Eli Lilly’s actions have swayed the development of drugs against Alzheimer’s disease. What investors need to know.

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When

Eli lilly

presented the results of a small study of his donanemab Alzheimer’s therapy last weekend, investors were hoping for a miracle.

That did not materialize and shares of Lilly (ticker: LLY), which had risen 11.7% when the company previewed the study in January, slipped 11.6% by the end of trading. Thursday.

These fluctuations in the stock do not tell the real story of donanemab. The data Lilly presented last Saturday was positive for Alzheimer’s drug development in general, and donanemab in particular, although it did not meet the high expectations of investors.

“The data is nuanced,” says Louise Chen, analyst at Cantor Fitzgerald. “You can read it however you want to read it, and I think that’s why it’s hard for people to make a decision.”

The results of the Phase 2 study do not radically change the landscape of drug development for Alzheimer’s disease. But they support the idea that companies working on the problem, including Lilly,

Roche Holding

(RHHBY), and

Biogen

(BIIB), bark in the right tree.

“It’s a data set, okay, but I think it’s really encouraging,” says Ronny Gal, analyst at Bernstein. “My two cents is that [in] three to five years… we’ll get there.

Barron’s wrote about the enormous challenges of treating Alzheimer’s disease with an aging population and the hopes of drugs to combat it in a cover article in early February, “The Other Pandemic: What to do in the face of the coming crisis. ‘Alzheimer’s’.

Donanemab likely won’t be approved by the U.S. Food and Drug Administration based on the latest data alone, but analysts say Lilly appears to have an actual drug on her hands. Chen maintained his overweight rating on the stock and a price target of $ 245, 33.2% higher than his recent quote of $ 183.93.

Additionally, the results offer further confirmation of the scientific theory behind most Alzheimer’s disease therapies in development. Pharmaceutical companies have failed to develop drugs to treat Alzheimer’s disease without new therapy approved for 18 years, raising concerns that researchers are wrong about how Alzheimer’s disease works and how to process it.

The FDA is now looking into the matter in the case of Biogen’s Alzheimer’s drug aducanumab. The agency’s advisory committee said there was insufficient evidence for the drug’s effectiveness and opinions on its approval remain mixed.

If the scientific theory of both aducanumab and donanemab, known as the amyloid hypothesis, were to be validated, it could boost the outlook for aducanumab.

Lilly’s scientific director Dr Daniel Skovronsky said Barron’s that Lilly’s study was the best clinical evidence to date to support the amyloid hypothesis. “When you remove amyloid plaque deeply and quickly, we slow the progression of tau pathology and we slow down cognitive decline,” Skovronsky said. “This is exactly what the amyloid hypothesis predicted.”

Experts who viewed the data in the days that followed raised questions about some of the details of Skovronsky’s account, noting that the slowing of cognitive decline seen in the study was not statistically significant in all respects, and that the effect on levels of tau, another biomarker linked to Alzheimer’s disease, has only been observed in certain regions of the brain.

Still, Chen said the study could boost confidence in the amyloid hypothesis. “If you believe in beta-amyloid, or if you think there is a cure for Alzheimer’s disease… now you have more evidence than before,” Chen said.

That may not be enough to push the FDA to approve aducanumab before its June deadline. Gal noted that the Lilly study showed the importance of targeting these drugs to very narrow categories of Alzheimer’s patients, which Biogen did not.

“I think in the long run I guess that’s a positive point; it increases the chances that Biogen has a drug, ”says Gal. “Does it increase their chances of being approved without further testing?” Well, I don’t think so.

Beyond aducanumab and donanemab, Roche is moving forward with gantenerumab, a similar drug. Just behind are other potential treatments for Alzheimer’s disease.

For investors, the key is to keep a cool head. “Investors have always reacted quite frantically to Alzheimer’s data because the goal at the end is so big; it’s such a large population, ”says Marc Goodman, analyst at SVB Leerink. “I think [the market] was way too excited at first, and Monday, that just made some of that excitement.

Write to Josh Nathan-Kazis at [email protected]