INDIANAPOLIS (TheStreet) -- Eli Lilly & Co. (LLY - Get Report) is shutting down clinical development of a cholesterol-lowering pill, removing what could have been the Big Pharma's next multi-billion dollar product from its research pipeline.

In a surprise announcement Monday, Lilly said a large phase III study of evacetrapib was being discontinued because an interim analysis determined the pill was unlikely to reduce the number of deaths, heart attacks, strokes or other cardiovascular events compared to a placebo.

Lilly shares fell 7% to $79.86 in early Monday trading following the announcement that all clinical trials involving evacetrapib were being shut down.

Coming into Monday, Lilly shares traded at a higher price-to-earnings ratio than its other Big Pharma peers, mainly because investors were optimistic about the company's pipeline of potential blockbuster drugs to fuel future earnings growth. With evacetrapib gone, Lilly will be under increased pressure to produce hits from its remaining pipeline, most notably the high-risk Alzheimer's disease drug solanezumab.

"We're obviously disappointed in this outcome, as we hoped that evacetrapib would offer an advance in treatment for people with high-risk cardiovascular disease. We'll be working with investigators to appropriately conclude these trials," said David Ricks, Lilly's senior vice president and president of Lilly Bio-Medicines, in a statement. "We remain confident in our pipeline as we prepare for launches in other therapeutic areas with significant unmet needs."

Evacetrapib is a once-daily pill in the class of cholesterol-lowering drugs known as cholesteryl ester transfer protein (CETP) inhibitors. CETP inhibitors were once hailed as the next blockbuster class of cholesterol-lowering medicines, but late-stage clinical failures experienced by Pfizer (PFE - Get Report) and Roche (RHHBY) cast a shadow over the drug class.

Now that Lilly's CETP inhibitor has also blown up, Merck (MRK - Get Report) is the only Big Pharma with the a CETP inhibitor in ongoing phase III studies. Merck shares are down 2% to $49.79.

In September, Amgen (AMGN - Get Report)  acquired a private company also developing a CETP inhibitor which completed phase II studies.

Investors, at least initially, are viewing the Lilly setback as a positive for Esperion Therapeutics (ESPR) , developers of a pill which also lowers cholesterol, but with a different mechanism of action. Esperion shares rose 8% to $27.03 early Monday following the Lilly announcement.

Shares of Amgen and Regeneron Pharmaceuticals (REGN - Get Report)  also opened higher Monday because Repatha and Praluent, their respective, injectable cholesterol-lowering drugs, which just recently launched commercially, stand to gain now that potential competition from  evacetrapib has been removed. 

Analysts, on average, were modeling approximately $800 million in 2020 sales for evacetrapib and peak sales of about $2.6 billion in 2025, said Evercore ISI analyst Mark Schoenebaum in an email to clients. Removing the drug from his financial model cuts $5 per share from Lilly's valuation, down to $80 per share from $85 per share, he writes. 

 

 

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.