Eli Lilly: After The Fall
Lilly Corporate Center
Indianapolis, IN 46285
|PRODUCT||2013 SALES||2012 SALES|
All sales are in millions of dollars.
In millions of dollars, except EPS
The leadership of Eli Lilly and Co. entered 2014 with their eyes wide open. “With the expiration of U.S. patents on Cymbalta in December 2013 and Evista in March 2014, we face the most challenging year in Lilly’s history,” Lilly chairman, president, and CEO John Lechleiter, Ph.D., wrote in the introduction to the company’s 2013 annual report. Rightly so; as recently as 2011, Cymbalta and the schizophrenia drug Zyprexa accounted for nearly $9 billion of Lilly’s revenue, more than a third of the total. With both now off-patent, in the first half of 2014 Lilly’s revenue tumbled by 16.6 percent.
But behind all this challenge, opportunity may be lurking. During the course of 2013 Lilly submitted four of its new compounds for approval by regulatory authorities, and two of them – the diabetes drug Jardiance and the cancer product Cyramza – have already been approved. And several other promising compounds are still waiting at the top of the company’s oncology and diabetes pipelines, with positive Phase III results leading to hopes for approval in the near future. So in spite of the recent earthquake at the top of their company’s P&L statement, Lilly’s leaders are sounding decidedly hopeful.
“The people of Eli Lilly and Company are proving that determination does indeed lead to discovery – and to growth,” Dr. Lechleiter says. “We intend to seize the compelling opportunities before us to realize our mission of improving people’s lives and to grow our business for the benefit of all of our stakeholders.”
Lilly’s total revenue edged up by 2.3 percent in 2013 to $23.11 billion. The company’s net income for the year rose 14.6 percent to $4.69 billion, while earnings per share were up 66 cents to $4.32. Expenditure on research and development for 2013 increased 4.8 percent to $5.53 billion. In the first half of 2014 Lilly’s total revenue was down 17 percent to $9.62 billion, primarily due to the loss of Cymbalta’s patent protection. Net income decreased 47 percent to $1.46 billion, and diluted EPS was down 46 percent to $1.36. R&D spending in the first half of the year was $2.3 billion, a decrease of 14 percent. Company leaders are projecting EPS for full-year 2014 at between $2.67 and $2.75.
Acquisitions And Partnerships
In August 2013, Lilly and Humana Inc. announced the launch of a joint research collaboration aimed at improving the health care of their members and patients. Under the partnership, the companies are using their expertise and resources to identify and analyze data and information with a focus on improving health care quality and outcomes. The partnership, company leaders say, reflects a shared commitment by both companies to address the challenges of improving quality of care and reducing treatment costs in today’s complex and changing health care environment.
Under the terms of the multi-year agreement, the companies are conducting a range of studies related to various disease states. Study methodologies include impact of interventions on outcomes, adherence programs, disease management, and pharmacoeconomics. The initial project is aimed at investigating patient characteristics associated with increased health-care costs in people with type 2 diabetes. This retrospective analysis utilizes de-identified medical, pharmacy and laboratory claims data, in addition to research algorithms focused on exploring patient attitudes and behaviors. Future studies may use this information to identify modifiable characteristics that can be targeted with behavioral and other therapeutic interventions.
“We are pleased to partner with Humana on research that will help benefit patients facing a variety of diseases, including diabetes,” says Dara Schuster, M.D., Medical Fellow, Lilly Diabetes. “Working together, we hope to provide patients with insights and guidance that will help them tailor their care to best match their individual needs.”
In January 2014 Lilly acquired all development rights for a calcitonin gene-related peptide (CGRP) antibody currently being studied as a potential treatment for the prevention of frequent, recurrent migraine headaches. CGRP is a sensory neuropeptide with vascular and pro-inflammatory effects, two processes that have been implicated in migraine headaches. Lilly’s CGRP antibody is a biologic entity injected subcutaneously that binds and inhibits the activity of CGRP, which is released during activation of sensory neurons involved in pain signaling.
