Eli Lilly: Detailed Phase 3 Alzheimer’s Data With Donanemab Reinforces Drug’s Strong Outlook

Eli Lilly LLY revealed details of the positive phase 3 Alzheimer’s study Trailblazer-ALZ 2 with donanemab that are largely in line with our expectations. We are not making any major changes to our outlook for donanemab or Eli Lilly’s fair value estimate. However, the strong data helps to reinforce the firm’s wide moat, building on an innovative pipeline of next-generation drugs.

The phase 3 data should support donanemab approval in 2024, and we expect the Alzheimer’s market to largely split between donanemab and Biogen’s competitive drug Leqembi. Despite several statistical problems with cross-trial comparisons between these two drugs, we view donanemab’s finite dosing and likely slight efficacy benefit for low/intermediate tau patients as benefits over Leqembi. However, donanemab’s safety profile looks slightly worse than Leqembi, netting out to a relatively equal playing field for the two drugs. Alzheimer’s disease drugs could create a large potential market, and we think both Biogen and Lilly will focus on establishing the market rather than fiercely competing against one another, particularly given the likely diagnosis hurdles and treatment bottlenecks in this nascent market. We project peak annual donanemab sales of over $7 billion.

Additional clinical studies should reinforce Lilly’s positioning in Alzheimer’s. We expect phase 3 donanemab data with different dosing schedules in 2024, which may help to alleviate the safety side effects of swelling of the brain. Also, we expect positive data from an additional phase 3 study focusing on prevention in 2027, as the drug appears to have the strongest benefit in early-stage patients.