Large and Small: Here’s What’s Moving Eli Lilly and Zosano

eli Lilly

It’s been a strong week in the biotechnology space for drug approvals, with a number of companies putting out positive responses from the FDA relating to various drug development programs.

The latest to hit press relates to Eli Lilly and Company (NYSE:LLY) and, specifically, a drug called Verzenio (abemaciclib). Eli was trying to get this one approved in a target indication of the treatment of postmenopausal women with hormone receptor-positive (HR+), human epidermal growth factor receptor 2-negative (HER2-) advanced or metastatic breast cancer, when used in combination with what’s called an aromatase inhibitor (AI).

So what happened?

Well, in line with the introduction of this piece, the development came in as favorable for Eli, with the FDA approving the drug for use in the above-discussed target indication.

But it’s not quite that simple. There are a couple of key points associated with this program.

First, this isn’t the first approval for this asset – the approval represents an expanded approval on an initial approval that hit press during September last year, which saw the drug approved as a combination asset with Fulvestrant in the same breast cancer indication, but once the disease had progressed following endocrine therapy.

Second, and this sort of feeds into the first, is that this drug is in direct competition with two assets called Ibrance and Kisqali, which were developed and are now marketed by Pfizer Inc. (NYSE:PFE) and Novartis AG (NYSE:NVS) respectively. Both of these are already expanded and this latest indication affords Eli the opportunity to stay neck and neck (if not a little ahead, given the data that supports this program’s approval) with its big-name peers.

Sticking with the data for a moment, the latest approval was based on a late-stage study in which Verzenio was taken twice a day with either anastrozole or letrozole and, on the back of this administration, the drug significantly delayed disease progression compared with a placebo and one of the aromatase inhibitors.

So how did markets respond to the news?

In a word, strongly.

The company closed out the session yesterday for a close to 2% premium to its daily open on Monday and looks set to pick up a bit more strength as markets open for standard participation on Tuesday.

That doesn’t seem particularly substantial at first glance, but when you consider that this is a company with a market cap of just shy of $90 billion, the 2% run becomes substantial.

Jumping now to the opposite end of the market, Zosano Pharma Corporation (NASDAQ:ZSAN) was another big mover in the biotechnology space early this week. The company gained close to 75% on what was essentially no news, with volume spiking into the close of the session on Monday.

There are a couple of speculative potential drivers for this run, although none are solid as far as making reliable conclusions is concerned. The company conducted a reverse split at the end of last month and put out the results of a special shareholder meeting, with the split reducing the share count by a ratio of 20 to 1 (shareholders had authorized a between 5 to 1 and a 20 to 1 ratio).

There are also some potential pipeline related drivers that might account for the action, but again this is an unusual volume flow even with the pipeline progressing nicely in the background.

For example, in its lead program, which was set up to investigate an asset called M207 for the treatment of migraine and which is currently in a long-term safety study, management expects to enroll 100 patients by the end of Q1, 2018, and 250 patients by Q2, 2018, with 6-month safety data from the trial expected in Q4, 2018.

There’s the argument, then, that the action we are seeing is coming in anticipation of confirmation that the company is on track with its lead program.

Again, it’s possible, but the degree to which Zosano has moved makes this unlikely as a primary driver.

Finally, there are some rumors surrounding an IP update, but these are yet to be confirmed.

So, what’s next?

We’re going to be watching this one closely for some insight into exactly what’s going on. Right now, Zosano shares go for $7.68 a piece giving the company a market cap of a little over $15.1 million.

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