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The FDA Rejected Lilly's Alzheimer's Drug. Why It's Only a Setback.The FDA Rejected Lilly's Alzheimer's Drug. Why It's Only a Setback.Nathan-Kazis, Josh. Barron's (Online); New York News that the Food and Drug Administration unexpectedly rejected Eli Lilly's application for accelerated approval of a new Alzheimer's treatment won't be a major blow for the company. Eli Lilly said late Thursday that the FDA had turned down the application. It said the company's data hadn't included enough patients who had been on the drug for at least a year, according to Lilly. But even if Lilly (ticker: LLY) had gotten accelerated approval, it was unlikely to see significant revenue from the drug, donanemab, until after it receives full approval from the FDA. That is due to a decision last year by the Centers for Medicare and Medicaid Services not to pay for drugs of donanemab's type without at least full FDA approval. Losing some number of months on the market under an accelerated approval before achieving full approval won't be financially significant to Lilly. The real question remains whether CMS will eventually agree to pay for the drug. The company said the news won't affect its financial forecasts for 2023. The potential timeline for donanemab receiving full approval hasn't changed. Still, the decision represents an unexpected speed bump in what has so far been a series of actions by the FDA to deliver a new crop of controversial antibody treatments for Alzheimer's to the market. Early this month, the FDA granted accelerated approval to a similar drug, Leqembi , developed by Biogen (BIIB) and Eisa (ESALY). That came 18 months after the FDA gave accelerated approval to Aduhelm, also from those companies, despite very limited evidence for its efficacy. Investors have gotten used to the FDA saying yes on these Alzheimer's drugs, even as the agency's own advisers have tried to tap the brakes. Biogen and Eisai's efforts to commercialize Aduhelm failed last year after CMS, in a rare break from the FDA's guidance, decided not to pay for it for Medicare patients. While Eisai's Phase 3 trial of Leqembi showed that Leqembi did slow cognitive decline, questions remain about whether its benefits outweigh its risks. Wall Street analysts brushed off the news of the FDA's rejection of donanemab, as did investors. SVB Securities analyst David Risinger called the rejection "immaterial," summing up the general response on the Street. Lilly shares were down 1.4% Friday, as the S&P 500 climbed 0.7%. Shares of Biogen rose 1.4%, while Eisai's American depositary receipt was up 1%. "An accelerated approval was widely anticipated by the Street so the news today comes as a downside surprise," Cantor Fitzgerald analyst Louise Chen wrote late Thursday. "This being said, we remain positive on the Alzheimer's opportunity for LLY." Lilly submitted its application for accelerated approval of donanemab on the basis of a Phase 2 trial. The company said that patients stopped treatment after a certain amount of brain plaque had been cleared, which meant that fewer than 100 received the full 12 months of treatment. The FDA told Lilly it wanted data on at least 100, the company said. Lilly said that the FDA identified "no other deficiencies" with its application. A larger Phase 3 trial is scheduled to produce initial results in the second quarter of this year. Lilly said it would base its application for full approval on that data "shortly thereafter." The results of that Phase 3 trial, and whether they show that donanemab works better or worse than Leqembi, will determine the shape of the future Alzheimer's drug market. Even more significant will be the decision by CMS on whether and how to cover the drugs if they receive full approval. "The key catalyst for BIIB's stock to work and for mutual funds to start owning it will be CMS reimbursement later this year," Jefferies analyst Michael Yee wrote on Thursday. |
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