Eli Lilly: New Drug Shows Strong Potential

Jun.22.12 | About: Eli Lilly (LLY)

Eli Lilly (NYSE:LLY) and Incyte (NASDAQ:INCY) have made significant headway with the drug Baricitinib as recent studies show positive results in the treatment of rheumatoid arthritis.

The trials so far have yielded statistically significant results that support the efficacy of the drug. Essentially, the drug has achieved its primary endpoint in studies so far, which is the best that Eli Lilly could ask for at this point in the testing game. Subjects were randomly assigned in this double blind study and the validity of the methods used is not in question at all. Study groups that took 4mg doses of Baricitinib combined with the group that took 8mg doses of Baricitinib achieved a 76% response as compared to the placebo group which achieved only a 41% response.

It must be noted that during the trials the "most common treatment-emergent adverse event class was infections". This is something worth looking out for. In addition, the final stage of testing still needs to be conducted.

These are very positive results and good news for the company as a whole. However, there is still a long way to go in terms of the drug Baricitinib and it is difficult at this point to analyze whether or not success is around the corner. However, in terms of Eli Lilly stock, this news is most likely a game changer and investors should keep a close eye on the long-term results.

Pharmaceutical companies have realized that in order to make a mark on the market they have to start addressing serous condition in earnest. One of the conditions that require attention is type 2 Diabetes. Recently, Eli Lilly and Boehringer Ingelheim Pharmaceuticals presented the results of a clinical trial involving the drug linagliptin. Essentially the results show that the drug makes a significant difference in controlling blood sugar levels in patients with the condition. The treatment is attractive in that it is a once-daily tablet taken orally by patients to control their condition.

However, at this point, it does seem like a positive drug in Eli Lilly's pipeline, so it is a drug well worth watching by anyone interested in Eli Lilly stock.

Things are looking good for Sanofi (NYSE:SNY) in terms of a clinical trial recently conducted. The results of this trial show that Sanofi's Lantus insulin is better for reducing blood sugar levels in people with type 2 diabetes than a similar drug offered by Merck (NYSE:MRK), which is called Januvia. There are a couple of things still standing in Sanofi's way however: firstly, its drug has more side effects than Merck's; secondly, its efficacy is greatest when started early in the treatment process. However, most doctors prefer to delay the start of insulin treatment. All in all, Merck probably does not have much to worry about. In fact, both companies may find their own niche in the diabetes treatment market, or perhaps one drug will reign supreme. Keep an eye on these companies doing battle here.

So Eli Lilly is not the only competitor looking for an innovative diabetes treatment. The company faces a lot of completion in this regard. In addition to the drugs offered by Sanofi and Merck Eli Lilly also has to consider Bristol-Myers Squibb (NYSE:BMY) and AstraZeneca's (NYSE:AZN) dapagliflozin and Johnson & Johnson's (NYSE:JNJ) canagliflozin as these are significant new drugs that have entered or that may soon enter the market. To keep ahead, Eli Lilly will have to work a bit harder.

Competitor Abbott Labs (NYSE:ABT) may have found the revenue driver that it has been looking for. The company, in partnership with Neurocrine Biosciences (NASDAQ:NBIX), is working on a treatment for endometriosis in women. The new drug, elagonix, will address the growing problem of endometriosis that costs more than $20 billion a year in the US. The results of testing so far have been very promising. For stock holders this may represent Abbott's revival and return to the pharmaceutical game as a significant player at last.

Novartis (NYSE:NVS) is making headway in the realm of multiple sclerosis treatment. Extension studies were recently conducted to evaluate the long-term efficacy of Novartis's drug Gilenya. It would appear that patients who consistently took the drug for a period of about 4 and a half years experienced fewer of the brain deterioration symptoms associated with multiple sclerosis. In addition, it was found that patients who switched to this treatment from another, more commonly prescribed medication showed a higher rate of improvement than those who did not. Breakthroughs in serious conditions such as this one are what make a pharmaceutical company memorable.

A cursory glance at Eli Lilly tells me that the company is doing its best. The question is whether or not its best is in fact good enough to continue being a significant player in the market. Its work in rheumatoid arthritis is significant but does not represent one of the major fields that require attention, such as diabetes and cancer. Even its attempt at a diabetes medication is facing extremely steep competition form companies that seem to have a much better idea of what they are doing. As stock go, this is a safe bet, but not necessarily the best bet. If you already have an interest in Eli Lilly it is probably better at this point to hang onto that interest as the there is a lot of potential for future success and growth in this company.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.