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The central theses

  • Eli Lilly shares rose in after-hours trading on Monday after a panel of independent advisers unanimously recommended the pharmaceutical giant’s Alzheimer’s drug donanemab, paving the way for its approval later this year.
  • If approved, the drug, along with Leqembi, a similar Alzheimer’s drug from Biogen and its Japanese partner Eisai, would expand treatment options for the six million Americans living with the disease.
  • During periods of profit-taking, watch the $795 level. This is an area on the chart where Eli Lilly stock would likely find support from the upper trendline of a channel, which is also very close to the rising 50-day MA.

Eli Lilly (LLY) shares rose more than 2% in extended trading on Monday after a panel of independent advisers to the Food and Drug Administration (FDA) unanimously recommended the pharmaceutical giant’s Alzheimer’s drug donanemab, increasing the likelihood of its approval in the U.S. later this year.

While some advisers raised concerns about donanemab’s effectiveness in black and Hispanic patients, as well as other groups, the committee unanimously declared in the second vote that the drug’s benefits outweigh its risks.

If approved, the drug, along with Leqembi, a similar Alzheimer’s drug from Biogen (BIIB) and its Japanese partner Eisai (ESAIY), would expand treatment options for the 6 million Americans living with the memory-destroying disease. Both donanemab and leqembi work by removing toxic beta-amyloid plaques from the brains of people with early Alzheimer’s, helping to slow the progression of the disease, although neither treatment offers a cure.

“We are really pleased that the advisory committee recognized the strong positive benefit-risk balance of donanemab,” said Dawn Brooks, Lilly’s head of development for donanemab, in an interview after the vote. Reuters reported. “With the panel now providing unanimous support, the company looks forward to FDA completing its review,” she added.

Eli Lilly has faced several hurdles in its attempt to bring donanemab to market over the past 18 months. In January of last year, the FDA rejected the drug and in March of this year, shortly before the expected approval decision, it requested further review of the treatment’s safety and effectiveness.

Watch this key level during periods of profit taking

Eli Lilly shares have been in a long-term uptrend since bottoming out below the 200-day moving average (MA) in early March last year. Recently, the price broke out of a three-month channel in mid-May and continues to make higher highs. With the Relative Strength Index (RSI) reading above 70 indicating overbought conditions, investors should focus on retracement support levels.

During periods of profit-taking, it is worth keeping an eye on the $795 level, an area on the chart where the price is likely to find support from the upper trendline of the channel, which is also very close to the rising 50-day MA.

Eli Lilly shares rose 2.1% to $883.45 in after-hours trading.

The commentary, opinions and analysis expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more information.

At the time of writing, the author does not own any of the securities mentioned above.

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