted development of its latest heart disease drug, which was in the final stage of trials.
But there is more to Eli Lilly, according to Cramer. 'You want to own Eli Lilly for its diabetes drug. You want to own it for its Alzheimer's formulation,' he said. 'If you can get it just under 80, just go buy.'
The Lilly's Diabetes results look good, so that may help in the long run, but short-term it will probably fall some more. Analyst's will probably revalue their price targets as well.
Source? Thanks.
I saw that too. It was on TheStreet today. Here's the direct link:
www.thestreet.com/.../...ut-buy-eli-lilly-now.html
Terry, do you think Cramer is wrong? Sure they may have other drugs, but this is a big hit which will be hard to bounce back from in the immediate future.
short term it may decrease a little more. As I mentioned above their Alzheimer's is still a big "if" and their diabetes program might help the share price recover. But those aren't guaranteed though, keep that in mind.
Thanks for your insight Terry!
Unbelievable. Not only can they kiss goodbye the expected $5 billion in sales, but they must have lost a fortune on the testing as well.