A tough break for Eli Lilly and Co (NYSE:LLY) shareholders today … reports of (another) failed drug trial have sent LLY shares 12% lower as of this writing. The current price near $67 is a two-year low for Eli Lilly stock.
And yet, to be fair, it’s not as if owners of LLY stock should be completely surprised. The drug was, after all, the same drug that failed in two previously conducted similar trials.
Whatever the case, as disappointing as solanezumab was as a means of slowing the loss of cognitive ability in patients with mild Alzheimer’s disease, perhaps even more disappointing is the fact that researchers still don’t have a clear idea about the true cause of — and therefore treatment of — Alzheimer’s.
Not only is this a potential problem for Lilly in the future, it’s a potential problem for all biopharma working on similar therapies.
Solanezumab Doesn’t Get the Job Done
The Q&D explanation of what happened: “Patients treated with solanezumab did not experience a statistically significant slowing in cognitive decline compared to patients treated with placebo (p=.095), as measured by the ADAS-Cog14 (Alzheimer’s Disease Assessment Scale-Cognitive subscale).”
Solanezumab is an antibody designed to help the body remove amyloid beta plaque from the brain. This plaque can become so thick and pervasive that it interferes with the synaptic activity of the brain, and is often observed in Alzheimer’s patients. This is the third trial of the drug Eli Lilly has performed, and the third failure.
What was not made clear by the company is the degree to which solanezumab removed amyloid plaque in the so-called Expedition III trial. It was the same drug used in Expedition I and Expedition II, and that data does exist. As a review of the drug’s trial explained earlier in the year:
“Of the 251 subjects with mild AD who participated in the optional amyloid imaging addendum and had interpretable baseline scans, 195 (78%) were considered to have positive amyloid burden at baseline based on a centralized visual reading of the PET scans. For these baseline amyloid positive subjects, the treatment group difference in baseline to endpoint change in composite summary SUVR normalized to mean whole cerebellum did not reach statistical significance (LS mean change [SE] placebo: 0.02 [0.017] vs. solanezumab: -0.01 [0.019]; P = .17).”
In other words, although the presence of solanezumab does make an impact on amyloid beta plaque. Never mind the fact that there’s still no measurable cause/effect connection between it and Alzheimer’s disease … at least not based on Lilly’s studies.
And therein lies the rub.
Had the Eli Lilly study showed an improvement in cognitive function without the reduction of amyloid plaque, a question would have been answered. Had Eli Lilly demonstrated a meaningful reduction in amyloid beta plaque but without an improvement in cognitive function (or a slowed deterioration of cognitive function), that, too, would have answered a key question. As it stands now, the link between amyloid plaque and Alzheimer’s disease is a weak one, at best.
It matters, because other biotech companies continue to press forward with the assumption that one causes the other.
Barking up the Wrong Tree?
While LLY stock fell on the heels of solanezumab’s failure, it was hardly the only biopharma hit hard on the news. Biogen Inc (NASDAQ:BIIB) was down to the tune of 5% when the presumed benefit of attacking amyloid plaque was called into question. Biogen is the developer of aducanumab — another antibody taking aim at amyloid beta plaque.
Some have heralded aducanumab as the game changer, even though it’s only in the early stages of its development. The drug has already demonstrated superiority to a placebo in terms of cognitive function.
A closer look at the drug’s actual results, however, raises questions. Specifically, while aducanumab has thus far been linked to the slowing of cognitive decline versus a placebo, it’s not been demonstrated to prevent or reverse such decline.
The comparison essentially ends with an “it could be worse” result. Though statisticians can do it, it’s difficult to demonstrate meaningfully-different efficacy when the baseline is constantly changing.
The aducanumab studies to date have also yet to affirm or disprove the cause/effect relationship between amyloid plaque and Alzheimer’s. With that as the backdrop, it’s worth noting that, in 2012, Pfizer Inc. (NYSE:PFE) and Johnson & Johnson (NYSE:JNJ) dropped the joint development of their Alzheimer’s treatment that was based on the same amyloid plaque theory.
Indeed, solanezumab isn’t even Eli Lilly’s first effort to intervene for Alzheimer’s patients by seeking a way of destroying amyloid beta plaque. Semagacestat’s development was halted in 2010 when it was found to have no meaningful benefit.
Bottom Line for LLY Stock
None of this is to say the amyloid beta plaque theory is wrong. It is to say, however, no research to date has conclusively linked one to the other in a cause/effect relationship; some think the plaque buildup is a symptom of another disease rather than the cause of Alzheimer’s disease. Also bear in mind that even if this plaque was determined to the the root cause of Alzheimer’s, no drug has yet to remove it to a meaningful, cognition-improving degree.
Further muddying the waters is the distinct likelihood that all of these factors aren’t black-and-white matters. Differing degrees of severity make it more difficult to pinpoint the root cause, in turn making it difficult to pinpoint the best way to develop a treatment.
As for the future of Eli Lilly stock, today’s plunge is arguably an excessive selloff, representing a buying opportunity. As future CEO David A. Ricks explained:
“Lilly has strong growth prospects without solanezumab. Driven by new product launches, we continue to expect to grow average annual revenue by at least 5 percent between 2015 and 2020. Over that time frame, we also expect to increase our margins and provide annual dividend increases to our shareholders.”
That’s a good thing too, because it’s unlikely a true Alzheimer’s treatment is in its foreseeable future … nor anybody else’s.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
