On Tuesday, Eli Lilly's (LLY 1.65%) shares soared by more than 15% after the pharma giant reported positive results from a phase 3 clinical trial for Verzenio. This drug is already approved for metastatic breast cancer and advanced breast cancer, but based on data from the new study, Verzenio could be effective in treating early-stage breast cancer as well.
Interim analysis of the clinical trial showed that Verzenio, in combination with standard adjuvant endocrine therapy, achieved the primary endpoint of invasive disease-free survival. This result was all the more impressive considering that late last month, it was announced that Ibrance, a cancer treatment marketed by Pfizer, had failed to achieve a statistically significant improvement in invasive disease-free survival in a clinical trial with early-stage breast cancer patients.
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Eli Lilly's news prompted Guggenheim analyst Seamus Fernandez to upgrade the company's stock from neutral to buy. According to Fernandez, Verzenio's success in the clinical trial "likely is a transformational event" for the pharma giant. The analyst set a $182 price target on Eli Lilly's stock -- about 13% above the $160 level where it's currently trading.
Is Eli Lilly's stock worth $182?
I think Fernandez's price target is reasonable, and here are two reasons why. First, Verzenio could enjoy an exciting opportunity in the early-stage breast cancer market. Worldwide, breast cancer is the most common cancer among women, and despite recent progress in the treatment of this disease, about 30% of patients with some forms of early-stage breast cancer are at risk of their cancers returning. Verzenio could be an answer to this problem.
Second, Eli Lilly remains one of the leaders in the market for diabetes drugs. Many of its diabetes products, especially Trulicity, continue to generate strong and growing revenue. Given these tailwinds, I believe Eli Lilly stock is more than capable of reaching -- and even exceeding -- the $182 mark within the next 18 months.
