Eli Lilly: "Bloom" Is Off The Pipeline

CNBC.com

Eli Lilly

If the stock closes down at least 4.46% today (as I write this it is off nearly 7%) Eli Lilly will suffer its worst one-day loss in more than four years, according to our resident statistical expert Robert Hum. If it were to close off more than 7.79%, Hum says it would be the stock's biggest one-day fall since Oct. 23, 2002--almost five years to the day.

After the closing bell yesterday the company put out a press release that said it was stopping patient enrollment in two small clinical trials for its experimental bloodthinner prasugrel.This drug was considered to be Lilly's most promising late-stage developmental drug and a potential billion-dollar-plus blockbuster. But beyond saying that it needed to amend the protocol of the studies it didn't offer any details about what exactly might be the problem--if, indeed, there is one.

But analysts and investors aren't waiting for an explanation. Many suspect that the drug might be so potent that it could be causing excessive bleeding in some patients. The results of Lilly's large prasugrel clinical trial are expected to be presented at the upcoming American Heart Association meeting on Nov. 4th. In the company's defense, one reason it might not be free to provide any more information is because it's under embargo by the AHA.

Deutsche Bank's Barbara Ryan writes in a research note to clients this morning, "It ain't good." Tim Anderson who just launched coverage of the sector earlier this week at Bernstein takes issue with LLY's lack of disclosure writing, "LLY is not answering some important questions, which is odd: for example, they are not saying what exactly the clinical issue was that led to suspended dosing."

Bert Hazlett at BMO Capital Markets says, "Trouble. Our peak prasugrel sales estimate was over $2 billion. To be conservative, however, we are now eliminating all prasugrel-related revenue from our Lilly models." Deutsche owns at least one percent of LLY shares, makes a market in the stock and has done and wants to do more investment banking for the company.

Bristol-Myers Squibb and Sanofi-Aventis are rallying on the news. They are partners on the mega-blockbuster bloodthinner Plavix. Bristol reported this morning that Plavix is back. Sales of the drug were up 99% worldwide and 128% in the U.S. compared to last year's third quarter when it was battling a temporary glut of generic Plavix.

But on the Bristol conference call officials declined to gloat about their potential good fortune with a possible delay or elimination of a competitor. In answer to an analyst's question, John Elicker, Bristol's VP of Investor Relations said, "I don't think it would be appropriate for us to comment on Lilly's press release yesterday at all." The company's Executive VP of Worldwide Pharmaceuticals, Lamberto Andreotti, then added, "We are happy to be back alone in the marketplace in the U.S. and not facing generic competition any longer."

The next analyst in the queue then pressed the officials on it saying that since they'd previously revealed that they were assuming competition from prasugrel in 2009 that it might actually be appropriate to say something about the Lilly news. But Elicker didn't take the bait. He only reiterated that yes, the company assumes a small impact from prasugrel in 2008 and a bigger impact in 2009 and 2010. Next question.

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