Lilly's Moat Still Intact After Halting Heart Drug Study

We plan to reduce our

Lilly ended the drug's pivotal Phase III study based on a data-monitoring committee's suggestion that the drug would not achieve a cardiovascular benefit. Despite the large potential for the drug, we had only modeled in $1 billion in peak sales potential (in line with consensus expectations) because of the high uncertainty of approval, as several similar drugs failed in late-stage development.

Nevertheless, we still view Lilly's moat as wide, buoyed by a strong late-stage pipeline and manageable patent losses over the next five years. Given the stock's major pullback on the discontinuation announcement, we now see Lilly as fairly valued.

Beyond the implications for Eli Lilly, the evacetrapib failure reduces odds of success for

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