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Lilly falls on Xigris split
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October 17, 2001: 1:50 p.m. ET
Drugmaker's shares lose ground after FDA panel splits on sepsis drug approval.
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NEW YORK (CNNmoney) - Shares of drugmaker Eli Lilly and Co. fell nearly 5 percent early Wednesday afternoon after the company was dealt a blow by regulators on a new blood disease treatment.
Late Tuesday a U.S. Food and Drug Administration advisory panel said it was split 10 to 10 on whether to recommend approval for Lilly's sepsis drug Xigris.
The FDA traditionally takes the advice of advisory panels on drug approval, and with more than 215,000 Americans dying from sepsis each year and no drug approved to treat the disease, Xigris was expected to be a boon for Lilly (LLY: down $3.86 to $75.14, Research, Estimates).
Some panel members suggested Lilly conduct a new study to clear up their worries, which included four patients bleeding to death after taking the drug and the company changing its original clinical trial in midstream to exclude patients likely to die from causes other than sepsis.
"We were surprised by some of the advisory committee's questions, particularly those around the protocol amendment, as they had not been raised by the FDA in the questions distributed to the committee," said Dr. William Macias, medical director of Lilly's Xigris team, in a statement. "However, we are confident that we can address these issues with the FDA."
The split vote is causing uncertainty among investors, but I think the FDA will approve Xigris," Banc of America Securities analyst Len Yaffe said. He noted that Xigris reduced mortality by 19.4 percent in the Lilly trial, which pitted the intravenous drug against a dummy treatment.
But he predicted the FDA will insist that Xigris be approved only for certain patients, such as those with at least one dysfunctional major organ, as well as conditions like rapid heartbeat or respiration and irregular body temperatures or white blood cell counts.
"We believe that given the proven efficacy of this drug, the high mortality rate of severe sepsis, and the absence of effective therapy, the FDA is still likely to approve Xigris but with label restrictions," analyst Jeff Chafkin of UBS Warburg said. He rates Lilly shares as "hold."
Chafkin said he is leaving Xigris revenue forecasts unchanged at $500 million worldwide in 2002 and peak sales of $1.4 billion in 2005.
"However, we believe that (Lilly) stock will be weak on this news. Should the stock trade below $70, we believe the risk/reward profile becomes favorable," he said. In the unlikely event that Xigris is not approved, Lilly could trade in the mid-$60s range, he said. 
-- from staff and wire reports
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