#8: Eli Lilly & Co.
Headcount 38,350
Year Established 1876
Pharma Revenues $21,685 5%
Total Revenues $23,076 6%
Net Income $5,070 17%
R&D Budget $4,884 13%
Top-Selling Drugs in 2010
Drug |
Indication |
$ |
(+/- %) |
Zyprexa |
schizophrenia |
$5,026 |
2% |
Cymbalta |
anxiety, depression, diabetic peripheral neuropathic pain |
$3,459 | 12% |
Alimta |
cancer |
$2,209 |
29% |
Humalog |
diabetes |
$2,054 |
5% |
Cialis |
erectile dysfunction |
$1,699 |
9% |
Gemzar |
pancreatic cancer |
$1,149 |
-16% |
Humulin |
diabetes |
$1,089 |
7% |
Evista |
postmenopausal osteoporosis |
$1,024 | -1% |
Forteo |
osteoporosis |
$830 |
2% |
Strattera |
ADHD |
$577 |
-5% |
Account for 88% of total pharma sales, same as in 2009.
PROFILE
These next few years are all about survival for Lilly. The company loses U.S. patent protection for top-seller Zyprexa in October 2011 ($2.5 billion in U.S. sales), followed by Cymbalta and Humalog in 2013. Those three drugs comprised 46% of the company’s total revenues in 2010. Cancer treatment Gemzar went generic in November 2010, leading to a 16% drop for the year and a 46% drop in 1Q11 revenues. The company is battling to keep patent protection for Strattera. By many accounts, Lilly faces the worst patent cliff of any company on our list.
In the years leading up to Zyprexa’s patent expiration, Lilly had been pinning some of its hopes on its Plavix-buster Effient. But delays in approval and a relatively slow market uptake left Lilly with $115 million in revenues in its first full year. There are some signs of promise, with the drug posting $56 million in Lilly’s 1Q11, but it’s a long way from becoming a blockbuster.
Lilly had a major pipeline disappointment when it had to halt development of Alzheimer’s treatment semagacestat after discovering in August 2010 that it was associated with worsening symptoms in some patients. The company (with partner Bristol-Myers Squibb) also had to stop enrollment in a Phase III trial of necitumumab as a first-line treatment for nonsquamous non-small-cell lung cancer, due to blood clot risk. A separate Phase III trial continues for treatment of squamous NSCLC. And a Phase III study of tasisulam in multiple myeloma was stopped after safety concerns arose. And then there’s the teplizumab Phase III trial in diabetes that missed its primary endpoint. And the once-weekly diabetes injection, Bydureon, received its third CRL in October 2010. Lilly and its development partners plan to resubmit by the end of 2011.
What I’m saying is that Lilly has a ton of valuable R&D programs going on, but has suffered a string of bad results, just when it can least afford them.
Industry analysts and experts have been clamoring for Lilly to make a major acquisition to buttress its revenue base for the years ahead, but the company has held off since its $6.8 billion acquisition of ImClone in 2008. Lilly put in an undisclosed bid for J&J’s animal health unit in March 2011, and the company did make a pair of smaller pharma acquisitions in the last year (see Acquisition News for more), but those haven’t panned out as well as the company hoped.
The application for liprotamase, the lead drug from the acquisition of Alnara, received a complete response letter from the FDA, asking for an additional clinical trial. Likewise, the NDA for Amyvid, the beta-amyloid plaque imaging agent that came over with the acquisition of Avid Radiopharmaceuticals, also got a CRL from the agency. This one was centered around the need to establish a reader training program to “ensure reader accuracy and consistency of interpretations of existing Amyvid scans,” according to a Lilly statement.
In January 2011, Lilly signed a diabetes co-development and marketing pact with Boehringer-Ingelheimer. The deal focused on two of Lilly’s basal insulin analogs and two of BI’s oral diabetes agents, with a BI option for Lilly’s anti-TGF-beta MAb. Lilly paid nearly $500 million to consummate the deal; BI is eligible for around $850 million in development milestones, while Lilly can achieve as much as $1.2 billion, if everything comes to fruition. BI’s Tradjenta was approved by the FDA in May 2011, and that’s where the story turns sour.
