Eli Lilly & Co.(NYSE:LLY) has been downgraded to Underperform by Cown & Co, citing risks in the drug firm's ability to develop new treatments and a patent dispute over its cancer treatment Alimta.
The research firm said in a note that the drug firm's shares are trading much higher than what it actually should, considering the risks attached to its business.
Shares of the company have risen by more than fifth this year, most of the gains coming during August, when it released preliminary results from trials that showed that solanezumab, its drug to treat Alzheimer's slowed down the process of mental decline in patients suffering from a milder form of the disease.
Analyst Steve Scala said that "solanezumab accounted for much of the stock's recent run," but according to him the drug was not likely to be a success and it would fail.
He wrote that he did not believe in the existing data and said that it was not sufficient for regulatory approval, and Lilly will pass on conducting another large, expensive study for more data.
Scala lowered his rating on Lilly shares to "underperform" from "neutral." The new rating means he expects the stock to perform worse than the Standard & Poor's 500 index.
Shares in Eli Lilly fell 0.3 percent to $50.45, though it rose about 0.15 percent in after-hours trading.