A late-stage study to assess Lilly's drug candidate, solanezumab, in people with mild dementia due to Alzheimer's was a dud.
Like a contagion, the Lilly-stoked selling has spread to AC Immune,Axovant,Biogen,Merck and Roche. But there could be growth opportunities.
Alzheimer's, characterized by the loss of brain cells leading to brain shrinkage, is one of the leading causes of death in the U.S., and there is no complete cure.
Lilly itself has spent more than $3 billion over two decades to find a cure for Alzheimer's but without much result.
Solanezumab is a monoclonal antibody that binds to forms of a type of protein called amyloid beta.
Lilly's approach was supposed to clear the protein before forming clumps called amyloid plaques, which probably leads to Alzheimer's. Drug candidates targeting amyloid plaques have struggled such as those at Johnson & Johnson and Pfizer, and Lilly's candidate is no different.
Lilly will likely revise full-year guidance and its 2017 outlook and record a hefty charge. In collateral damage, PDL BioPharma shares plummeted because it faces a huge haircut in royalties on solanezumab sales from Lilly.
Investors must figure out if they are holding stocks with Alzheimer's bets that are similar to Lilly's.
Roche's Gantenerumab is a fully human monoclonal antibody that binds and neutralizes disease-relevant aggregated forms of amyloid beta. Merck's MK-8931 concept also centers on stopping production of amyloid beta peptides, which is similar to the Lilly approach.
Genentech and Roche are also working on RG6100 that targets another hallmark of Alzheimer's, the protein tau. It is too soon to know whether targeting tau will work, because an anti-tau drug from TauRx Pharmaceuticalsrecently flopped.
Meanwhile, Biogen has aducanumbab, which is Phase 3 development for the treatment of early onset Alzheimer's. Aducanumab, a human recombinant monoclonal antibody, goes after beta amyloid in the brain.
And then there is AC Immune's Crenezumab in partnership with Roche, a fully humanized IgG4 monoclonal antibody. This binds all forms of misfolded Abeta proteins to prevent and break up Abeta aggregation and help the disaggregation of existing Abeta aggregates, including plaques.
Some see Axovant's intepirdine (RVT-101) as having a good chance at treading Alzheimer's. This drug candidate is positioned as a potent antagonist of the 5HT6 receptor.
Choking the 5HT6 receptor encourages the release of acetylcholine.
Analysts hope that donepezil and intepirdine work to preserve acetylcholine and boost the cognition and function of patients with mild to moderate Alzheimer's. Cholinesterase inhibitors such as donepezil, are the lone class of drugs accepted by the Food and Drug Administration to treat patients with mild to moderate Alzheimer's.
Meanwhile, micro-capitalization Anavex Life Sciences' lead candidate Anavex 2-73 has been the cause of some excitement after Lilly's drug flopped.
Anavex's approach relates to sigma-1 receptor, which plays a key role in modulating neurotransmission.
With Lilly out of the picture, the investment stakes are high for drug companies eyeing the lucrative Alzheimer's market.
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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.