#8 - Eli Lilly & Co.
Lilly Corporate Center
Indianapolis, IN 46285
Tel: (317) 276-2000
Fax: (317) 277-6579
|R&D Budget (pharma only)||$4,327||+13%|
|2009 Top Selling Drugs|
|Cymbalta||anxiety, depression, diabetic peripheral neuropathic pain||$3,075||+14%|
Account for 88% of total pharma sales, up from 86% in 2008.
Lilly chief executive officer John Lechleiter has given several speeches in the past year on the “innovation crisis,” stressing the importance of Collaboration, Competency and Culture in restoring growth in the biopharma arena. Mr. Lechleiter’s could certainly do with some revitalization in the next few years.
The Lowe Down
Lilly’s another outfit with looming patent expiration worries. They’ve been battening down the hatches over there for some time, though, not least by outsourcing everything that’s not sunk in concrete. If they weather the Zyprexa-goes-generic phase well, then look for other companies to follow suit and ship off even more of their operations, under the theory that hey, it worked in Indianapolis. And that’ll most likely take place even before anyone has a chance to be sure that it has, in fact, worked in Indianapolis.
I wish that some other companies had followed Lilly’s lead in refusing to do a big merger. They remain adamant on that point, which I salute — while thinking at the same time that that’s just what Merck always used to say, too. Don’t look for anyone to emulate another one of the company’s recent moves, though, introducing the Umpteenth Statin. If you’re trying not to appear desperate, that’s not a good way to do it.
At any rate, they look to be the last Big Pharma that’s not next to a Big City. Does that still count if a big chunk of the employees speak different languages, work in different time zones, and aren’t even quite Lilly employees, though?—Derek Lowe
Lilly and partner Daiichi-Sankyo finally got FDA approval for anti-platelet drug Effient in July 2009, but now comes the hard part: building the market. Effient’s approval included a Black Box warning about significant bleeding risk and is covered by a REMS, and it’s only indicated (for now) to reduce heart attack risk in patients who have undergone angioplasty, so Effient has a lot of work ahead — with regulators, physicians and payers — to live up to its blockbuster hype.
Pharmacy benefits manager Medco Health Solutions has is conducting its own head-to-head study of Effient and Plavix, to determine outcomes among patient groups. An earlier study will be conducted to weed out the recently identified patient group that metabolizes Plavix poorly. Since Plavix will be off-patent soon, the trial could put a crimp in Effient’s growth if Medco determines there’s little difference between the drugs among the “good metabolizers.” Medco may think that Lilly’s head-to-head trial against Plavix included poor metbaolizers, dragging the Plavix group’s numbers down.
Running To Stand Still
In theory, there’s still time for Effient to grow into a blockbuster, but in practical terms, Lilly needs to replace a huge amount of revenues in the next few years. Gemzar — already under attack in some countries — loses U.S. patent protection in November 2010. Top-seller Zyprexa goes generic in the U.S. after 2011, followed by Cymbalta and Humalog in 2013. Those four drugs comprise more than half of Lilly’s 2009 revenues. It’s a good thing cancer medication Alimta is going gangbusters, but Lilly has stated that it expects annual revenues for the 2012-2014 period to be “at least” $20 billion, which means it’s going to be treading water at best for the next four years.
As it continues its transition from a FIPCo (Fully Integrated Pharmaceutical Company) to a FIPNet (Fully Integrated Pharmaceutical Network), Lilly has made a series of strategic outsourcing deals. Last year, we covered the company’s bioanalytical supply deal with Covance, in which Lilly sold the CRO its Greenfield Laboratories for $50 million, with a 10-year supply agreement.
In October 2009, Lilly sold its Tippecanoe Laboratories API manufacturing site in Lafayette, IN to Evonik Industries. Financial terms weren’t disclosed, but the deal included a nine-year supply and services agreement for Evonik to make final and intermediate API several human and animal health products. The site’s 700 employees were to be offered jobs under the new ownership.
In March 2010, Lilly entered into a large-scale clinical trials materials supply chain agreement with Fisher Clinical Services. FCS bought Lilly’s on-site CTM site in Indianapolis, IN and will handle manufacturing, packaging and labeling there, as well as distribution of all Lilly’s CTM in North America. The initial supply and services agreement is five years, but in an interesting twist, FCS will not bring other clients’ work into the Lilly facility, and the agreement does not include a guaranteed amount of business.
In our exclusive interview in the May 2010 issue of Contract Pharma, Lilly’s vice president pharmaceutical sciences R&D, Ralph Lipp, Ph.D., told me, “[W]e don’t believe that we need to fully own all aspects of the CTM supply chain, but we do need to have a high security and dependability and, to that end, we needed to have a very clear access to a certain amount of capacity in that space. To us, it was the utmost importance that the Resources , which will be owned by Fisher, will be 100% dedicated to Lilly work.”
Asked about further extensions of FIPNet into late-stage manufacturing, Dr. Lipp commented, “We’ll look into further opportunities, comparable to what we’ve done with Fisher. It’s important that we understand what capabilities are truly core to Lilly and what we would like to partner with. There’ll likely be further development in future, but it will always be a case-by-base process.”
To help deal with the impending crash, Lilly announced a restructuring plan in 4Q09 to reduce its cost base for the rough times ahead. The company reorganized around five units: units cover oncology, diabetes, established markets, emerging markets and animal health. “Established markets” covers both geography and certain therapeutic classes, while “emerging markets” refers solely to geographical regions. By the end of 2011, Lilly will shed 5,000 jobs (around 12% of its workforce) and reduce its cost structure by $1 billion, if all goes according to plan.
Lilly also plans to establish a Development Center of Excellence to “help address the industry-wide challenge of a drug development process that is increasingly complex, slow and expensive,” according to a company statement. The CoE will use “one common operating system, one common set of priorities and a singular focus to streamline the development of new medicines,” the statement noted.
On the R&D end, Lilly plans to have 10 molecules in Phase III by the end of 2011 and hopes to launch two new drugs annually beginning in 2013. (I’m putting this in print so we can look back in a few years and see how that panned out.) For now, Lilly gained approval for an extended release version of Zyprexa, got Byetta approved as a monotherapy, and bought co-promotion rights to Livalo, a new statin (!?!) developed by Kowa, but the company’s hopes for expanding Cymbalta into the chronic pain indication has been booted down the road by the FDA.
The agency also sent Lilly (and partners Amylin and Alkermes ) a complete response letter for the NDA for a weekly injectable of Byetta, to be marketed as Bydureon. FDA was concerned with manufacturing processes, labeling and a REMS. Bydureon may not save the company’s hopes — Byetta brought Lilly $448 million in 2009 revenues — but it can help extend the franchise in the brutally competitive diabetes market.
In addition to the Kowa partnership, Lilly also bought a global license to sell Axiron, a testosterone cream currently under review with the FDA. The deal, which included $50 million in upfront payment, can potentially reach $335 million, plus royalties. Lilly also inked a (potential) $755 million pact with Incyte for an oral RA treatment currently in Phase II.
Last year, a few weeks after consummating Lilly’s imClone acquisition, Mr. Lechleiter told an interviewer that he “got hungry again” for more acquisitions. With Z-Day (for Zyprexa) approaching, I have a feeling Lilly will be more focused on circling the wagons and trying to stave off a takeover in the next year or two.
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