Eli Lilly: Alzheimer’s Drug Posts Strong Efficacy but Side Effect Profile Causes Some Concerns

Eli Lilly reported largely positive phase 3 data with Alzheimer’s drug donanemab in line with our expectations, and we don’t expect any major changes to the firm’s fair value estimate. In the study, the drug impressively met all primary and secondary endpoints related to slowing cognitive and functional decline. However, the side effect of serious ARIA (swelling of the brain) occurred in 1.6% of patients and led to at least two deaths. Despite the serious but rare side effect, we expect the drug will gain approval in early 2024 based on the strong efficacy, adding another new likely blockbuster launch for Lilly while also reinforcing the firm’s wide moat.