MINYANVILLE ORIGINAL There is little doubt in the minds of some Wall Street analysts that Eli Lilly’s
(LLY) experimental drug for Alzheimer’s disease will fail.
“No one thinks (the drug) is going to work,” ISI Group analyst Mark Schoenebaum says.
The assertion is barely an exaggeration. A growing number of analysts and investors are coming to that conclusion about a product once considered a potential blockbuster after a similar treatment being developed by Pfizer
(PFE), Johnson & Johson
(JNJ), and Elan
(ELN) failed in studies. The disappointing results prompted those companies to pull the plug on their clinical program earlier this month. (See Elan Shares Drop After Alzheimer's Drug Fails in Study
Lilly plans to disclose top-line results of a study of its medicine solanezumab
for mild to moderate Alzheimer’s by the end of September. (No exact date is set.) The company then expects to present data at a conference of the American Neurological Association
in Boston in early October and then at the Clinical Trials on Alzheimer’s Disease
meeting in Monte Carlo later that month.
Probability for success of this drug is less than 5%, according to Leerink Swann analyst Seamus Fernandez. Jefferies analyst Jeffrey Holford predicts failure and lowered his opinion rating of Lilly to a sell late last month.
“We just need to see the findings from our data and can’t speculate at this time,” Lilly spokeswoman Stefanie Prodouz says.
Both the Pfizer-J&J and the Lilly Alzheimer’s programs were considered high-risk, high-reward bets on a very difficult to treat disease.
The question is how much will Lilly shares fall if the drug does indeed fail? The stock traded up less than 1% to $42.32 in morning trading Wednesday. The shares dropped more than 4% in the past month, but are up 19% over the past 12 months.
Schoenebaum says he thinks the stock will fall no lower than the high $30s because there are such low expectations for solanezumab. Investors who want to buy when the shares are depressed would be making bets that other drugs in Lilly’s pipeline
of developmental products will work or that the company will make good on vows to lower its costs.
Lilly is a prime example of the problem with big pharmaceutical companies as it experiences and faces even more patent cliffs for big drugs in the next few years. In addition to its Alzheimer’s drug, the company has experimental treatments for diabetes, cancer, psychiatric conditions, and other diseases in the late stages of development.
No positions in stocks mentioned.
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