Eli Lilly (LLY 0.69%) has a potential Alzheimer's treatment in donanemab that shows a lot of promise. The company reported data from a recent trial which demonstrated some encouraging results, and even the commissioner of the U.S. Food and Drug Administration (FDA) is excited with how well the drug is doing.
Donanemab could succeed where Biogen's Aduhelm has failed, and that should get investors bullish on Eli Lilly's long-term prospects.
Donanemab slows cognitive decline in trials
A big controversy in Alzheimer's treatments is that while some drugs may reduce amyloid plaque, which is often associated with the disease and its progression, they aren't helpful in actually slowing down the disease and having a meaningful effect for patients. Therein lies the question of whether focusing on amyloid plaque alone is useful.
In 2021, the FDA granted accelerated approval for Aduhelm on the basis that it reduced amyloid beta plaque in the brain. A high price tag for the treatment and questions about overall effectiveness, however, ultimately led to a lack of support for the drug. Biogen effectively pulled the plug on it by opting to "substantially eliminate commercial infrastructure" for Aduhelm.
Donanemab has been able to reduce amyloid plaque. In a recent late-stage trial, it also demonstrated that it slowed cognitive decline in patients by 35%. And when looking at the drug's effectiveness in treating people with high levels of tau, a protein also correlated to the disease's progression, it slowed progression by 29% according to the Clinical Dementia Rating Scale. This is slightly higher than the 27% reduction in cognitive decline that another Alzheimer's drug from Biogen, Leqembi, has demonstrated under the same scale.
The results have the FDA taking notice
What's noteworthy is that even FDA commissioner Dr. Robert Califf is impressed with the results. He said: "We have to look at the data when it comes in before making a judgment, but if the data look as good as the press release -- this is really, really exciting."
The irony is that earlier in the year, donanemab didn't obtain accelerated approval because of the drug's high success rate. It cleared amyloid plaque too quickly, and patients were able to stop the study because of that result. This led to too small a sample size by the end of the trial for the FDA to grant the contingent approval.
However, the end goal for both Eli Lilly and Biogen is to obtain full, traditional approval. Otherwise, Medicare won't provide coverage for the costly treatments, which can run in the tens of thousands of dollars -- unless patients are involved in clinical trials (a minuscule minority).
The FDA is clearly encouraged by the results that donanemab has been showing thus far. This suggests that unless there's some problem with the data (and there's no reason to suspect there should be), full traditional approval could be coming for donanemab in the future. The healthcare giant plans to apply for approval this summer, and the FDA could approve the drug either before the end of this year or toward the early part of 2024.
Eli Lilly is a slam-dunk buy
Eli Lilly's stock trades at an astounding price-to-earnings multiple of more than 60, which may make it seem as though the stock is overvalued. But that's based on the company's trailing earnings and is a short-sighted view given the company's long-term growth potential.
Donanemab is a potential game-changer in the world of Alzheimer's. Eli Lilly also makes diabetes treatment Mounjaro, which the FDA may approve this year for weight loss as well.
Although Eli Lilly's stock doesn't look cheap, there's good reason. The sky could be the limit if the company obtains approvals for both donanemab and Mounjaro.
