Eli Lilly: Slowing Down Alzheimer's?

 Stock: Eli Lilly (LLY)

Rating: Overweight

Price Target: $200

Target Date: 12/2021

Headline:

Shares of the biopharmaceutical giant Eli Lilly (LLY) rose over 10% in early trading this morning! The reason why? Investors are responding to the new promising published data on the early Alzheimer's drug, Donanemab. In early trials, Donanemab showed a positive effect on slowing down the cognitive decline effects of Alzheimer's! While only in phase 2, this could be a major new treatment made available for LLY should it ultimately be approved!

Details:

So what actually happened and what did the data say? Today LLY announced their drug met the primary endpoint of change from the baseline to 76 weeks in the integrated Alzheimer's disease rating scale - slowing the decline by up to 32% relative to the placebo used in the trials! This data, matches the initial data shown in phase 1. Better yet, the safety profile was also consistent with the data in phase 1 - which is very encouraging! The trial was done on a patient group of 272 patients showing the initial stages of cognitive decline. We do not have the full results yet, but they will be posted in a future medical meeting!

Next Steps:

So what's next? LLY will discuss the results of this trials with regulators to assess what the next steps should be. If these conversations go well, LLY may be able to file this trial with the FDA for approval! However, they have also undergone a study with different types of Alzheimer's patients earlier this summer, which will not be completed for several years. So even if the first batch was to be approved, the second would still be years away!

Conclusion:

While not conclusive yet, Donanemab is showing very promising results thus far. And while it may take years to get it fully approved for all patients, at scale, FDA timeline approvals like these, are not uncommon. So while do like the promising news, and are long the stock, we are still investing cautiously should the news take a turn for the worse.

Additionally in the midst of their overall portfolio, this medicine also represents only a piece of their overall business. Should it be approved, accepted and rolled out nationally, the implications would be massive. But in the interim, looking at the rest of their pipeline until such an event should happen, in term's of upcoming drug approvals and testing, we see other trials coming up soon that should be promising as well (e.g. Tirzepatide for Diabetes)! All in all, we have and continue to like LLY as a company and the treatments in their pipeline on a go forward basis. We therefore are overweight the stock over the long term and anticipate the price to appreciate. The risks we are watching for, in terms of short terms spikes would be, and financial misses, pipeline disappointments and any drug pricing complications.