Eli Lilly ‘s experimental Alzheimer’s treatment hit another hurdle with U.S. drug regulators. It pushed out the timeline for potential approval but did not rattle our investment thesis in the company. The Food and Drug Administration plans to call a meeting of a key advisory panel to review trial data for Eli Lilly’s donanemab, the Indianapolis-based drugmaker said in a press release Friday. As a result, Lilly said the FDA’s ruling on the treatment for the memory-robbing disease will no longer happen before the end of March, as had previously been expected. The delay is surprising and disappointing, Jim Cramer acknowledged Friday, but it is not a major cause for concern due Eli Lilly’s booming GLP-1 weight-loss and diabetes drugs, Zepbound and Mounjaro. “It’s a great story. Nothing’s changed there,” Jim said. Shares of Eli Lilly fell more than 2% on Friday to around $764 each as investors digested the donanemab decision delay. Lilly entered Friday’s session up more than 33% year to date, extending its strong 2023 stock performance on the back of investor optimism around Zepbound and Mounjaro. Those injectable drugs are the foundation of our position in Eli Lilly, representing the primary drivers of revenue growth in the short and long term for the company. Lilly shares hit their most recent all-time high — just above $800 each — on Monday. Jim has long said tirzepatide, the active ingredient in both Zepbound and Mounjaro, could become the best-selling drug of all time. LLY 1Y mountain Eli Lilly’s stock performance over the past 12 months. In convening the advisory panel, Lilly said the FDA is seeking a better understanding of donanemab’s safety data and how the design of the clinical trials — which used a first-of-its-kind approach for Alzheimer’s studies to determine patient eligibility — impacted the efficacy of the drug. No date has been set for the meeting yet. Donanemab is one of Eli Lilly’s most closely watched experimental drugs, but its financial contributions early on are expected to be minimal due to bottlenecks in the U.S. health-care system that make it difficult for patients to get onto this new class of Alzheimer’s treatments. Those bottlenecks, which include access to dementia specialists who can properly diagnose the complex disease, have contributed to slower-than-expected uptake for Biogen ‘s Leqembi, the lone rival Alzheimer’s drug to donanemab on the market. Donanemab is expected to represent just 4% of Eli Lilly revenue in 2030, Morgan Stanley analysts said Friday, meaning it’s not the main contributor to the company’s future earnings. Both Leqembi and donanemab — delivered by intravenous infusion — try to slow the disease by reducing abnormal clumps of amyloid protein that build up on the brain. Those clumps, often referred to as amyloid plaques, have long been associated with Alzheimer’s, though their exact role in the disease is up for debate. Co-developed by Biogen and Japanese pharmaceutical firm Eisai, Leqembi secured full FDA approval in July — the first drug that slows the progression of Alzheimer’s disease, albeit modestly, to receive that clearance. An earlier, controversial Alzheimer’s drug developed by Biogen and Eisai received only conditional approval and has been a commercial failure. In January, Biogen said it was discontinuing that drug, known as Aduhelm. Both Aduhelm and Leqembi were reviewed by the same group of FDA advisors now tasked with reviewing donanemab, Eli Lilly noted Friday. Investors, including the Club, primarily own Eli Lilly for its lineup of weight-loss and diabetes drugs, which are part of the fast-growing class of drugs known as GLP-1s. Some analysts predict the market for GLP-1s – which mimic a gut hormone to improve blood-sugar control and effectively suppress appetite, leading to weight loss – could be worth $100 billion by the end of the decade. Drugmakers and investors alike are keenly focused on the health benefits of GLP-1s beyond diabetes and obesity, such as treating a liver disease called MASH and reducing the risk of heart attacks. Those additional uses for GLP-1s could boost their commercial potential even further, in part by expanding insurance coverage for the pricey drugs, which has so far been somewhat limited for obesity treatment. Eli Lilly and Denmark’s Novo Nordisk are the main players in the GLP-1 category currently, though drug companies of all sizes are investing heavily to secure a place in the market. Though some smaller firms such as Zealand Pharma and Viking Therapeutics have posted positive trial data in recent weeks, Wall Street analysts generally believe Eli Lilly and Novo Nordisk will dominate the GLP-1 market for the foreseeable future due, in large part, to their head starts in building the manufacturing capacity needed to produce the drugs. While not expected to be nearly as big as GLP-1s, Lilly has spent decades and billions of dollars in pursuit of a successful Alzheimer’s treatment. Donanemab is the company’s best effort to date. The FDA in early 2023 rejected Eli Lilly’s attempt to receive accelerated approval for donanemab, citing the need to see data from a larger, late-stage clinical trial. In that larger trial, which lasted 18 months, donanemab slowed cognitive and functional decline by 35% in one early Alzheimer’s patient group compared with a placebo group. In its own 18-month study, Biogen and Eisai’s Leqembi slowed the progression of Alzheimer’s by 27% versus the placebo. The safety of donanemab has long been an area of focus, though. Anti-amyloid drugs can cause brain swelling and bleeding in patients. In general, Leqembi is seen as having a better safety profile than donanemab. The FDA’s decision to convene the advisory group at this stage in the review process was “unexpected,” Anne White, the president of Lilly Neuroscience, said in the release Friday. Nevertheless, White said the company is “confident in donanemab’s potential to offer very meaningful benefits to people with early symptomatic Alzheimer’s disease.” (Jim Cramer’s Charitable Trust is long LLY. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. 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David Ricks, CEO, Eli Lilly
Scott Mlyn | CNBC
Eli Lilly‘s experimental Alzheimer’s treatment hit another hurdle with U.S. drug regulators. It pushed out the timeline for potential approval but did not rattle our investment thesis in the company.
