- Shares of Eli Lilly were down 3% Tuesday morning as first quarter earnings showed many of the company's closely watched products didn't meet some analysts' expectations.
- Lilly recorded $5.1 billion in revenue across the three-month period, up 3% year over year on a reported basis. Nearly 40% of that revenue came from products launched in the last five years, such as immunology therapies Taltz and Olumiant and diabetes drugs Basaglar, Jardiance and Trulicity.
- Yet Basaglar was the only key growth product to beat Wall Street estimates, according to Credit Suisse's Vamil Divan. Though Trulicity and Taltz grew 30% and 72%, respectively, they still performed markedly lower than consensus among analysts, Divan noted.
Lilly maintains that recent product launches in the areas of pain, oncology and immunology will help offset challenges elsewhere in its business. But not all of Wall Street is sold on that argument.
In pain, for instance, Lilly's Emgality (galcanezumab) was the third in a new class of migraine therapies to gain Food and Drug Administration approval. Revenue from the drug totaled $14.2 million for the first quarter, well below the $95 million Amgen's rival product Aimovig (erenumab) raked in during the fourth quarter.
Analysts have pressed Lilly for more details about how it will catch up. Christi Shaw, head of Lilly Bio-Medicines, noted on a Tuesday call with investors that Emgality is already No. 2 in the CGRP class for new and total prescriptions — having surpassed Teva's Ajovy (fremanezumab) — and is on track to brush past Aimovig in the second quarter on total prescriptions.
Aiding that pursuit: "very good receptivity" among payers for CGRP drugs, which Shaw said provides a greater choice for physicians and patients. Lilly estimates that, by the end of the first quarter, 67% of patients on commercial insurance who submitted a claim for Emgality received reimbursement. The company also said it has access to 82% of payers.
Yet migraine isn't the only place where Lilly is playing catch up. Though Taltz (ixekizumab) is on the path to blockbuster status this year, its revenue remains far behind a similar immunology therapy marketed by Novartis.
The markets where Taltz operates are also getting increasingly crowded. Johnson & Johnson's Tremfya (guselkumab) and, most recently, AbbVie's Skyrizi (risankizumab) have gotten the FDA go-ahead as treatments for plaque psoriasis, an indication Taltz secured back in early 2016.
"As we look at Taltz's ability to compete, the competitive environment that we're in really doesn't change," Shaw said, responding to an analyst question about Skyrizi breaking into the market.
"Access is very similar," she added. "Skyrizi and Tremfya, Taltz — all of the newer agents really coming to market have helped increase the expectations that patients and doctors should have on skin clearance. And so it's a competitive marketplace, but we like our chances."
Lilly is investigating Taltz in non-radiographic axial spondyloarthritis, which could further differentiate the drug's label should it lead to an approval. With Phase 3 data in hand, the company expects a regulatory action there sometime this year.
In addition to Taltz, Lilly's trying to ramp up adoption of another immunology drug Olumiant (baricitinib).
A janus kinase (JAK) inhibitor cleared to treat rheumatoid arthritis, Olumiant brought in $82 million for the first quarter. The drug is hindered, however, by a black box warning and safety concerns looming over the larger JAK class.
Olumiant also recently had a poor showing in a Phase 3 psoriatic arthritis study. Lilly won't be going after that indication anymore, but still contends the drug has promise in lupus and atopic dermatitis.
The company has spent a significant amount of money in cancer, as evidenced by its recent $8 billion acquisition of Loxo Oncology. The deal may be particularly valuable given first quarter revenue for Lilly's biggest cancer drug Alimta (pemetrexed) was flat year over year while newer offerings like Cyramza (ramucirumab) and Verzenio (abemaciclib) are not yet huge additions to Lilly's bottom line.
Collectively, Lilly's first quarter underscored that growth is subjective. Despite big gains for Trulicity and Taltz, investors want more assurance that fresh products and late-stage assets will provide enough of a cushion to soften the blow of established products like Humalog (insulin lispro) and Cialis (tadalafil) declining.
Lilly forecasts $22 billion to $22.5 billion in 2019 revenue. That's lower than its previous forecast of $25.1 billion to $25.6 billion, but accounts for the recent spinoff of its animal health business Elanco.
"We believe Consensus estimates are a little messy this quarter given the impact of Elanco, but think the results will still lead to some pressure on Lilly shares today given the underperformance of Trulicity and Taltz," Credit Suisse's Divan wrote in an April 30 note.