This novel molecule, LY2951742, was discovered by Lilly scientists and then licensed to Arteaus Therapeutics for development in the clinical proof-of-concept study. Arteaus was formed in 2011 with an $18 million investment from Atlas Venture and OrbiMed, upon acquiring the rights to develop Lilly’s CGRP antibody. Licensing Lilly’s CGRP antibody to Arteaus was part of Lilly’s alternative risk-sharing strategy, which includes participation in the Capital Funds Portfolio. The Capital Funds Portfolio comprises virtual project-focused companies, financed by independent investment funds that acquire early-stage molecules to develop through proof-of-concept. If the molecule shows efficacy, the molecule and/or development rights are offered for sale to biopharmaceutical companies.
“Of the nine project-focused companies currently in the Capital Funds Portfolio, Arteaus is the first to reach proof-of-concept and to achieve positive results,” says Jan M. Lundberg, Ph.D., executive VP for science and technology and president, Lilly Research Laboratories. “Through this strategy, independent investment firms and portfolio companies provide a unique way to access, share risks, and expand funding to develop molecules, such as the CGRP antibody, to help speed the delivery of timely valued medicines to patients who are waiting. Neuroscience remains a key focus for Lilly, and bringing novel medicines to patients is our priority. Migraine is a debilitating condition that can be severe and extremely disabling, and migraine sufferers need new safer and better treatment approaches.”
Two of Lilly’s major acquisitions in the first part of 2014 were of veterinary targets. In February, Lilly’s animal health division Elanco announced the acquisition of Lohmann SE (Lohmann Animal Health), a global leader in the supply of poultry vaccines and feed additives. The acquisition, company leaders say, will establish Elanco as a global poultry leader, solidify the division’s vaccine presence, broaden its product offerings, and significantly augment its vaccine manufacturing capabilities.
“Effectively competing in the animal vaccine segment is a cornerstone of Elanco’s long-term strategy and is one more way we will expand the value we create for customers,” says Jeff Simmons, senior VP of Lilly and president of Elanco Animal Health. “The addition of Lohmann Animal Health provides a unique opportunity for Elanco to expand our presence in the global poultry market and to enter the global poultry vaccine market with a solid base, established products, and global commercial and manufacturing capabilities.”
Then, in April, Lilly announced the signing of an agreement to acquire Novartis Animal Health for about $5.4 billion in an all-cash transaction intended to further strengthen and diversify Elanco. Upon completion of the acquisition (expected in first-quarter 2015), company leaders say, Elanco will be the second-largest animal health company in terms of global revenue, will solidify its number two ranking in the United States, and improve its position in Europe and the rest of the world.
With a presence in about 40 countries and 2013 revenue of about $1.1 billion, Novartis Animal Health is focused on developing better ways to prevent and treat diseases in pets, farm animals and farmed fish. Lilly will acquire Novartis Animal Health’s nine manufacturing sites, six dedicated research and development facilities, a global commercial infrastructure with a portfolio of about 600 products, an R&D pipeline with more than 40 projects in development, and a team of more than 3,000 employees.
“Animal health continues to represent an attractive growth opportunity for Lilly,” Dr. Lechleiter says. “We intend to keep Elanco and to take advantage of the substantial synergies between our animal health and human health businesses. Significant investments in our animal health business in recent years have enabled Elanco to double its revenue since 2008, leading the industry in growth. Global trends suggest continued sustained demand for animal health products in the years ahead. Through this acquisition, which moves Elanco to top-tier in the industry, we intend to create value for our shareholders by adding to our promising pipeline of innovative animal health assets, increasing sales through a larger commercial footprint, and improving efficiencies and lowering costs.”
