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Eli Lilly Hits 52-Week Low on Poor Data on Alzheimer's Drug

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Indianapolis, IN-based Eli Lilly and Company’s (LLY - Free Report) shares tumbled to a new 52-week low of $64.18 on Nov 23 after the company announced disappointing data from a late-stage study on its Alzheimer's disease candidate, solanezumab. The company’s shares closed a little higher at $68.00, reflecting a decline of almost 11% from the close of the last trading session.

What Led to the Decline?

Eli Lilly announced that solanezumab failed to meet the primary endpoint in a phase III study (EXPEDITION3) in patients with mild Alzheimer's dementia.

The study revealed that patients treated with solanezumab failed to demonstrate a statistically significant slowdown in cognitive deterioration compared to placebo.

Consequently, the company has decided not to submit the regulatory submissions for the candidate. These unfavorable findings will result in a fourth-quarter 2016 charge of approximately $150 million (pre-tax), or approximately 9 cents per share (after-tax). Eli Lilly will issue an updated guidance for 2016 and reveal its expectations for 2017 next month.

We remind investors that this is not the first time that solanezumab has failed to meet the primary endpoint in late-stage studies. In Aug 2012, the company announced that solanezumab failed to meet the primary endpoint in two phase III EXPEDITION studies – EXPEDITION1 and EXPEDITION2 – in patients with mild-to-moderate Alzheimer's disease.

Earlier this year, the company’s shares took a hit when it changed the primary endpoint for the EXPEDITION3 study. While the original study design included co-primary endpoints of cognition and function, the company decided to proceed with a single primary endpoint of cognition.

Dementia due to Alzheimer’s disease accounts for 60–80% of all dementia cases. As many as 47 million people are estimated to be living with dementia across the world. Moreover, people affected by the disease are expected to increase to nearly 75 million in 2030 and 131 million in 2050.

The market thus represents huge commercial potential and a successfully developed product could generate billions of dollars of sales once launched. However, successful development of therapies for the treatment of Alzheimer’s disease is very challenging, with a number of companies already having failed to do so.

Meanwhile, Eli Lilly, in collaboration with AstraZeneca plc (AZN - Free Report) , is currently evaluating another Alzheimer’s disease, candidate, AZD3293, in a phase III study. AZD3293 enjoys fast track status in the U.S.

Eli Lilly carries a Zacks Rank #3 (Hold).

Stock to Consider

Investors looking for a couple of favorably placed stock in the health care sector may consider Vanda Pharmaceuticals, Inc. (VNDA - Free Report) and Cambrex Corp. (CBM - Free Report) . Both stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Vanda’s loss estimates narrowed from 68 cents to 56 cents for 2016 over the last 60 days, while its earnings estimates increased from 16 cents to 17 cents for 2017. The company posted a positive earnings surprise in three of the last four quarters, with an average beat of 56.65%. Its share price has surged 86% year to date.

Cambrex’s earnings estimates increased from $2.46 to $2.55 for 2016 and from $2.91 to $3.06 for 2017 over the last 60 days. The company posted a positive earnings surprise in three of the trailing four quarters with an average beat of 19.78%.

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