Investors offer grim odds of success for two big Alzheimer's programs

Wall Street both loves and fears a big "binary" biotech event. Investor parlance for a high-stakes gamble where a missed or made endpoint or some other key play can drive a stock up or down in seconds. And in a world where investors regularly throw the dice on data and deals, few events will merit as much discussion and analysis this year as the readout on a slate of late-stage studies of new Alzheimer's drugs from Eli Lilly ($LLY) and a partnership of Johnson & Johnson ($JNJ) and Pfizer ($PFE).

With that in mind, Mark Schoenebaum and the ISI group assessed the odds 146 prominent investors were giving to both Eli Lilly and the J&J/Pfizer drugs, solanezumab and bapineuzumab. Lilly, which has the most at stake here with a lean record of pipeline successes and some brutal generic competition to account for, registered a mere 14% chance of clinical success, according to a report from Reuters. J&J/Pfizer got better odds, with a 21% chance of success at hitting all primary endpoints. Neither figure is likely to make any of the companies involved feel very good about their prospects. But J&J/Pfizer did much better at its long-term prospects for an eventual approval, with a 29% shot at success, versus only 15% for Eli Lilly.

Why the discrepancy and what's the lesson here for all drug developers? Reuters cites uneasiness over Lilly's relatively brief 12-week Phase II studies, while Pfizer took 18 months to consider the right dose levels for Phase III. You could also add that Lilly has failed at this before while all the companies are struggling with a high level of scientific uncertainty over what causes Alzheimer's and how it can be best treated. 

The bounty from an approval would be enormous. Patients suffering from Alzheimer's would flock to any drug that offered even marginal benefits. It could save Lilly from its vanishing Zyprexa franchise and give Pfizer an enormous boost when it's needed most. J&J would continue to build a reputation for real savvy at in-licensing.

Defeat, though, would be punishing. With Lilly and Pfizer likely to take a nasty hit on their stock price. There's also been considerable buzz that Lilly CEO John Lechleiter could face a shareholder rebellion--perhaps even be forced to resign--if the studies fall short of their primary endpoints. Elan, which retained a share of the royalties on bapineuzumab, even delayed its planned CEO transition to wait for the data. The new chief can either come in on the wings of a major win, or face the consequences of failure.

- here's the story from Reuters