Why the FDA's Rejection of Eli Lilly's Alzheimer's Drug Is Actually Great News for the Stock
When the Food and Drug Administration (FDA) rejects a key drug from a healthcare company, it can send the stock spiraling into a sell-off. But that's not what happened to shares of Eli Lilly (NYSE: LLY) in January, even though the FDA didn't grant accelerated approval to the company's promising Alzheimer's treatment, donanemab. So what did happen?
In order for the FDA to be confident in a drug's effectiveness, it needs to have a large enough sample size to evaluate it. Unfortunately, in Eli Lilly's case, it simply didn't have enough data points for the agency to make a positive conclusion about the treatment and grant it accelerated approval.
The healthcare company received a letter from the FDA stating that the rejection happened "due to the limited number of patients with at least 12 months of drug exposure data provided in the submission." It's not a negative for the business, especially when you consider why Eli Lilly didn't have enough data for the FDA.
Source Fool.com
