Eli Lilly has a new drug that could push its stock price higher.

stock ellie lily (LLY -0.57%)The world’s largest pharmaceutical company continues to hit record highs, driven by weight loss and diabetes drugs Zepbound and Mounjaro.

demand for these drugs, including from competitors; novo nordisk The prices of Wegovy and Ozempic products were so high that both companies had trouble manufacturing enough, leading to shortages.

Eli Lilly’s stock price is up 53% so far this year due to the incredible success of these products. However, the company is currently developing another drug that could push its stock price even higher.

What is Eli Lilly’s newest drug?

Donanemab, a treatment to slow the progression of Alzheimer’s disease, is currently in the final stages of FDA review. One very positive sign of the final approval of donanemab is that on June 10, the FDA’s independent advisory panel unanimously approved the treatment for early-stage Alzheimer’s disease. Although this does not guarantee approval, the FDA generally follows the recommendations of such panels. Approval of the drug may be possible by the end of this year.

The Alzheimer’s Society, a registered charity in the UK that works to fund dementia research, took note of the findings and said in a post that donanemab was effective in slowing the progression of Alzheimer’s disease. The organization states, “After one year of taking donanemab, almost half of the people who took it had no decline in their memory and thinking skills. People who took donanemab also had improvements in their ability to perform daily activities, such as: “Degradation has also been reduced by 40%.” “They are responsible for managing finances, driving, hobbies, etc.”

The group also noted: “These are exciting results, but because the trial only lasted 18 months, we don’t fully know what this will mean in the long term for people taking donanemab. Additionally, 91.5% of participants said they would not be able to take these drugs as the trial was from a white background. “We need more diversity in clinical trials to demonstrate that treatments work for everyone with early-stage Alzheimer’s disease.”

The drug has been linked to death in rare cases, but researchers believe serious side effects can be prevented by selecting patients who carry specific genes.

Large Market Opportunity in Alzheimer’s Disease

The Alzheimer’s treatment market is large and expected to grow. Currently, approximately 6.9 million Americans have Alzheimer’s disease, and approximately 55 million people worldwide struggle with this disease and other forms of dementia. Experts estimate that the market will grow at an average annual rate of 20% from 2023 to 2030.

Lily’s main competitor is Leqembi. biogen and EisaiIt received FDA approval in 2023 and is effective in reducing amyloid plaques in the brain. Eisai, the Japanese company that manufactures the drug, predicts it will generate $2 billion in sales by March 2027.

Donanemab, which targets amyloid plaques in the brain, offers advantages over Leqembi, with several notable advantages. Reported studies have shown that donanemab further slows disease progression and requires blood infusions once every four weeks compared to once every two weeks for Requevy.

Medicare Coverage

Another reason to be optimistic about the future of donanemab is that Medicare has already agreed to cover 80% of Leqembi’s costs, suggesting they will likely do the same for donanemab if it receives FDA approval. Because almost everyone in the United States likely to use a drug would have Medicare, Medicare coverage would open up a large, government-subsidized market for drugs. Federal health insurance program for people age 65 and older and people with disabilities.

Leqembi costs more than $26,000 per year. It is not yet known how much donanemab will cost, but assuming it will be in a similar range, it could be a huge profit opportunity for Eli Lilly.

The positive signs of final approval of donanemab, the size of the Alzheimer’s market, and the high likelihood of coverage by Medicare could push this new drug higher for Eli Lilly’s stock price.