Eli Lilly's new treatment has proved ineffective in late-stage trials yet another blow for a struggling sector, says Ben Judge.
US pharmaceutical giant Eli Lilly was confident that its new drug, Solanezumab, or Sola, would be able to slow the progression of dementia in patients with Alzheimer's disease after it showed promise in early trials. The treatment had reached phase-III of clinical trials, the final hurdle before seeking permission from the Food and Drug Administration to market it.
The trial was "the most important drug discovery event of the year", with "major implications" for the industry, says Charley Grant in The Wall Street Journal. But when the results were announced last week, they proved disastrous. The drug failed to beat a placebo dashing hopes of a treatment for the disease and a potential $10bn in annual sales.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The news caused Lilly's share price to slump by 16% to an eight-year low before clawing back some of the lost ground. The company said it would take a $150m charge in the fourth quarter to take account of the failed trial, while it will "not now pursue regulatory submissions" for Sola for the treatment of mild dementia.
This is not just a major setback for the company and millions of people at risk of the disease. It is also a blow to "the most widely accepted theory of what causes Alzheimer's", according to the FT's David Crow. It has raised doubts about "an entire branch of Alzheimer's research that has dominated the industry's efforts in the past decade", adds Peter Loftus in The Wall Street Journal.
Sola targeted the beta amyloid protein believed to cause the sticky brain "plaques" that develop in Alzheimer's patients. It was a major area of study not only for Lilly, but for other companies too. Biogen, which was testing a similar drug, saw its share price fall by 4.3%.
It's yet another blow for pharmaceutical companies in a bad year for the industry. With Bristol-Myers Squibb, Alexion Pharmaceuticals and Biogen all announcing "failures of highly anticipated clinical programmes", the main problem for the sector has been "a lack of new blockbuster drugs", says Grant. And even those drugs that have successfully come to market have "experienced lower sales than investors anticipated, as payers pushed back against high prices". As previously successful drugs start to "show their age", this is a "precarious moment" for the sector.
Still, Gene Marcial at Forbes believes Lilly is now worth buying. Despite the stock being "toxic in the mind of many Wall Street analysts", he says, it is one of the "falling stars" that have been "beaten down but whose fundamentals remain attractive".
Bids and deals: JD Sports in the great outdoors
Sports fashion retailer JD Sports has paid £112m for Go Outdoors, which sells outdoor leisure equipment and clothing. The acquisition makes JD Sports Britain's largest outdoor equipment retailer, adding to its stable of brands. JD Sports has its own Ultimate Outdoors brand, while it also bought Blacks and Millets in 2012, and Scotland's Tiso in 2013. Go Outdoors was founded in Sheffield in 1998 and now operates 58 shops in the UK, employing some 2,500 people.
Turnover last year reached £202m, with pre-tax profits of £4.9m. It has been looking for a buyer for a while, says Lauren Fedor in the Financial Times, having appointed KPMG in May to "explore a sale". JD Sports's CEO said the deal "complements" its "existing significant interest in the outdoor market".
JD Sports's existing shops are mainly on high streets, whereas Go Outdoors is concentrated in out-of-town retail parks. JD is expanding rapidly abroad, too. It bought Australia's Next Athleisure, which trades as Glue, which it hopes will provide "the platform to open JD in Australia". It has also recently bought businesses in Portugal and the Netherlands, says Sadie Whitelocks on Thisismoney.co.uk. JD Sports's share price has risen by over 50% in the last year, hitting a record high. It recently split its existing shares into five new ordinary shares to improve liquidity.
City diary
Electrolux, the Swedish white-goods manufacturer, is experiencing "tepid" growth in sales of its dishwashers and tumble dryers, says Richard Milne in the Financial Times. So the company's new chief executive, Jonas Samuelson, is thinking outside the box. "We have a few fun ideas we are testing," he says. "How about a laundry Uber, where people share their unused laundry time?"With washing machines idle for much of their life, you could pimp yours out to wash your neighbours' smalls. However, there are a few details to iron out before this idea could become a reality, says Samuelson. "What happens if the clothes come out and are ruined?"
The widely touted war on excessive boardroom pay doesn't seem to be having much effect. Sir Martin Sorrell, the £70m-a year chief executive of advertising giant WPP, has taken to the pages of the FT to "defend the indefensible", says Alex Brummer in the Daily Mail, "despite hefty shareholder dissent". So investors are unlikely to be happy at the news, reported by Alex Ralph in The Times, that Sorrell has been granted "nil-cost options over 656,873 shares as part of a five-year incentive scheme". At current prices, and "subject to performance targets", that's worth "about £11.2m".
In the showdown between Iceland the country and Iceland the frozen food chain over the commercial use of the name "Iceland", the retailer is sending a "high-level delegation" team to Reykjavik this week in "an attempt to thaw relations", says Rebecca Smithers in The Guardian. The supermarket owns a Europe-wide trademark on the word, which the Icelandic government is seeking to invalidate. The country claims Icelandic firms are "unable to promote themselves across Europe in association with their place of origin".
