Dip in Eli Lilly Stock Makes It a Buy, Mizuho Analyst Says

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Lilly is also conducting a Phase 3 trial on its experimental Alzheimer’s disease drug.

Daniel Acker/Bloomberg

Eli Lilly

shares suffered a rout Monday, falling 9.1% after data from a trial of an experimental Alzheimer’s disease drug failed to meet investors’ high expectations.

But even amid the selloff, Mizuho analyst Vamil Divan wrote in a note out late Monday that the drug, called donanemab, was far from a lost cause, and called the drop in share price a buying opportunity, advising investors to “buy the dip.”

“From a big picture perspective, we remain impressed by the Phase 2 donanemab data and find good reasons to be optimistic on its ability to deliver positive results in the Phase 3 TRAILBLAZER-ALZ 2 trial, setting the stage for possible commercialization in 2024,” Divan wrote.

On Saturday, Lilly (ticker: LLY) presented data on a Phase 2 trial of donanemab in early-stage Alzheimer’s patients, and published results of the trial in the New England Journal of Medicine. The company had announced tantalizing top-line results from the trial in January, and investors had hotly anticipated the new data, expecting high-quality results.

Lilly officials said the results were very positive, saying the study was better than any other Phase 2 study conducted in Alzheimer’s disease. “Every way that we look at the data, we cut the data in many different ways to try and look to see if there’s some anomaly that can explain the results other than a successful drug, and we just don’t see it,”
Dr. Daniel Skovronsky,
Lilly’s chief scientific officer, told Barron’s.

But investors disagreed, sending shares down to $189.16 by the market’s close Monday, from $208.18 at the close of the market Friday. Shares were up 1.1% in premarket trading Tuesday, to $191.15.

In addition to the Phase 2 trial the company reported on over the weekend, Lilly is conducting a Phase 3 trial, known as Trailblazer-ALZ 2, which it says will produce interim data in the first half of 2023. 

In his note, Mizuho’s Divan said the updates that the company announced Monday to the design of Trailblazer-ALZ 2 would increase its chance of success, including the company’s decision to increase the number of patients and switch which measure of Alzheimer’s disease severity it would use as the trial’s primary endpoint.

Divan also said the Food and Drug Administration’s decision on


(BIIB) Alzheimer’s drug, aducanumab, expected in June, would affect Lilly shares. Approval, he said, would be greeted as a positive for donanemab, while rejection of aducanumab by the FDA could be interpreted as a negative for donanemab by investors.

“With Monday’s stock selloff now behind us, we remind investors of the strength of the overall Lilly story, including donanemab’s mid-long term potential,” Divan wrote.

He said that, without donanemab, he valued Lilly shares at $180. “With the stock only ~$9 above that level, we see an attractive risk/reward going forward and reiterate our Buy rating,” Divan wrote.

Write to Josh Nathan-Kazis at [email protected]

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