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Lilly shares rise after report on cancer treatment

Shares of Eli Lilly and Co. started the week strong after the drug developer said Monday a potential stomach cancer treatment met goals for improved patient survival and progression-free survival in a late-stage study that compared it to a dummy treatment.

THE SPARK: The Indianapolis company said it compared the treatment, ramucirumab, with a placebo as second treatments in patients with gastric and gastroesophageal junction cancers that have spread.

Gastric cancer affects the stomach lining and often goes undetected while developing slowly, Lilly said. Gastroesophageal junction cancer forms where the esophagus connects to the stomach.

Progression-free survival measures the time before a disease progresses or the patient in the study dies.

THE BIG PICTURE: Lilly plans to release details from its study at an upcoming scientific meeting, and it will talk to regulators about submitting the drug for approval. A company spokeswoman said it was too early to speculate on the specifics of that submission.

Lilly also is studying ramucirumab in combination with the chemotherapy drug paclitaxel in a separate, late-stage trial. It also is examining the drug in late-stage testing as a potential treatment for breast, colorectal and lung cancers

THE ANALYSIS: Leerink Swann analyst Seamus Fernandez thinks the drug has an 80 percent chance for approval for the use Lilly highlighted Monday. He said in a research note he was increasing his sales forecast for the drug to $1.6 billion by 2020 from $600 million.

That forecast assumes that sales begin next year in the United States and in 2014 for Europe. Fernandez also said he believes annual sales of $2 billion could be "easily achievable" if the drug receives approval to treat forms of lung and breast cancer.

Fernandez raised his rating on shares of Lilly to "Outperform" from "Market Perform," based on the drugmaker's announcement Monday.

SHARE ACTION: Up 4.8 percent, or $2.41, to $52.86 in late-morning trading, while the Standard & Poor's 500 index was nearly flat.

The price of Lilly shares has climbed nearly 25 percent since the company said in late August that results from studies of its experimental Alzheimer's drug suggest it may modestly slow mental decline, especially in patients with mild cases of the disease.