Eli Lilly stock seesawed Tuesday after a Food and Drug Administration panel endorsed its Alzheimer's treatment, donanemab.
Despite the stock move, analysts largely expect donanemab to gain FDA approval. The agency isn't bound by the panel's recommendation, but often follows it.
Late Monday, the advisors to the FDA voted unanimously that the clinical trials support the effectiveness of donanemab, and that the benefits of treatment outweigh the risks.
Lilly's donanemab as well as Biogen and Eisai's Leqembi work by clearing abnormal plaque called amyloid beta from the brain. The decision Monday likely bodes well for companies like Prothena and Roche, which are also developing amyloid-targeting Alzheimer's treatments.
"Overall, we believe (Monday's) advisory committee meeting results are positive for the space as they signaled an openness of the FDA and the (key opinion leaders) to approve effective therapies in Alzheimer's disease with acceptable benefit-risk profile," Leerink Partners analyst Marc Goodman said in a report.
Eli Lilly stock closed up a small fraction at 865.82 after falling in earlier trades. Prothena shares sank 2.6% to 20.49. Eisai stock also toppled 3.6% to 10.52, while Biogen stock lost a fraction, closing at 225.74. Roche stock, on the other hand, rose less than 1% to 33.54.
Eli Lilly Stock: Trailing Biogen
Biogen and Eisai are the current leaders of the Alzheimer's treatment market with Leqembi. But the launch has been slow. Analysts expect $130 million in Leqembi sales this year growing to $455 million in 2025 and $1 billion in 2026, according to FactSet.
Similarly, analysts following Eli Lilly stock call for $25 million in donanemab sales in 2024. Over the next two years, Wall Street predicts $331 million and $705 million in sales, respectively.
Rising tides will lift all boats in the Alzheimer's treatment space, RBC Capital Markets analyst Brian Abrahams said in a report.
It's true, Eli Lilly will likely take some share from Biogen and Eisai. There are potential benefits for donanemab. Donanemab requires a monthly 30-minute infusion, William Blair analyst Myles Minter said in a report. Leqembi is an hourlong infusion every two weeks. This week, Biogen and Eisai asked the FDA to consider approving a monthly dosing schedule for maintenance treatment.
But donanemab also carries a higher risk of amyloid-related imaging abnormalities, or ARIA, than Leqembi. ARIA is a form of brain swelling that occurs when these drugs remove amyloid beta. Biogen and Eisai have also asked the FDA to sign off on a subcutaneous injection of Leqembi. This at-home shot would eliminate the need to drive to an infusion center for treatment.
"Having a potential second, large player using their marketing muscle to educate and further establish delivery infrastructure should benefit Biogen/Leqembi," RBC's Abrahams said. "Leqembi remains a safer option, and Leqembi's subcutaneous form could mitigate Lilly's dosing advantages over time."
He has an outperform rating and 317 price target on Biogen stock, but doesn't list a rating on Eli Lilly stock.
Broad Label With ARIA Warning
Importantly, the FDA advisors seemingly supported a broad label for donanemab.
Lilly tested the Alzheimer's treatment in patients whose plaque carried intermediate levels of a protein called tau. Across all patients, donanemab slowed cognitive decline by 29% over 18 months. In patients with intermediate levels of tau, the drug slowed cognitive decline by 35% to 36%.
The results were less promising in patients with high levels of tau, and Lilly excluded patients who had no tau or very low levels.
"Given reasonably supportive data across the breadth of populations and limited real-world access to this biomarker, we got the sense consensus was that the label should be tau-agnostic — as we expected even prior to the briefing documents," Abrahams said.
Analysts also expect donanemab to carry a black box warning against the risk of ARIA, similar to Leqembi. But Leerink's Goodman predicts donanemab recipients may need an extra PET scan to monitor for the ARIA symptoms.
Leerink analyst David Risinger has an outperform rating on Eli Lilly stock.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
