Eli Lilly became the latest stock to sink in reaction to bad news, as its Alzheimer’s drug Solanezumab failed to improve losses in cognition in late-stage clinical trials. The stock dropped more than 10 percent in one trading session, as Lilly decided to pull the plug on the drug and not seek FDA approval. Further, Lilly said they’d have to reevaluate their entire portfolio of potential Alzheimer’s drugs. Solanezumab was touted as a promising drug that might have been a powerful weapon against the formation of amyloid plaques that form in the brain—slowly killing brain cells and leading to loss of cognition, memory, and the ability to do day-to-day tasks. The collateral damage hit other drug companies that had a stake in the amyloid hypothesis, including Biogen and Merck. Both stocks opened dramatically lower when Lilly’s news was announced last week. But Merck and Biogen both recovered well above their intra-day lows. Over the intermediate term, Merck is trading very close to 52 week highs. However, Biogen suffered a steep decline from $400 a share to about $250 during the 2015-2016 biotechnology bear market but is now trading back above $300.
The failure of Solanezumab spilled over into other drugs currently in development, as investors feared that Aducanumab (Biogen’s amyloid drug) and Crenezumab (Merck’s Amyloid candidate) would also meet with disappointing results when their trial data were released. However, RBC Capital’s Michael Yee was quick to point out that Biogen’s antibody is very different than Lilly’s failed drug, and in late clinical trials showed reduced amyloid plaque formation in brain imaging.
The pharmaceutical industry and Wall Street analysts believe that any effective Alzheimer’s drug has the potential for super blockbuster status of $5 billion or more. With Lilly bowing out of the competition, the field will be left to a few other companies.
In addition to the theory that Amyloid plaque leads to Alzheimer’s disease, there is another theory that states Tau proteins or Tau “Tangles” might also cause the death of brain cells. (The Tau tangles prevent normal transport of molecules along the nerve cell body, leading to eventual death). Some believe both Amyloid and Tau are involved in the process that gradually leads to brain cell death (see Figure 1 below). Clearly, we are still early in the game, and while Merck and Biogen may hold great promise at this point, there is much work to be done. Fortunately government and corporations realize the importance and have placed many drugs on fast-track designation, and plowed a significant sum of research money into the effort.
Currently 5 million people suffer from Alzheimer’s disease and it’s estimated that 13 million will have the disease by 2050. Given the costs to treat Alzheimer’s patients and the number of years they live, the financial ramifications are stupendous. This could explain why the NIH will funnel nearly $900 million into Alzheimer’s research efforts in 2017, up from $600 million in 2016. With the stakes so high, it’s encouraging to know that despite Lilly’s failed trial, other companies will carry on in the fight.
Disclaimer: In Sickness and Wealth owns shares of Merck stock and is closely evaluating Biogen for potential purchase. We do not hold shares in Eli Lilly.