#9 Eli Lilly &Co.

 

Lilly Corporate Center, Indianapolis, IN 46285
Tel: (317) 276-2000 Fax: (317) 277-6579
www.lilly.com

 

Headcount	40,450
Year Established	1876
Pharma Revenues	$19,285	+9%
Total Revenues	$20,378	+9%
Net Loss	$2,072	n/a
R&D Budget	$3,841	+10%

2008 Top Selling Drugs
Drug	Indication	Sales	(+/-%)
Zyprexa	schizophrenia	$4,696	-1%
Cymbalta	anxiety, depression, diabetic peripheral neuropathic pain	$2,697	+28%
Gemzar	pancreatic cancer	$1,720	+8%
Humalog	diabetes	$1,736	+18%
Cialis	erectile dysfunction	$1,446	+26%
Alimta	cancer	$1,155	+35%
Evista	postmenopausal osteoporosis	$1,077	-1%
Humulin	diabetes	$1,063	+8%
Forteo	osteoporosis	$779	+10%
Strattera	ADHD	$580	+2%

Account for 88% of total pharma sales, up from 87% in 2007.

 

PROFILE

 

Last year, we wrote about Lilly’s waiting game for approval of Effient, the drug that could go after some of Plavix’s nearly $9 billion market share. At the time, the FDA had booted the PDUFA deadline to September 2008. Nine months have passed from that deadline, and Effient (trade name: prasugrel) is still in limbo in the U.S. In February 2009, the drug was approved in the EU for prevention of atherothrombotic events in patients with acute coronary syndrome undergoing percutaneous coronary intervention. An FDA panel unanimously recommended Effient that same month, after examining data from a trial that pitted Effient head-to-head against Plavix, but the agency has no deadline set for its decision.

The Lowe Down So Lilly swallowed up Imclone last year, and like anyone else who's ever bought anything from Carl Icahn, they must by now have been overcome by occasional midnight worries that they've overpaid. It's too early to say, especially since (as far as I know) the fate of the company's second-generation biologics — specifically, how much is owned by Bristol-Myers Squibb - hasn't been clarified yet. Better to suspend judgment until that's lawyered out. For such a relatively stable company, out there in more-than-relatively stable Indianapolis, Lilly has been involved in a lot of shouting matches in the last few years. Zyprexa, Cymbalta, Byetta — all of them have been featured in accusations of sharp practice, and some truly epic fines have resulted as well. Malcolm X probably doesn't get quoted much in profiles of Lilly, but the company has some areas — CNS and diabetes, especially — that they've shown that they'll defend by any means necessary. That aggressive approach has paid off in some ways, but the occasional billion-dollar fine will have to be taken into account. Harder to measure is the damage to the company's name. The industry's under enough of a cloud as it is.—Derek Lowe

Zyprexa remains Lilly’s top seller, but also its top worry. Sales of the atypical antipsychotic drug were $4.7 billion last year (-1%) and were flat in 1Q09 at $1.1 billion, and the company can’t escape its legal woes tied into Zyprexa’s marketing. As we wrote last year, the company made a $1.2 billion in payments to settle approximately 30,000 Zyprexa lawsuits tied to diabetes complications. In January 2009, the company pled guilty to a misdemeanor charge and paid out another $1.4 billion to the Department of Justice and various states for promoting Zyprexa for off-label purposes between 1999 and 2001.

The hits keep coming, unfortunately. There are still 12 states that are suing Lilly over Zyprexa’s marketing practices, while insurers and other third-party payors are suing the company for fraudulent marketing and are asking for $6.4 billion in damages. The main charge is that Lilly knowingly promoted Zyprexa as a treatment for dementia in the elderly, despite the fact that it proved to be of no benefit and may actually have increased the death rate in elderly patients in a clinical trial. There are marketing documents and e-mails that look incredibly damaging to Lilly’s reputation, although the company contends those items have been taken out of context by the plaintiffs and the press.

