Eli Lilly shares are cratering after the FDA rejected a $1 billion arthritis drug on safety concerns

Shares of Eli Lilly dropped more than 4 percent Monday morning after the Food and Drug Administration rejected its drug to treat rheumatoid arthritis.

Shares of Incyte, Lilly’s partner on the drug, baricitinib, fell nearly 11 percent in early morning trading. Wall Street analysts believed the treatment would have generated more than $1 billion in sales by 2020 if it had been approved, according to Bloomberg data.

Lilly said Friday that the FDA needed additional data to “characterize safety concerns across treatment arms” and to determine “the most appropriate doses.”

Christi Shaw, president of Lilly Bio-Medicines, said in a statement: “We will continue to work with the FDA to determine a path forward and ultimately bring baricitinib to patients in the U.S.”

Analysts at BMO Capital Markets downgraded Lilly’s stock to underperform from market perform and lowered their price target on the shares to $71 from $73. The analysts called baricitinib’s rejection a “surprising, and significant, setback for Lilly.”

“Overall, we highly doubt that the stated FDA concerns could be addressed without new clinical trials; therefore, we believe the timing for Bari’s U.S. RA launch is most likely pushed back at least three years,” BMO said in a Monday note, adding it lowered its 2017 global sales forecast on the company to $1.6 billion from $2.2 billion.

Eli Lilly’s shares closed at $85.88 on Thursday, up more than 16 percent this year.

LLY in 2017

Source: FactSet

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