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Eli Lilly Stock Volatility After Foundayo Liver Event

Eli Lilly's stock experienced volatility after an adverse event report linked a patient's liver failure to its drug Foundayo. The stock initially dropped on this news, but rebounded after Lilly stated that its internal review found the event was "not reasonably related" to the drug. Market activity was also influenced by rising oil prices due to geopolitical tensions and increased bond yields, pushing up the perceived probability of Fed rate hikes. The company reassured investors by citing robust clinical trial data and noted that Foundayo's adoption is unlikely to negatively impact sales of its existing GLP-1 drugs.

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Eli Lilly Stock Volatility After Foundayo Liver Event

Eli Lilly's stock experienced significant intraday volatility following a recent adverse event report concerning its drug Foundayo, despite a strong post-earnings surge last week. The market also reacted to geopolitical tensions and rising interest rate expectations.

Market Context: Geopolitics and Rates

Concerns surrounding the war in Iran contributed to market fluctuations. This geopolitical tension impacted energy markets and bond yields:

  • Oil Prices: WTI crude climbed approximately $3 per barrel to $105, while Brent crude rose about $6 to $114 per barrel, following reports of missile and drone attacks in the UAE.
  • Interest Rates: The yield on the 10-year Treasury jumped to around 4.45%, and the 30-year yield surpassed 5%. Consequently, the probability of a Fed rate hike by year-end increased to 36% (up from 23% on Friday).

Eli Lilly's Stock Movement and Foundayo Concern

Following a 9% surge after last week's earnings report, Eli Lilly's stock faced a downturn due to news regarding Foundayo, its oral obesity drug. The initial concern stemmed from:

  • FDA Report: The Food and Drug Administration's Adverse Event Reporting System (FAERS) indicated one patient experienced liver failure after using Foundayo.
  • Market Sensitivity: This report heightened market sensitivity, especially given that the FDA had previously requested more safety data, including liver injury information, around the drug's April approval.
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However, the stock subsequently recovered after Lilly issued a statement addressing the incident. The company confirmed that:

  • Safety Review: Lilly's patient safety division reviewed the case and determined the adverse event was "not reasonably related to Foundayo."
  • Company Assurance: A spokesperson stated that the assessment was based on robust clinical trials involving over 11,000 participants, where the liver safety profile was comparable to placebo and other active comparators, with no observed cases of drug-induced liver injury.

Foundayo Outlook and Industry Context

Despite the initial scare, the company provided context on Foundayo's market position:

  • Adoption: Over 20,000 people have started using the drug, with more than 80% being new to GLP-1 medications.
  • Sales Impact: Lilly noted that Foundayo is not expected to cannibalize sales of its established injectable drugs, Zepbound and Mounjaro.
  • Future Outlook: The company anticipates a strong second half of the year as commercial access improves and consumer promotions scale up.

Other Market Movers

Beyond Lilly, several other companies are scheduled to report earnings, including Palantir, Onsemi, BWX Technologies, and Pinterest. Additionally, DuPont, Eaton, Shopify, PayPal, Pfizer, KKR, Fiserv, American Electric Power, and GlobalFoundries are reporting before the opening bell on Tuesday.

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