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Eli Lilly and Company (LLY - Analyst Report) recently announced the voluntary termination of a mid-stage study being conducted with its Alzheimer’s disease candidate, LY2886721. LY2886721, a beta secretase (BACE) inhibitor, was being evaluated as a once daily treatment for Alzheimer's disease.

Eli Lilly’s decision was based on abnormal liver biochemical tests identified during routine monitoring. The company believes that the abnormal tests were not related to the BACE mechanism and remains interested in continuing with the development of BACE inhibitors. Eli Lilly will continue monitoring the patients in whom the abnormal liver biochemical tests were observed. The future of the LY2886721 development program will be determined once the data is evaluated further.

Eli Lilly said that the discontinuation of the phase II study will result in a financial charge being incurred though the same is not expected to affect the company’s guidance for 2013.

The Alzheimer’s disease market has attracted a lot of attention from several companies. However, the successful development of therapies for the treatment of Alzheimer’s disease is challenging and we note that several companies have failed in developing treatments for the same. In fact, Eli Lilly has faced failure before in this field. The company suffered a major setback in Aug 2010 when it had to halt the development of a phase III Alzheimer’s candidate semagacestat (LY450139).

Then, last year, Eli Lilly had announced that another phase III candidate, solanezumab, failed to meet its primary endpoint in studies being conducted in patients with mild-to-moderate Alzheimer's disease. Development plans for another late-stage candidate, Pfizer/Johnson & Johnson’s (PFE - Analyst Report)/(JNJ - Analyst Report) bapineuzumab IV, were shelved after it failed two phase III studies. The mechanism of action of solanezumab as well as bapineuzumab IV is different from that of LY2886721.

The Alzheimer’s disease market represents huge commercial potential and a successfully developed product could generate billions of dollars in sales once launched.

Eli Lilly currently carries a Zacks Rank #3 (Hold). Among large cap pharma stocks, Novo Nordisk (NVO - Analyst Report) currently looks well-positioned with a Zacks Rank #2 (Buy).

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