Oh, and a generic version of Zyprexa is on the market in Germany. Its U.S. patent expires in 2011. Lilly is waiting for U.S. approval of a Long Acting Injection version of the drug for treatment of schizophrenia, pending the agency’s evaluation of its Risk Evaluation & Mitigation Strategy (REMS) document.

Meanwhile, Cymbalta is growing by leaps and bounds (+28% for FY08 and +17% in 1Q09), gaining new approvals for pain indications and adding prescriptions. In June 2009, the company resubmitted an SNDA for treatment of chronic pain, which could help drive Cymbalta sales through the roof. It got approved in the EU in 2008 for treatment of generalized anxiety disorder and is being studied for the delaying of depression episodes. I hate to sound skeptical, but I admit it worries me when a treatment starts branching out in so many fields like this, in light of the preceding paragraphs.

Outsourcing News As part of its efforts to restructure its R&D model, Lilly sold off a lab facility to Covance in August 2008. The CRO took over Greenfield Laboratories for $50 million. The companies signed a 10-year service agreement as part of the deal; Covance will take over Lilly's tox testing and support activities at the site and, according to a Lilly statement, expand their early-stage work and Phase II/III trial support. At the same time as the Covance deal, Lilly announced that it transferred its U.S. and Puerto Rico clinical trial monitoring work to Quintiles and its U.S. data management work to i3. Making the announcement, Lilly CEO John Lechleiter said, "What we call Years YZ — the period beginning in late 2011 when patents for several medicines begin to expire — requires a thorough transformation of our company that includes reduced cycle times and lower R&D costs." I admit that I'm intrigued by the Covance deal in particular. It put me in mind of the “buy our manufacturing facility cheap and we‘ll throw in a five-year supply deal!“ model that has helped launch some contract manufacturers and helped sink others. Obviously, lab services are a different beast than manufacturing, and perhaps the steady demand for them will avoid the peaks and valleys (and unexpected interruptions) that manufacturing facilities face.

Lilly made a bold move by going after ImClone late last year, bidding up the company to $70/share and putting it out of reach of development and marketing partner Bristol-Myers Squibb. The $6.5 billion acquisition gives the company a share in moneymaking biologic Erbitux, as well as a biomanufacturing facility that’s been described to me by more than one source as “the Bio-Taj Mahal.”

While Erbitux revenues are tied into marketing deals with BMS (U.S./Canada) and Merck Serono (everywhere else), and there’s some debate over who has marketing rights to Erbitux followup IMC-11F8, Lilly will have more control over the next round of drugs in ImClone’s pipeline. At a December 2008 Wall Street presentation, the company showed that, with the addition of ImClone, a full 40% of the Lilly pipeline consists of large molecule drugs.

In a Financial Times interview in March 2009, Lilly chief exec John Lechleiter said that he “got hungry again about three weeks after ImClone got closed” and is on the lookout for more acquisition targets. Dr. Lechleiter explicitly crossed peer BMS off the list, stressing that Lilly’s acquisition range was $5 to $15 billion. Given Lilly’s financial position and the overall market trends, one would have to assume they’ll look at more stressed biopharmas. A few years ago, you’ll recall, Lilly bought its Cialis development partner, Icos.

Lilly’s other acquisition last year came mere weeks after we closed the 2008 report. In July 2008, the company spent $64 million on SGX Pharmaceuticals. The companies had been collaborating since 2003 on X-ray crystallography and the buy gave Lilly access to SGX’s synchrotron as well as its preclinical oncology portfolio.

Lilly’s late-stage pipeline has some good prospects. If it can bring Effient to the U.S. market, get its long-acting version of Byetta and new osteoporosis treatment Arzoxifene approved, and get out from under the really dark cloud of Zyprexa’s marketing fraud, the company may find itself in a decent position to weather its patent cliff. And if it can use its $6 billion in cash to pick up some promising compounds or late-stage development companies, it might get through the next few years alright.