See, Lilly already has a diabetes marketing agreement with Amylin for Byetta, and Amylin didn’t think it was right for Lilly’s sales staff to begin selling a Byetta competitor. Amylin initially won an injunction against Lilly/BI’s tie-up, but a judge threw out Amylin’s claims, opening the door for Lilly to begin selling Tradjenta. It’s an ugly twist in the Lilly/Amylin relationship, but Lilly’s in a revenue bind, and Byetta seems to have maxed out its potential, bringing in $431 million in sales and collaboration revenue for Lilly in 2010 (-4%).
So what’s going right for Lilly? Well, they’re reducing their cost structure and headcount through restructuring and a plethora of outsourcing activities. Alimta’s patent protection was affirmed in court, saving Lilly from another multi-billion-dollar beatdown. Also, Cymbalta gained an added indication for chronic musculoskeletal pain, which should help that drug’s revenues grow in the double-digits (until 2014). Plus, most of the company’s Zyprexa lawsuits are behind it (and Lilly’s developing a new schizophrenia drug that gets around the weight gain/diabetes problems that Zyprexa and similar drugs caused).
Chief executive officer John Lechleiter predicted that the company will manage not to dip below $20 billion in total revenue, provided Lilly wins its Strattera patent case, but I don’t see how Lilly will generate enough new revenue in the next several years to offset the generic erosion it’s facing.
Longtime readers know that I’m sympathetic to Lilly’s FIPNet model, in which the company looks outside for many of the functions that were traditionally kept in house. It’s sad that a string of terrible pipeline results has put the company in such a bind. —GYR
OUTSOURCING NEWS
In September 2010, Lilly formed a strategic partnership with Parexel for clinical research support and portfolio management in Asia-Pacific. That same month, the company expanded its outsourcing with i3 Statprobe. Lilly and i3 had been working together since 2008, when Lilly transferred much of its domestic data management work to i3, along with 80 staffers. The new partnership covers medical writing and biostatistical services.
In March 2011, Lilly and Advion expanded their relationship to allow Advion to conduct bioanalytical work. For more details on that partnership and the companies’ perspectives on it, please check out our Newsmakers Interview with Lilly and Advion!
ACQUISITION NEWS
Target: Avid Radiopharmaceuticals
Price: $300 million, plus as much as $500 million in milestones
Announced: November 2010
What they said: “The acquisition . . . aligns well with Lilly’s innovation-based strategy, offers a potential near-term revenue opportunity, leverages our neuroscience expertise and will immediately bolster our diagnostics capabilities.”
—John Lechleiter, Ph.D., chairman and CEO, Lilly
Target: Alnara Pharmaceuticals
Price: $180 million and as much as $200 million in milestones
Announced: July 2010
What they said: “The acquisition . . . provides Lilly with a promising entry into enzyme replacement therapy — an area with unmet medical needs as well as opportunities for novel compounds that give patients additional treatment options.”
—Bryce Carmine, executive vice president,
Lilly and president, Lilly BioMedicines
THE LOWE DOWN
Will I be the first person to write about Eli Lilly this year without mentioning the phrase “patent cliff”? Nope, blew it in the first sentence. But with Zyprexa saying good-bye later this year, and Cymbalta in 2013, that’s really the first thing to say. The company’s whole recent history has been about finding some way to deal with the disappearance of these revenue streams.
You can always cut costs, but how far does that get you? And at this point, haven’t they cut most everything that can be cut? It sure seems that way from outside. And you can always try to bring some new revenue in with an acquisition, but are there any deals out there that make much sense? Or any that will replace several billion dollars a year in sales?
No, Lilly seems to be settling in between in immovable rock and a very hard place indeed. It’s going to be a different-looking organization, one way or another, by the time it emerges. —Derek Lowe
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