Eli Lilly and Company (LLY - Analyst Report) recently provided an update on its rheumatoid arthritis candidate, tabalumab. The company said that it intends to discontinue its phase III rheumatoid arthritis program for the candidate.

However, Eli Lilly will continue developing tabalumab for systemic lupus erythematosus. ILLUMINATE, the phase III program for the lupus indication, will continue as planned.

We note Eli Lilly had scrapped a pivotal phase III study being conducted with tabalumab in Dec 2012. Tabalumab, an anti-BAFF monoclonal antibody, was being evaluated in the FLEX-M study for the treatment of moderate-to-severe rheumatoid arthritis in patients who have not responded adequately to methotrexate therapy.

The company’s decision to halt the study was based on a planned interim futility analysis which showed insufficient efficacy.

Given the disappointing FLEX-M findings, Eli Lilly conducted an interim futility analysis of FLEX-V, another study being conducted with tabalumab on patients suffering from moderate-to-severe rheumatoid arthritis who did not respond sufficiently to one or more tumor necrosis factor (TNF) inhibitors.

Based on the interim futility analyses of these studies, Eli Lilly decided to discontinue the development of tabalumab in the ongoing rheumatoid arthritis program.

Eli Lilly expects to record a charge of about $50 million in the first quarter of 2013 due to the discontinuation of the rheumatoid arthritis program.

Our Take

The discontinuation of the tabalumab rheumatoid arthritis program is disappointing. However, we note that Eli Lilly has another promising rheumatoid arthritis candidate, baricitinib, in its pipeline. Eli Lilly and partner, Incyte Corporation (INCY - Analyst Report) recently presented encouraging phase II data on the candidate, which is being developed for the treatment of patients with moderate-to-severe rheumatoid arthritis who had an inadequate response to treatment with methotrexate. We expect investor focus to remain on baricitinib and other pipeline candidates.

Eli Lilly currently carries a Zacks Rank #2 (Buy). Other large-cap companies like Sanofi (SNY - Analyst Report) and Novo Nordisk (NVO - Analyst Report) currently carry a Zacks Rank #2 and a Zacks Rank #1 (Strong Buy), respectively.