Lilly Alzheimer's Study Change Piles Risk on Risk; Jim Cramer Comments

Updates from Tuesday at 3:30 p.m. ET to include comments from Jim Cramer and Jack Mohr of Actions Alert PLUS.

Clinical trials of Alzheimer's drugs are always risky. Alzheimer's drug clinical trials altered midstream without the consent of regulators are, therefore, super risky.

The super risky situation Eli Lilly (LLY)  is where finds itself in Tuesday after disclosing a change to the primary endpoint of its most important Alzheimer's disease clinical trial involving the beta-amyloid antibody solanezumab.

Lilly consulted with the U.S. Food and Drug Administration and its counterpart in Europe about the change but acknowledges regulators were not necessarily in agreement with the the company's plan.

The disappointing result prompted TheStreet's Jim Cramer, manager of the Action Alerts PLUS charitable portfolio, to drop Lilly.

"We believe LLY's disclosure is significant and reduces the already slim possibility of achieving regulatory approval for mild Alzheimer's," said Cramer and Research Director Jack Mohr on Wednesday. "In doing so, we believe the stock's risk/reward has been negatively skewed, with higher risk containing the upside and steepening the downside. The investment has become an increasingly speculative one, and we want to avoid what we view as an increasingly binary outcome amid diminishing clarity."

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Solanezumab ("sola" for short) has already failed to demonstrate a convincing benefit for mild to moderate Alzheimer's patients in previous, large clinical trials, so investor confidence is already shaky ahead of results from the EXPEDITION3 study in mild Alzheimer's patients expected in the fourth quarter.

Add the uncertainty surrounding a change to the primary endpoint of EXPEDITION3 and the 4% drop in Lilly's stock price Tuesday is understandable.

As announced, the new primary endpoint of the EXPEDITION3 study will measure only the change in cognition over time between sola and placebo.

The study's origin design called for co-primary endpoints measuring change to cognition and function. Under the amended trial design, function is now a secondary endpoint, Lilly said.

Lilly says the change was made because of "emerging scientific evidence" which suggests cognitive decline precedes and predicts functional decline in mild Alzheimer's patients. The decision to amend the primary endpoint was not based on an early look at data from the ongoing study, the company says.

But Lilly's decision to change the sola study, particularly so close to top-line results, does suggests that internally, the company lacks the confidence in the drug's ability to achieve a co-primary endpoint of cognition and function.

By demoting function to a secondary endpoint, Lilly can claim victory in EXPEDITION3 if sola improves cognition only.

By the way, Biogen (BIIB) , another Action Alerts PLUS holding, is conducting a large, phase III study of its Alzheimer's drug aducanumab, which has a primary endpoint which combines measures of cognition and function.

The most important paragraph in Lilly's announcement Tuesday was this one focused on how regulators view the threshold for approving a disease-modifying Alzheimer's drug:

Lilly understands that regulators globally will continue to view both cognitive and functional endpoints as necessary for clinical trials in people with mild Alzheimer's dementia, and regulatory guidance has been to include these as co-primary endpoints. Lilly is submitting the EXPEDITION3 amendment to all appropriate regulatory authorities.

In other words, Lilly might declare the sola study a win on cognition alone, but regulators still view improvement in function as a requirement for approval.

Lilly believes cognition is the best efficacy measure for a drug designed to modify early-stage Alzheimer's, a spokesperson tells me. That might be true, but Lilly's effort so far to convince regulators in the U.S. and Europe to agree with its view have not been successful. The company may have better luck once data from EXPEDITION3 is known but there are no guarantees.

If the EXPEDITION3 results come out in the fourth quarter showing sola capable of improving cognition in mild Alzheimer's patients by a wide margin, then all the controversy over demoting function to a secondary endpoint might be moot. The need for an effective disease-modifying Alzheimer's drug is so great that regulators might be under great pressure to approve even if functional change is nominal. Under this scenario, demoting function to a secondary endpoint gives Lilly more regulatory flexibility. 

But the track record for beta-amyloid antibodies in Alzheimer's so far is perfectly dismal. All have failed. Lilly's previous studies of sola have failed, salvaged only by rose-colored, post-hoc analyses.

The most likely outcome for EXPEDITION3 is more of the same. If sola does work, its benefit will probably be marginal, at best. Through that skeptical lens, Lilly's decision to amend the EXPEDITION3 study within months of expected results piles risk on top of risk.

The bet Lilly is making on sola in Alzheimer's is already a Hail Mary, but instead of having to throw a touchdown pass for 90 yards, Lilly now has to throw the ball 180 yards. Is that a bet investors are willing to make?

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.

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