Positive Alzheimer's drug trial data pushes Eli Lilly shares to another all-time high and brightens our outlook

Published Wed, May 3 20231:45 PM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

Eli Lilly 's (LLY) said Wednesday its experimental Alzheimer's drug slowed progression of the disease in a large-scale study, sending its stock to new all-time highs and brightening the Club's investment outlook for the pharmaceutical giant. Lilly's treatment, known as donanemab, slowed cognitive and functional decline by 35% in one early Alzheimer's patient group compared with trial participants who took a placebo during the 18-month Phase 3 trial, the company said in a press release . Just under half the people who took donanemab showed no disease progression after one year, based on a commonly used system to measure Alzheimer's severity, compared with 29% of the placebo group. "It is not a cure, but it is a significant step forward," Lilly's chief executive, Dave Ricks, told CNBC on Wednesday. The drug, he contended, "significantly slows the disease down in our study." Eli Lilly plans to submit the data to the Food and Drug Administration by the end of June and "hopefully have full approval by the end of the year," Ricks said. The FDA in January rejected the company's push for fast-track approval , citing a need to see more data. Donanemab attempts to treat Alzheimer's by reducing the amount of amyloid plaque — abnormal clumps of a protein called beta-amyloid commonly found on the brains of people with the memory-robbing disease. The exact role those amyloid plaques play has long been uncertain and controversial. But Eli Lilly and other pharmaceutical peers have spent years — and billions of dollars — developing anti-amyloid drugs, arguing that successfully lowering amyloid levels would translate to slower disease progression. Removing amyloid plaques is "not the only thing to do" in treating a complex disease like Alzheimer's, Ricks said on CNBC. "But we have a new tool today." LLY 1Y mountain Shares of Eli Lilly over the past 12 months. The FDA granted accelerated approval to an anti-amyloid drug — developed by Japanese pharmaceutical firm Eisai and U.S.-based partner Biogen (BIIB) — in early January. The regulator is expected to decide on full approval for that treatment, marketed under the name Leqembi, in July. Donanemab's successful Phase 3 data is good for both Eli Lilly and the makers of Leqembi, according to some Wall Street analysts who cover the companies. They say it should help bolster the overall credibility of anti-amyloid drugs in the eyes of regulators and health insurers, especially the federal agency that administers Medicare. The Centers for Medicare and Medicaid Services has yet to broadly cover anti-amyloid treatments. But there is growing hope CMS will change its stance on reimbursement, clearing the way for the drugs like Leqembi, and possibly donanemab, to be commercially viable. "There is room for both drugs," said BMO Capital Markets analyst Evan David Seigerman, who has a buy rating on Eli Lilly shares, in a CNBC interview. "A rising tide lifts all boats, and I think having two strong drugs validates the amyloid hypothesis, so you have more pressure on CMS." Additionally, having three companies — Eisai, Biogen and potentially Eli Lilly — in the market is necessary to build out the infrastructure needed in the U.S. medical system to give these intravenous drugs to patients, Seigerman added. "It's a positive for the space, generally," he said. For Eli Lilly, specifically, Seigerman said the donanemab data appears to be a "home run." The company's Alzheimer's pursuits have not been the main driver of BMO's bullishness — a view that mirrors the Club's own thinking . That crown belongs to Mounjaro, Lilly's type-2 diabetes drug with immense promise to treat obesity. But the strength of the Alzheimer's data Wednesday increases the likelihood that donanemab becomes a commercial success, Seigerman said, solidifying Lilly as the leader in the pharmaceutical industry. The safety of donanemab is likely to remain in focus because anti-amyloid drugs are associated with what's known as amyloid-related imaging abnormalities, or ARIA; symptoms can include brain swelling and bleeding. Eli Lilly said two participants in the Phase 3 trial died due to ARIA side effects, while a third patient did after a serious ARIA incident. "The majority of ARIA cases were mild to moderate and resolved or stabilized with appropriate management," the company said in a press release. A more detailed dataset will provide better context around safety, Wells Fargo analyst Mohit Bansal indicated in a note to clients Wednesday. But in the company data released Wednesday, donanemab's safety profile roughly matched expectations, said Bansal, who has an overweight, or buy, rating on Eli Lilly shares. Leqembi "may have an edge on safety," Bansal said, while donanemab appears to be slightly more effective in slowing the progression of Alzheimer's. "Investors would take a sigh of relief with this success," he wrote. Bottom line We'd been hopeful that Eli Lilly's late-stage donanemab data would impress, but the complexity of Alzheimer's — and the company's numerous unsuccessful studies in the past — made it hard to know for sure how the trial would go. A sigh of a relief is certainly in order now. "It's the holy grail," Jim Cramer said Wednesday. "It's what Eli Lilly was looking for. ... It's what we wanted." Eli Lilly shares climbed more than 6% to around $429 each. More upside is likely ahead for the stock, Jim predicted, as investors reconsider the impact a commercially successful Alzheimer's drug would have for the company. "This is a very big win for Eli Lilly," he said. Lilly's biggest financial winner in the years ahead is still likely to be Mounjaro, which has gotten off to a stellar start since launching as a type-2 diabetes drug last summer. Its promise to treat obesity — and other conditions, such as sleep apnea — will dramatically expand its sales potential. Jim has said it could become the best-selling drug of all time. Eli Lilly hopes U.S. regulators will allow Mounjaro to be marketed as an obesity drug by the end of the year, another positive catalyst looming on the horizon. Of course, future updates around donanemab — including any change to CMS's reimbursement policy for anti-amyloid drugs — will be closely watched by investors. (Jim Cramer's Charitable Trust is long LLY. See here for a full list of the stocks.) 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The Eli Lilly logo is shown on one of the company's offices in San Diego, California, Sept. 17, 2020.

Mike Blake | Reuters