The Food and Drug Administration on Thursday rejected a lung cancer drug Eli Lilly tested only in China, but LLY stock inched higher.
Now, Eli Lilly and its partner, China-based Innovent Biologics, will have to run a broader study in multiple regions to win FDA approval. The FDA recommended the companies run another test to determine their regimen — chemotherapy and a drug called sintilimab — isn't inferior to the standard of care in patients with advanced lung cancer.
The news is a boon for companies like Merck and Bristol Myers Squibb. Lilly hoped to offer the cancer drug at a steep discount in the U.S. by testing it in a less expensive location. Drugs in this class, which block proteins called PD-1 and PD-L1, cost around $150,000 annually.
On the stock market today, LLY stock advanced 1.2% to 287.69.
LLY Stock: FDA Decision Unsurprising
Previously, the FDA's advisory committee voted against recommending sintilimab's approval in patients with untreated non-small cell lung cancer, prompting Eli Lilly stock to fall less than 2%. Although the FDA isn't bound by the panel's vote, it often follows the recommendation. So, the FDA rejection isn't a complete surprise.
Lilly says it and Innovent are now evaluating their next steps for sintilimab in the U.S.
Despite the news Thursday, LLY stock remains in a buy zone after breaking out of a cup base on March 17. Shares topped a buy point at 284, according to MarketSmith.com.
So far, the FDA has approved seven drugs in this class. In addition to Merck's Keytruda and Bristol Myers' Opdivo, Roche, AstraZeneca, EMD Sereno, Regeneron Pharmaceuticals and GlaxoSmithKline also have drugs on the market.
Others are likely to try a tactic similar to Eli Lilly's. Notably, biotech company EQRx launched in January 2020 to work on cheaper medicines. It has licensed a number of treatments from China. Among those is sugemalimab, a PD-L1 cancer drug licensed from CStone Pharmaceuticals.
Shares Remain In A Buy Zone
LLY stock is among leading stocks, and has a Relative Strength Rating of 93, IBD Digital shows. The RS Rating pits a stock's 12-month performance against all other stocks. Stocks with a rating of at least 80 exhibit strength.
LLY stock also has a promising Composite Rating of 92, which puts it in the top 8% of all issues in terms of fundamental and technical measures.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
