Eli Lilly and Co (LLY) Dives Down After the Failure of Its Alzheimer’s Drug, What’s Ahead for the Stock?

By Carrie Williams

eli-lilly-and-co-lly-dive-down-after-the-failure-of-its-alzheimers-drug-whats-next-for-the-stockHealthcare giant Eli Lilly and Co (NYSE: LLY) had a fall yesterday after its Alzheimer’s drug solanezumab (sola) failed to meet the primary endpoint in its stage 3 clinical trial. The share prices of the company fell by nearly 15.5% to reach the year’s low price of $64.18 and recovered slightly to close at $68. Following the news, Credit Suisse analyst Vamil Divan maintained his Buy rating while slashing the price target from $96 to $87. This new PT is an upside of 27.9% from the current levels.

After failing pivotal EXPEDITION-3 trial in patients with mild dementia due to Alzheimer’s disease, LLY is no longer planning to submit the drug Soha for approval. However, Soha’s failure does not mean the end of the road for LLY, thanks to the company’s important new products and pipeline assets.

If LLY’s diversified products in inflammation (baricitinib, Taltz), oncology (abemaciclib, Lartruvo) and diabetes (Trulicity, Jardiance) picks up the slack, the company is expected to quickly scale back to its earlier price levels. Although Soha has tapped out from current trails, it is still being studied in other indications like preclinical Alzheimer’s in the A4 study and dominantly inherited Alzheimer’s in DIAN. Moreover, LLY also has several other assets in their Alzheimer’s pipeline.

Some of the important upcoming approvals for LLY include FDA approval of a Jardiance label expansion next week as well as FDA approval for baricitinib in mid-January. If they read out positively, the tide is expected to quickly turn for LLY, bringing back the investors who are currently remaining on the sidelines. Other upcoming influential events include the results of the interim analysis for REWIND cardiovascular outcome study for Trulicity and the ruling on the ongoing US patent litigation for Alimta.

With plenty of bounce back opportunities available for LLY, the current slide in share prices appears to be just a temporary setback. At any rate, based on the recent corporate insider activity of 96 insiders, corporate insider sentiment still remains positive on the stock meaning its insider are currently mostly buying shares.

LLY has an overall consensus rating of Strong Buy as well as an average analyst price target of $92.44 according to data compiled by TipRank.com. This PT is an upside of 35.94% from the current levels.