Lilly gets lift from new drugs, but baricitinib setback hangs over revenue growth
- Eli Lilly executives on Tuesday expressed confidence the drugmaker can still meet its pledge to hit 5% annual revenue growth through 2020 despite a stinging rejection of baricitinib, Lilly's closely watched arthritis drug, by the Food and Drug Administration earlier this month.
- Baricitinib is one of several newly launched or late-stage drugs that Lilly is counting on to offset waning revenues from current top-sellers. The drug's failure to win a widely expected approval, coupled with setbacks in the development of treatments for Alzheimer's, have raised questions about future growth.
- But that target reflects a minimum level of performance Lilly hopes to achieve and is not based on the success of any one asset, said Derica Rice, chief financial officer at Lilly, on an earnings call Tuesday.
The surprising rejection of baricitinib cast a shadow over higher-than-expected first quarter earnings and strong performance from new drugs like Trulicity (dulaglutide) and Taltz (ixekizumab).
When the news was first announced in mid-April, Lilly indicated the FDA had requested additional clinical data to determine the most appropriate dose, as well as better characterize safety.
But Christi Shaw, the newly hired head of Lilly Bio Medicines, emphasized Tuesday that Lilly still believes in the risk/benefit profile of baricitinib at both the 2mg and 4mg doses and disagrees with the FDA's assessment. The company hopes to meet with the FDA within the next two months to better understand the regulator's concerns.
Notably, Shaw said Lilly has not considered any scenario where the company would abandon the rheumatoid arthritis indication to focus only on other conditions like lupus or atopic dermatitis, a concern raised by one analyst on Tuesday's earnings call.
Although baricitinib is just one part of Lilly's pipeline and plans for growth, the company has placed heavy emphasis on new drug launches and innovation — making setbacks all the more scrutinized.
Elsewhere, Lilly's new drug strategy delivered better results. Sales of Trulicity beat expectations and helped boost the drugmaker's diabetes portfolio, offsetting lukewarm revenue growth from Jardiance (empagliflozin). The GLP-1 drug now has a nearly 35% market share of total prescriptions across the drug class.
And Lilly sees an opportunity for faster growth from its psoriasis drug Taltz, which pulled in $97 million in first quarter sales. According to Shaw, Taltz's new-to-brand prescription share has surpassed both Amgen's flagship Enbrel (etanercept) and Novartis' now-blockbuster Cosentyx (secukinumab). Both Taltz and Cosentyx are IL-17A inhibitors, a new class of drugs that threaten to unseat existing biologic treatments.
On the financial side, overall first quarter revenue grew 7% to $5.23 billion, with new products now accounting for roughly 15% of sales. Pharmaceutical revenues increased by 9%.
But an $858 million charge related to acquired in process R&D from Lilly's $960 million acquisition of CoLucid Pharmaceuticals in January pushed net income to a loss of $111 million.
CEO David Ricks, who took over from John Lechleiter January 1, said the company continues to look for M&A opportunities like CoLucid, but noted competition for new growth has driven premiums to acquire promising biotechs higher. Still, M&A is a top priority for Lilly's deployment of capital, Ricks said.
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