Eli Lilly Stock Suffers Setback With Alzheimer’s Drug Failure
Eli Lilly (NYSE:LLY)
On Wednesday, Eli Lilly stock tumbled by 10.51% after the company reported that its phase 3 Alzheimer’s trial failed to meet the primary endpoint of the study. The hope was that the drug would be able to help improve memory in patients with Alzheimer’s.
Unfortunately, the study failed to improve upon this metric and it sent the LLY stock sharply lower. The company really needed this treatment to work as it was one its top watched drug candidates in the pipeline. After all, the LLY stock tumbled by 10.51% which is a huge loss in market cap. The fact that it had tumbled so much demonstrates how crucial this trial was for the company.
LLY Trial Failure
The phase 3 trial recruited a total of 2,100 patients that had mild dementia associated with Alzheimer’s disease. The trial, known as EXPEDITION3, used Eli Lilly’s drug Solanezumab to treat these patients.
The drug was a bust because it had no success in slowing the cognitive decline in patients compared to the placebo. This was quite disappointing indeed, especially for those patients desperately seeking for a new treatment option. The CEO of LLY John C. Lechleiter had this to say about the failed trial:
“The results of the solanezumab EXPEDITION3 trial were not what we had hoped for and we are disappointed for the millions of people waiting for a potential disease-modifying treatment for Alzheimer’s disease. We will evaluate the impact of these results on the development plans for solanezumab and our other Alzheimer’s pipeline assets”
The CEO states in the quote that LLY will take a look at the results and determine the next course of action for the drug. The problem is that with the reported results, the program is pretty much dead in its tracks.
This is because the drug missed the primary endpoint of the study, and can’t be sent to the FDA for marketing approval. The truth is that LLY will have to cut this program out completely. That will be a huge negative for the stock which has already fallen on this phase 3 trial failure.
Alzheimer’s Progression
Investors were quite disappointed with LLY results in Alzheimer’s sending shares sharply lower. Why was so much emphasis placed on this trial and indication? That is because the Alzheimer’s market is expected to reach $13billion or more by 2023. That is why the company dropped so much during the trading day. Had the trial been successful it would have had a huge chunk of the market all to itself.
This is not just a setback for Eli Lilly itself, but a setback for Alzheimer’s treatment as well. Solanezumab was targeting the mechanism of action many pharmaceuticals companies believe is responsible for Alzheimer’s forming in patients. This mechanism of action is known as beta amyloid plaque which builds up in the brain of these patients.
The role of the drug was to remove this beta amyloid plaque in hopes of reversing cognitive decline. As observed within the LLY trial, this method may not be as robust as was once thought. This might make the company and other pharmaceuticals reevaluate how they approach the disease entirely.
Looking Forward
The trial failing caused the stock to lose 10.51% in one day, but the fact is that things were not rosy beforehand anyways. The stock had already been down 10% year over year. LLY lacked the pipeline necessary to carry the stock higher. That’s not to say that it doesn’t have other good potential drug candidates in its pipeline, but they are not as exciting as the Alzheimer’s indication.
The LLY stock closed at $68 per share, which is good considering that the phase 3 trial failed miserably. A key level to watch for in the stock would be the first support level at $65.30 per share. As long as the stock trades above that it should be enough to allow LLY to trade higher.
The Alzheimer’s indication for LLY was a longshot at best anyways. The indication carried a 99.6% failure rate, as there have been no approved drugs for many years in this indication. Hopefully, investors can recover a majority of their losses in LLY. The good news is that LLY has a nice dividend of 3%, therefore, the blow to investors won’t be as bad.
The problem is that nobody knows what the future of the Solanezumab drug program will be. That will become clear once LLY reveals additional data, and states its plans for the program going forward. Until then the stock should see a lot of pressure on it, making it hard to pass resistance points above.
Disclosure: None.