Eli Lilly shares tank after Alzheimer's drug fails in late-stage trial

An experimental drug from Eli Lilly (LLY) failed to slow the loss of cognitive ability in patients with mild Alzheimer's disease, the company said Wednesday.

Shares of Lilly shed 10.5 percent on Wednesday following the report.

Based on the failure of the more than 2,100 patient study in Phase III clinical trials, Lilly said it won't seek U.S. approval of solanezumab, the infused drug for mild dementia.

Outgoing Eli Lilly CEO John Lechleiter told CNBC on Wednesday that solanezumab's failure is a disappointment for Alzheimer's sufferers, but the company has other potential treatments for the disease in the pipeline.

"We have an oral drug we're testing now in Phase III. We have five other therapeutic agents in early stages of development," said Lechleiter, who is retiring at the end of the year.

It could take "weeks or months" to figure out what went wrong with solanezumab, he said on " Squawk Box ."

Incoming CEO David Ricks told "Squawk Box" that Lilly had been planning for this worst-case scenario, and still expects to grow without the drug.

"We knew it was a high-risk, high-reward program. We're disappointed with the results," Ricks said. "We have a lot going on beyond Alzheimer's, launches in diabetes and oncology and immunology."

Ricks said Lilly stands by July projections, calling for revenues to grow an average of 5 percent between by the end of the decade, and calling for margins to improve without solanezumab. "That's still intact," he said.

Some analysts had predicted solanezumab, if approved, would have eventually led to more than $5 billion in annual sales and a boost to Lilly's earnings for years to come.

Lilly said the study outcome is expected to result in a fourth quarter pretax charge of about $150 million, adding the company plans to provide updated 2016 financial guidance and announce 2017 guidance on Dec. 15.

Shares of Biogen (BIIB), which is developing a similar drug, declined more than 3 percent during the session.

— Reuters contributed to this report

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