Shares of Eli Lilly (LLY) dropped in morning trading after the large-cap drugmaker said its drug to treat non-small cell lung cancer failed to meet its primary goal in a clinical trial. Separately, the stock was downgraded at Credit Suisse and an analyst at BMO Capital said he has concerns about its results in fiscal 2019 and 2020.

DRUG TRIAL FAILURE: Eli Lilly said this morning that its Phase 3 JUNIPER study evaluating Verzenio for advanced non-small cell lung cancer failed to meet the primary goal of improving overall survival. The late-stage study was comparing the drug with erlotinib, a drug made by Roche (RHHBY), in patients with advanced non-small cell lung cancer with gene mutations whose cancer has progressed despite initial therapies. Despite missing the primary endpoint, Eli Lilly said Verzenio showed evidence of improvement in secondary endpoints, including progression-free survival in patients and overall response rate. “While the outcome is unfortunate for patients with KRAS-mutated, advanced lung cancer, we remain encouraged by the antitumor activity observed with abemaciclib in this form of lung cancer where few clinical advances have been achieved,” said Levi Garraway, M.D., Ph.D., senior vice president, global development and medical affairs, Lilly Oncology. Lilly will submit the data for presentation at a medical meeting in 2018. In late September, the U.S. Food and Drug Administration approved Verzenio to treat advanced or metastatic breast cancer that has progressed after taking therapy that alters a patient’s hormones.

VALUATION ‘FULL’: In another dose of bad news for Eli Lilly this morning, Credit Suisse analyst Vamil Divan downgraded the stock to Neutral from Outperform and kept an $88 price target on shares. Divan told clients that he sees “limited drivers” of further upside and that the valuation looks “full” with shares up 13% since mid-August. Divan expects Lilly’s sales growth to be flat in 2018, due to patent expirations, before returning to growth. Commenting specifically on Verzenio, Divan said he expects a slower ramp up for the drug following the FDA approval given competition in that space.

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