- Eli Lilly & Co. beat analysts' consensus estimates by 2% in the third quarter, reporting on Tuesday sales of $5.6 billion for the three-month period.
- The beat was driven by sales of newer products like the copycat insulin Basaglar and the diabetes drug Trulicity, as well as older products such as its mainstay insulin Humalog, the antidepressant Cymbalta and the osteoporosis treatment Forteo.
- Alongside its earnings, Lilly announced it will look into strategic options for its animal health business, including a potential sale or spin-off. Elanco, the animal health unit, brought in $741 million during the quarter.
Lilly CEO Dave Ricks highlighted the scope and scale of the Elanco animal health business during a Oct. 24 call with analysts. He noted that "this is a good time" to review the business as it has grown through acquisitions. Elanco now has positions in all areas of the animal health sector, including companion animals and farm animals.
The company said it would explore all options for the business, including an IPO, merger, sale or even retention of the business if none of those options pan out. Lilly expects to have an update on the process in 2018. Ricks explained during the call that the animal health business has few synergies with the pharma business, but that the company would look into "contractually retaining" some of those synergies.
The review of Elanco is part of a larger restructuring ongoing at Lilly, which is narrowing its focus more closely on both diabetes and oncology. The company announced earlier this year that it would eliminate 3,500 positions as part of this overall shift.
Lilly isn't the only business making changes. Many of its big pharma peers have been "right-sizing" their businesses and funneling resources to just a few core therapeutic areas. Pfizer Inc., for example, recently said it would examine options for its consumer health business, laying out a similar case as Lilly did Tuesday.
Growth in diabetes
Despite the Elanco news, analysts' focus was largely on Lilly's diabetes business. Lilly has long been one of three key players in the space along with Novo Nordisk A/S and Sanofi SA. Its insulin Humalog (insulin lispro) was its best-selling product during the quarter, bringing in $696 million, above expectations of $643 million.
Meanwhile, the GLP-1 antagonist Trulicity (dulaglutide) also beat expectations, bringing in $528 million for the period. The drug grew 117% year over year, largely due to growth in the market.
While Lilly is confident Trulicity will continue to grow, analysts worried on the call that it could be hurt by the recent entrance of competition from Novo Nordisk, which got the backing of an FDA panel last week for its once-weekly GLP-1. The Danish company is also developing an oral formulation of that drug that could be a threat.
"GLP-1s as a class represent less than 30% of the basal insulin prescriptions. So the opportunity for growth is very significant," said President of Lilly Diabetes Enrique Conterno, explaining that there are still a significant number of patients on insulin that could also be taking a GLP-1.
"Trulicity has an enviable position in this market by the benefit it offers when it comes to the real-world efficacy of the product and ease of dosing," Conterno added. "We have competition, but we also have to keep in mind that the competition is also going to help fuel the overall growth of the class. The class has very healthy growth and we expect that's going to be a continued catalyst for Trulicity."
Looking toward its other class of diabetes medications, the Jardiance (empagliflozin) franchise brought in $127 million for the quarter. The drug recently got an Food Drug Administration OK for adding cardiovascular benefits to its label and Lilly has been pushing hard on this.
"Jardiance has pretty quickly become the new standard when initiating patients on an SGLT-2 therapy," said Conterno. "Our share now when it comes to new-to-brand prescriptions is now north of 50% and the overall trends when it comes to volume are very strong."
"The opportunity is enormous. There are 160 million prescriptions written for oral [diabetes] medicines in the U.S. and SGLT-2s have only 10 million of those," he said. "And we are looking at a product that has the ability to reduce the risk of cardiovascular death for people with type 2 diabetes or established cardiovascular disease, which we believe is about 30% of the people with diabetes."