Eli Lilly (NYSE:LLY) continued to decline in the morning hours Friday even as several analysts defended the company after the FDA refused accelerated approval for its Alzheimer's treatment donanemab.
Cantor Fitzgerald's Louise Chen leads the pack, reaffirming the Overweight rating and $432 per share target on Lilly (LLY). "We think an accelerated approval was widely anticipated by the Street so the news today comes as a downside surprise," the analyst wrote.
Chen remains positive on LLY's (LLY) Alzheimer's prospects due to the ongoing confirmatory Phase 3 TRAILBLAZER-ALZ 2 trial, which is set for a topline readout in Q2 2023.
SVB Securities analyst David Risinger agreed, noting that the delay in FDA approval is "immaterial" and will allow the agency to go through the late-stage study results before a final decision.
"We'd be buyers on any weakness," BMO's Evan David Seigerman wrote, highlighting that the FDA decision only delayed but did not deny the donanemab development. "Headline impact to the stock is not great, especially after a softer 2023 guide," the analyst added, referring to the underwhelming 2023 outlook Lilly (LLY) shared in December.
However, Seigerman points to the stock's long-term potential given the market opportunity for the company's experimental weight loss therapy Mounjaro and confirmatory Alzheimer's data.
SVB and BMO have Outperform ratings and $410 per share targets on LLY.
Meanwhile, Jefferies analyst Michael Yee notes that the regulatory setback means a delay for the donanemab launch, and Lilly (LLY) can submit the treatment for traditional approval by mid-2023.
"This is a modest positive for Biogen" (BIIB), Yee wrote, pointing to the rival Alzheimer's drug developer who, with partner Eisai (OTCPK:ESALY) (OTCPK:ESALF), won the FDA signoff for its anti-amyloid therapy lecanemab early this month under accelerated approval.
Baird analyst Brian Skorney noted: "…we think, at minimum, it gives Eisai some extra time on the market... to build a lead over donanemab."
Seeking Alpha contributor Lane Simonian predicted in October that LLY stock would drop to the mid-200s if FDA declines donanemab.