Also in April, Lilly and T1D Exchange launched a research collaboration designed to enable both organizations to gain deeper insight into the experience of people with type 1 diabetes, to identify new ways to improve care and advance outcomes. As part of this multi-year collaboration, the organizations will engage in a range of projects that combine Lilly’s long history of and expertise in type 1 diabetes with T1D Exchange’s patient-centric model that connects a clinic registry of more than 26,000 people with T1D, a clinic network comprised of more than 70 clinics across the United States, a sample repository that stores patient biosamples, and Glu, a patient and caregiver online community for T1D. The collaboration will involve multiple projects over an initial five-year period.
“Lilly’s commitment to supporting people with type 1 diabetes dates back to 1923, when we introduced the first commercially available insulin,” says Dara Schuster, M.D., Medical Fellow, Lilly Diabetes. “Having access to the resources of T1D Exchange to bolster our understanding of the needs of people with type 1 diabetes, their caregivers, and health care providers will help us continue our mission of addressing the global diabetes burden through the development of innovative medicines and programs.”
The first project of the collaboration will assess user experience associated with insulin pumps and multiple daily injections. Initially, T1D Exchange data will be analyzed to inform development of a survey of health-care providers from the clinic network and members of the Glu community. Following the survey, a study of clinic registry participants is planned, to further shed light on how insulin pumps are used and how multiple daily injections occur in real-world practice. Data and recommendations from this research will be shared publicly once analysis is complete, for the benefit of both the type 1 diabetes and researcher communities.
One of Lilly’s longest-standing collaborations received public recognition in April, when the Association of Strategic Alliance Professionals presented the company and its partner Covance, a drug development services provider, with a 2014 Alliance Excellence Award. The two companies were recognized for their transformative collaboration that has infused greater efficiency and quality into the drug development process and enabled new medicines to advance to market sooner.
“Our awards committee was impressed by the many ways in which this groundbreaking alliance continues to evolve – utilizing best practices in alliance management, harnessing technologies, building a collaborative culture, and investing in process innovation,” says Michael Leonetti, ASAP’s president and CEO. “We also commend this partnership’s willingness to share their knowledge and experiences, and further contribute to the advance of the alliance management profession.”
As a result of the alliance, Covance and Lilly completed more than 11,000 studies in support of discovery research and more than 500 toxicology studies supporting nearly 50 different molecules. More than 800 studies have been conducted spanning late-stage development, including clinical, central laboratories, genomics, biomarkers, and companion diagnostics.
“We are five years strong into our industry-pioneering alliance with Covance, designed to support the transformation of our R&D model,” says Andrew Dahlem, Ph.D., VP, chief operating officer, Lilly Research Laboratories and LRL Europe. “Working together, we have improved research and development efficiencies, reduced costs, and accelerated drug development timelines by as much as 50 percent. Ultimately, we are measuring success against our most important goal – to speed quality, innovative medicines to patients.”
In July, Lilly and Immunocore Ltd. entered into a co-discovery and co-development collaboration to research and potentially develop novel T cell-based cancer therapies. Using Immunocore’s Immune Mobilising Monoclonal T-Cell Receptor Against Cancer (ImmTAC) technology, the companies will seek to use the power of the body’s own immune system to attack cancer cells. ImmTACs have shown potential to direct a patient’s T cells to specifically target the cancerous cells, avoiding damage to healthy cells.
Under the terms of the agreement, Immunocore will receive an upfront fee of $15 million per program for the discovery of novel ImmTACs against jointly selected cancer targets in order to generate preclinical candidate packages. If Lilly accepts a preclinical candidate package to develop and potentially commercialize, Immunocore will receive an opt-in fee of $10 million and will have an option to continue co-development with Lilly on a cost-sharing and profit-sharing basis. If Immunocore does not exercise its option, it will be entitled to potential future significant milestone and royalty payments.
“The major goal and challenge of cancer immunotherapy is to direct the immune system to recognize and destroy cancer,” Dr. Lundberg says. “We believe Immunocore’sImmTAC platform has the potential to do just that. We are delighted to be working closely with Immunocore to develop potential novel therapies for cancer patients.”
