Next Big Test for Biotech Investors Is FDA Panel on Lilly Drug

(Bloomberg) -- Biopharma investors face another test next week as a highly anticipated U.S. Food and Drug Administration advisory panel is set to spark moves in shares of Eli Lilly & Co., Incyte Corp. and other companies developing medicines for rheumatoid arthritis.

Analysts are cautious after the FDA last year rejected Lilly and Incyte’s baricitinib and asked for more data about potential safety concerns and optimal dosing. Credit Suisse estimates that a positive recommendation for both doses of baricitinib at Monday’s meeting could boost Lilly shares by 3 percent to 5 percent and lift Incyte by 10 percent to 15 percent. The worst-case scenario -- if neither dose wins panel backing -- might send Lilly lower by 5 percent and Incyte by 13 percent, according to the bank.

The stakes are high for other drugmakers too. AbbVie Inc. has a similar drug in development and could benefit from positive commentary by the panel of advisers. Credit Suisse sees AbbVie shares rising 1 percent if baricitinib is endorsed and falling 3 percent if it isn’t. Gilead Sciences Inc. and Galapagos NV may also reflect read-through to their experimental filgotinib treatment, with upside for Galapagos shares of 5 percent and downside risk of 10 percent, Credit Suisse estimates.

Next Big Test for Biotech Investors Is FDA Panel on Lilly Drug

Regulators are expected to post briefing documents on Thursday morning for the advisory committee meeting. Here’s what analysts are saying ahead of the event:

Credit Suisse, Vamil Divan

  • Panel’s views on risk of major blood clots and whether both the 2 milligram and 4 milligram doses should be approved will be critical to the commercial outlook for baricitinib; Divan expects a boxed warning for thromboembolic events, says safety concerns may affect the whole class of drugs known as oral JAK inhibitors
  • Sees an 80 percent chance of U.S. approval for baricitinib; estimates ~$1 billion in sales in 2026
  • Cautions that doctors aren’t convinced about baricitinib’s potential superiority over AbbVie’s Humira; even so, panel remains a big catalyst for Incyte after epacadostat’s study failure sent shares down 23 percent on April 6

Cowen, Steve Scala

  • Sees a 50 percent chance of baricitinib approval; estimates sales of $180 million in 2018, rising to $1.5 billion in 2024
  • Expects AbbVie shares to trade similarly to Lilly
  • Says experts surveyed by Cowen indicate that a black box warning “would not be overly problematic” for doctor and patient adoption

BofA Merrill Lynch, Ying Huang

  • Sees Incyte shares moving up or down 10 percent to 15 percent depending on the panel outcome; removal of this overhang may allow investors to "re-rate" the shares and shift focus to interesting pipeline assets and upcoming trial results
  • Expects shares to fall if only 2 milligram dose is recommended as there’s limited commercial opportunity for low-dose-only approval; notes that only 4 milligram dose showed superiority to Humira
  • Adds that while both doses are approved in Europe and Japan, European regulators recently added a warning for patients who have risk factors that may cause them to develop blood clots

Bloomberg Intelligence, Asthika Goonewardene

  • FDA is looking to see if so-called venous thromboembolic events are “really something to be worried about” as Lilly’s clinical data didn’t show a clear signal of a higher-than-anticipated rate of such side effects
  • The discussions will frame how the agency looks at AbbVie’s upadacitinib, which has mixed data so far with some instances of blood clots; more Phase 3 data are still expected
  • Notes baricitinib also would be a competitor to Pfizer Inc.’s Xeljanz

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