Looking ahead at Lilly's 2016 prospects after a challenging 2015
Eli Lilly had an up and down 2015. The Indianapolis-based pharmaceutical company grew slightly and saw significant sales growth from several newly approved drugs. However, other older drugs faltered and Lilly had to terminate development of two compounds.
Lilly renewed its investment in oncology R&D, announcing plans to build out its immuno-oncology facilities in New York City. After a slowing pipeline and heavy reliance on ten-year or older drugs, Lilly needs to hit on its late-stage compounds. 2016 should give a better sense of Lilly’s future competitiveness in diabetes and oncology treatments.
New Drug Approvals:
In terms of new molecular entities, Eli Lilly had only one drug, its lung cancer med Portrazza, approved by the FDA in 2015. Portrazza was approved as a first line treatment of squamous non-small cell lung cancer (NSCLC) in conjunction with two chemotherapies. In clinical trials, it extended median patient life by six to seven weeks.
Lilly priced Portrazza at $11,430 a month, which some physicians have described as too high for a drug with only modest benefit. Additionally, setting the list price above $10,000 a month—the average cost of a cancer drug in the U.S.—could potentially cut into uptake of the new med. Sales of Portrazza were projected to hit $497 million by 2020, according to consensus forecasts compiled by EP Vantage.
In addition to Portrazza, Lilly also won approvals for a number of other compounds in 2015, notably the insulin glargine Basaglar. The “follow-on” biologic was the product of Lilly’s diabetes partnership with Boehringer Ingelheim, which launched in 2011 and developed the potential blockbuster Jardiance.
Ongoing patent litigation with Sanofi had originally held up the approval of Basaglar, a copy of Sanofi’s Lantus. The two firms reached a settlement in September allowing Lilly to market Basaglar in the U.S. beginning on December 15, 2016.
Sanofi raked in more than $8 billion in Lantus sales in 2014, so the market potential for Basaglar is strong when it eventually does make it to market. Basaglar will be priced between 10% and 20% below the price of Lantus, said Enrique Conterno, SVP, on an investor call Thursday.
Lilly’s pipeline hasn’t been as strong as many of its big pharma competitors in recent years. Ninety-one percent of its 2015 sales came from products over ten years old, according to data from EP Vantage (forecast before Lilly released its 2015 annual earnings). This exceeded most other major pharma companies.
That pipeline took two major hits last year when the company decided to scrap the development of the long-acting insulin peglispro and its CV drug evacetrapib.
Regulatory submission of peglispro had been delayed due to indications the drug may cause a potentially dangerous buildup of liver fat. While no liver impairment was observed in its 6,000-person trial, development was terminated to focus elsewhere. The move will cost Lilly a one-time $55 million financial hit. Perhaps more importantly, it will lose the potential of developing future combo treatments with other compounds in its diabetes franchise.
The phase 3 trial for evacetrapib was dropped in October, costing Lilly $90 million in R&D expense. Sales of evacetrapib had been forecast for $612 million in sales by 2020.
In 2016, Lilly hopes to see regulatory movement on its IL-17a psoriasis drug ixekizumab, which it submitted in 2015 for approval in the US, EU, and Japan. There is a possibility it sees US approval sometime this year, giving Lilly a potential blockbuster by 2020.
Early in January, Lilly and Incyte Corp submitted the JAK inhibitor baricitinib for U.S. approval. Baricitinib is designed to treat rheumatoid arthritis and is the only oral JAK1/JAK2 inhibitor in late stage development. However, the RA market has a number of strong competitors, perhaps leaving Lilly late to the game. In its favor, baricitinib demonstrated superiority to AbbVie’s market-leading Humira.
Renewed investment in oncology:
Elsewhere, Lilly invested in the development of its oncology pipeline. It launched, and subsequently expanded, a collaboration agreement with Merck to evaluate the combination of its Alimta with Merck’s Keytruda in a phase 3 study for nonsquamous NSCLC. It also has a partnership with AstraZeneca to study the combo of durvalumab with three Lilly compounds.
Furthermore, five phase three cancer studies were initiated in 2015. Four of them are testing Cyramza (ramucirumab) for expanded treatment of NSCLC and gastric, bladder, and hepatocellular cancers. As Cyramza was a driver of growth in 2015, it will be worth watching to see if the studies show results supporting a broader label.
Despite pipeline setbacks, Lilly got a boost when a clinical trial found its (along with Boehringer Ingelheim) diabetes med Jardiance significantly reduced the risk of cardiovascular death. This is potentially groundbreaking as CV disease is a major cause of death in people with diabetes. Jardiance is the first diabetes med to demonstrate this effect, showing a 38% decline in the risk of CV death.
While this CV effect is not currently on Jardiance’s label, the FDA has accepted the filing of the outcomes data. On the same call on Thursday, Conterno indicated Lilly expects this to be added to the label in the second half of 2016 and believed “it will make a huge difference when we actually have the label.”
Lilly splits Jardiance profits with Boehringer Ingelheim but, with some analysts forecasting peak sales of $6 billion, the drug should lift both companies.
Revenue grew by a little under 2% in 2015 from 2014 on a GAAP basis, while profits rose marginally by 0.7%. Sales of Alimta and Cymbalta fell substantially, with the latter dropping by nearly 37% year over year. Two of its other big-sellers, Humalog and Cialis, treaded water in 2015, notching small gains.
Growth was boosted by the performance of Cyramza and Trulicity, which jumped from marginal sales in 2014 to just over $630 million combined.
Eli Lilly has forecast 2016 revenue between $20.2 billion and $20.7 billion.
Overall, it appears Lilly is content to stay out of the large scale M&A market.
In Lilly’s Q4 earnings calls, CEO John Lechleiter said, “I think the current volatility and generally lower valuations in the biotech sector doesn’t change our basic strategy. We continue to look for small to mid-sized opportunities that complement the therapeutics areas that we are already in.”
While it may be steering clear of larger deals, Lilly did make some intriguing moves over the past year.
In March, Lilly launched a partnership with the Chinese Innovent Biologics for research on three anti-PD-1 antibodies for treatment of cancer. Innovent received $56 million upfront, with the potential for an additional $1 billion in milestone payments (under an extension of the original deal). Lilly has the rights to develop, manufacture, and commercialize the three compounds outside of China while Innovent maintains those rights domestically.
Additionally, Lilly invested in building out its presence in New York City at the Alexandria Center for Life Science. The company plans to create an immuno-oncology hub, adding 30,000 square feet of space and increasing its workforce. This is part of Lilly’s renewed commitment to developing its pipeline, especially in oncology. 2016 should give a better sense of how that commitment is paying off for Lilly.
Follow Ned Pagliarulo on Twitter