The SNRI anti-depressant and anti-anxiety drug Cymbalta remained at the top of Lilly’s revenue charts in 2013, edging up 1.8 percent to $5.08 billion and accounting for about 22 percent of the company’s total revenue. But Cymbalta’s run will be coming to an end this year; the compound’s U.S. patent protection expired in December 2013. Accordingly, Cymbalta sales in the first half of 2014 dropped 68.9 percent to $880 million.
Alimta, indicated for NSCLC and mesothelioma, increased its sales by 4.2 percent in 2013 to $2.7 billion. According to Lilly executives, Alimta is the leading product for the treatment of first-line advanced nonsquamous NSCLC, with shares ranging from nearly 40 percent to more than 70 percent in the countries around the world. In the first half of 2014, Alimta sales rose another 4.5 percent, to $1.34 billion.
Lilly’s leading diabetes product Humalog enjoyed solid growth in 2013, with sales up 9 percent to $2.61 billion. Humalog’s U.S. patent protection expired in May 2013, but as a biologic it has not yet faced biosimilar competition; in 2015 the product will celebrate its 20th anniversary on the U.S. market. In the first half of 2014 Humalog sales were up by 7 percent to $1.35 billion, edging ahead of Alimta to place first on the company’s sales charts.
The erectile dysfunction drug Cialis cracked the $2 billion mark for the first time in 2013, with sales increasing by 12 percent to $2.16 billion. In October 2013, FDA approved a product label addition to include data from a 26-week study that showed Cialis 5 milligrams for once-daily use started in combination with finasteride significantly improved the signs and symptoms of benign prostatic hyperplasia as early as four weeks, compared to placebo with finasteride, in men with BPH and an enlarged prostate. In the first half of 2014, Cialis sales were up another 5.3 percent to $1.04 billion.
Humulin, Lilly’s second-leading diabetes product and the world’s first human health care product created using recombinant DNA technology, increased sales by 6.2 percent to $1.32 billion in 2013. On the market since 1982, Humulin is in a similar situation as Humalog – expired patent protection but no biosimilar competition yet. In the first half of 2014, Humulin sales were up 4.6 percent to $669 million.
The osteoporosis drug Forteo enjoyed an 8.2 percent sales bounce in 2013, improving to $1.25 billion. In the first half of 2014, Forteo sales rose by 5.3 percent to $609 million.
Evista, Lilly’s other leading osteoporosis drug, accounted for $1.05 billion in sales in 2013, an improvement of 4 percent. But Evista’s U.S. patent protection expired in March 2014; the product’s sales in the first half of the year dropped by just over 50 percent to $258 million.
The ADHD drug Strattera accumulated $709 million in sales for Lilly in 2013, an increase of 14.2 percent. In the first half of 2014, Strattera sales rose by 5 percent to $352 million.
The cardiovascular drug Effient improved its sales by 11.4 percent in 2013 to $509 million. Lilly markets Effient jointly with Daiichi Sankyo in the United States, major European markets, Brazil, Mexico, and several other countries. In the first half of 2014, Effient sales dropped slightly – by 0.1 percent – to $258 million.
In The Pipeline
The news has been mostly positive of late for Cyramza, one of the compounds at the top of Lilly’s oncology pipeline. In April, FDA approved Cyramza as a single-agent treatment for patients with advanced or metastatic gastric cancer or gastroesophageal junction adenocarcinoma with disease progression on or after prior fluoropyrimidine- or platinum-containing chemotherapy. With this approval, Cyramza became the first FDA-approved treatment for patients in this setting. The approval was based on results of REGARD, a multicenter, randomized, placebo-controlled, double-blind trial of patients with locally advanced or metastatic gastric cancer including GEJ adenocarcinoma previously treated with fluoropyrimidine- or platinum-containing chemotherapy. REGARD is the first Phase III trial to show improved overall survival and progression-free survival with a biologic agent in advanced gastric cancer after prior chemotherapy.
