Eli Lilly didn’t wake up to a good day on Monday as shares plummeted after it was revealed that the Food and Drug Administration (FDA) has rejected the company’s drug baricitinib, to treat rheumatoid arthritis.
Shares closed down more than 4% while shares of Incyte, Lilly’s partner on the drug, closed down almost 11%.
According to estimates from Wall Street, baricitinib would have generated more than $1 billion in sales by 2020 if it had been approved.
The FDA said that it needs additional data to “characterize safety concerns across treatment arms” and to determine “the most appropriate doses.”
President of Lilly Bio-Medicines, Christi Shaw, 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.”
The stock has already been downgraded by BMO Capital Markets to underperform and the firm lowered its target on shares to $71 from $73. According to analysts at the firm, the rejection was 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.
Disclaimer: We have no position in Eli Lilly And Co (NYSE: LLY) and have not been compensated for this article.