Healthy Skepticism Library item: 8989

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Publication type: news

Lipton J.
Positive Catalysts Seen For Lilly
Forbes.com 2007 Mar 22
http://www.forbes.com/2007/03/22/eli-lilly-prasugrel-markets-equity-cx_jl_0322markets13.html?partner=yahootix

Full text:

Prasugrel might thin your blood but it could very well thicken Eli Lilly’s profits.

The potential blockbuster drug, one of the most talked-about in Eli Lilly’s pipeline, is currently being tested head-to-head with Plavix, a money-making blood thinner produced by Bristol-Myers Squibb and Sanofi-Aventis.

The drug is being tested in more than 13,000 patients. Full enrollment in the trial was announced on Jan. 16, with completion of the trial expected in mid-2007.

Goldman Sachs analyst James Kelly wrote in a client note posted Wednesday that the release of the Phase III data for Prasugrel will be an important catalyst for shares in 2007, as the drug could, if successful, challenge Plavix, a $6 billion drug which stands alone in this segment of the oral antiplatelet market.

“We remain optimistic on Prasugrel’s chances,” Kelly told clients.

The analyst ran a scenario analysis evaluating the impact of Prasugrel on Eli Lilly’s bottom line.

He sees upside of around 6% from current level or a share price of $57 should the drug demonstrate superior efficacy compared to Plavix with an acceptable safety profile. Look for an upside of 10% from current levels or $59 if Prasugrel showcases superior efficacy versus Plavix, with an equivalent safety profile. A third possibility, Kelly said, is downside of around 5% or shares trading in the low-$50 range in the worst case scenario, in which the trial results show an unacceptable risk/reward balance.

Kelly told his clients to push money into the company, citing continuing stabilization in base business trends and improving capital discipline. His price target is $62.

Besides Eli Lilly’s attempts to break into the blood-thinning market, there is also an ongoing legal tug-of-war between Bristol-Myers and generic drugmaker Apotex about Plavix.

That showdown started back in August, when Bristol-Myers announced in a quarterly report that a generic knockoff of Plavix produced by Apotex would soon hit the market. (See: “Plavix Pain.”)

Not so fast, said Bristol-Myers and Sanofi, which insist that Plavix is still protected by a patent. They sued Apotex in a New York court. The parties are now awaiting a decision.

On Thursday morning, shares of Eli Lilly climbed 0.4%, or 22 cents, to $54.04.