“Lilly Oncology is committed to delivering innovative medicines that extend the lives of people with cancer,” says Richard Gaynor, M.D., senior VP, product development and medical affairs for Lilly Oncology. “Until now, there were no FDA-approved options for patients in this indication. We are pleased that the FDA has approved Cyramza for these patients. This is an aggressive disease that is difficult to treat, and the prognosis has typically been very poor.”
Two months later, Lilly announced positive results from REVEL, a global Phase III study of Cyramza in combination with chemotherapy in patients with second-line non-small cell lung cancer. REVEL is the first positive Phase III study of a biologic in combination with chemotherapy to demonstrate improved overall survival compared to chemotherapy alone in second-line NSCLC.
“While there have been other recent Phase III studies that have evaluated the addition of a cytotoxic or targeted agent in previously treated NSCLC patient populations, none have demonstrated improved overall survival in the total patient population,” Dr. Gaynor says. “We are pleased that Cyramza demonstrated a significant survival improvement in a difficult-to-treat patient population where there continues to be a major unmet medical need in both nonsquamous and squamous NSCLC patients.”
But not all the Cyramza trial data has come back so positively. Just a few days after the REVEL trial data came out, Lilly announced that the Phase III REACH trial of Cyramza in patients with hepatocellular carcinoma, also known as liver cancer, did not meet its primary endpoint; overall survival favored the Cyramza arm but was not statistically significant. Encouraging single-agent Cyramza activity was still observed, with meaningful improvements in key secondary endpoints of progression-free survival, overall response rate and time to progression.
“Although the REACH study did not achieve statistical significance for survival, we are encouraged by the efficacy seen overall, especially in specific subpopulations,” Dr. Gaynor says. “We plan to discuss these results with regulatory authorities.”
Necitumumab, also at the top of Lilly’s oncology pipeline, is showing promise in the treatment of lung cancer patients with metastatic squamous cell carcinoma. In March, results from the Phase III SQUIRE trial showed that patients with stage IV metastatic squamous NSCLC demonstrated a statistically significant improvement in overall survival with a median survival of 11.5 months when receiving necitumumab in combination with gemcitabine and cisplatin as a first-line treatment, as compared to 9.9 months for those treated with chemotherapy alone.
“The SQUIRE trial results offer an important step in our pursuit of improving outcomes for patients with advanced squamous NSCLC,” Dr. Gaynor says. “With these findings, Lilly anticipates a regulatory submission of necitumumab before the end of 2014.”
In February, Lilly announced that the REVEL trial, a global Phase III study of ramucirumab in combination with chemotherapy in patients with second-line non-small cell lung cancer (NSCLC), showed a statistically significant improvement in the primary endpoint of overall survival in the ramucirumab-plus-docetaxel arm compared to the control arm of placebo plus docetaxel. REVEL also showed a statistically significant improvement in progression-free survival in the ramucirumab arm compared to the control arm. Ramucirumab is being studied in a variety of other tumor types as well; the compound recently earned positive results in a Phase III study with advanced gastric cancer but failed to meet the primary endpoint in another Phase III study with locally recurrent or metastatic breast cancer. Ramucirumab was assigned priority review status by FDA in October 2013 as a single-agent treatment for advanced gastric cancer following disease progression after initial chemotherapy.
The top of Lilly’s diabetes pipeline has been looking strong as well. In June, the company released detailed results from dulaglutide’s sixth AWARD trial, showing that once-weekly dulaglutide 1.5 milligrams was non-inferior to once-daily liraglutide (marketed by Novo Nordisk as Victoza) 1.8 milligrams. A few days later, Lilly released results from two other AWARD trials that showed treatment with once-weekly dulaglutide 1.5 milligrams resulted in superior reductions in HbA1c from baseline compared to insulin glargine, with a lower risk for hypoglycemia. Once-weekly dulaglutide, an investigational GLP-1 receptor agonist being studied as a treatment for type 2 diabetes, has been submitted to FDA, the European Medicines Agency, and other regulatory bodies. Five AWARD registration trials were submitted as part of the regulatory package. If approved, dulaglutide will be marketed under the brand name Trulicity. (EDITOR’S NOTE: Trulicity was approved by FDA on Sept. 18th, just as this issue was going to press).
“These results show that, compared to a commonly used basal insulin, once-weekly dulaglutide improves glycemic control, provides weight benefits, and has a lower risk for hypoglycemia,” says Sherry Martin, M.D., senior medical director, Lilly Diabetes. “If approved, dulaglutide will be the only ready-to-use, weekly GLP-1 therapy that may be an alternative for patients with type 2 diabetes who need to intensify their treatment.”
Also in June, results from two Phase III clinical trials showed that the investigational combination tablet of empagliflozin and linagliptin reduced blood glucose levels in adults with type 2 diabetes. If approved, this investigational combination would bring together the distinct mechanisms of action of a sodium glucose co-transporter-2 (SGLT2) inhibitor and a dipeptidyl peptidase-4 (DPP-4) inhibitor for the first time in one tablet. Lilly and partner developer BoehringerIngelheim Pharmaceuticals Inc. announced that their NDA for the combination tablet was accepted for review by FDA in April.
In March the partners announced positive results from two Phase III trials of empagliflozin alone. In a two-year study, empagliflozin demonstrated significantly greater decreases in hemoglobin A1C, body weight, and blood pressure compared with glimepiride as add-on to metformin in adults with T2D. And in a 52-week study of obese adults with T2D on high insulin doses with or without metformin, adding empagliflozin to multiple daily insulin injections significantly reduced blood glucose and body weight with lower insulin doses compared with placebo. With the help of these study results, the compound was approved by EU health authorities in May and FDA during August under the trade name Jardiance for adults with type 2 diabetes.
In May, Lilly announced positive top-line results of three completed Phase III clinical trials in patients with type 2 diabetes for basal insulin peglispro (BIL), which is being studied as a once-daily treatment for both type 1 and type 2 diabetes. The primary efficacy endpoint of non-inferior reduction in hemoglobin A1c (HbA1c) compared to insulin glargine was met in all three trials. Having met the primary endpoints, superiority for HbA1c lowering was examined and, in all three trials, BIL showed a statistically superior reduction in HbA1c compared with insulin glargine.
“These results are promising,” says Enrique Conterno, president, Lilly Diabetes. “Basal insulin peglispro is the first basal insulin to demonstrate consistently superior HbA1c reduction versus insulin glargine in Phase III clinical trials. If approved, BIL could offer a differentiated profile and provide an important new treatment option for patients with diabetes. We are on track to make regulatory filings by Q1 next year.”
In December 2013, Lilly announced that results from three studies of edivoxetine did not meet the primary study objective of superior efficacy in depression after eight weeks of treatment. When added to a selective serotonin reuptake inhibitor (SSRI), edivoxetine did not separate from placebo on the Montgomery-Asberg Depression Rating Scale (MADRS) in three acute randomized placebo-controlled Phase III studies (LNBM, LNBQ and LNBR). While the safety and tolerability of edivoxetine was consistent with previous studies, the efficacy results did not support a regulatory submission for adjunctive treatment in patients with major depressive disorder.
“Lilly undertook a robust Phase III program to address a significant unmet need for people suffering from depression,” says David Ricks, senior VP and president, Lilly Bio-Medicines. “However, the lack of efficacy compared to SSRI alone in three separate clinical trials means that Lilly will not proceed with development of edivoxetine as an add-on treatment for depression.” The ongoing clinical study evaluating the long-term maintenance effect of edivoxetine will continue to completion.