A year ago, Eli Lilly and Co. officials watched sorely as Gov. Mitch Daniels, an ex-Lilly executive, celebrated Pfizer Inc.'s
expansion at its plant in Terre Haute.
Pfizer was ramping up production there of Exubera, its new inhaled insulin product. Lilly, meanwhile, knew it wouldn't have a competing product on the market until at least 2010.
But Exubera has stumbled out of the gate, failing to win acceptance from diabetes doctors, health insurers and patients. Pfizer predicted the drug would become a $2 billion-a-year blockbuster, but now some analysts are questioning if Pfizer will even recoup the $1.3 billion it spent to acquire the rights to the drug.
That would appear to keep the door open for Lilly, as well as for other companies racing to develop inhaled insulin. But Pfizer's troubles could be bad for Lilly, if they cause doctors and patients to sour on all inhaled insulin products.
"It's much easier if you have an early mover," said Kelly Close, whose San Francisco consulting firm, Close Concerns Inc., focuses on diabetes care. "It would be great news for everyone if [Exubera] took off."
Every battle in the insulin market has huge financial implications, as the number of patients with diabetes soars worldwide. There are more than 180 million diabetics now--21 million of them in the United States--and the World Health Organization predicts there will be 360 million by 2030. Diabetics use more than $7 billion of insulin every year.
Lilly could certainly use a win in its insulin business, which has lost nearly half its market share in the last five years. Lilly's Humalog and Humulin insulin products accounted for 14 percent of the Indianapolis company's sales in 2006, or $2.3 billion.
Insulin, which is administered as a shot, helps diabetics overcome their inability to convert glucose from food into energy. If left unchecked, diabetes can lead to blindness, kidney failure or even death.
Inhaled insulin has been pursued for decades because it could attract patients tired of injecting themselves several times a day or help some needle-phobic patients embrace insulin earlier in their treatment, thereby improving their health.
But drugmakers have been tripped up by several hurdles--those include turning large insulin molecules into breathable powders, making sure inhalers give precise dosages, and ensuring inhaled insulin is safe for the lungs. At the same time, injections have been made more convenient by the development of insulin pens.
"We wouldn't be trying to develop an inhaled insulin if we didn't see that there's some large unmet need," said Janet Tobian, medical director for Lilly's inhaled insulin project. "We don't view this as just a convenience."
There's still time for Exubera, which launched only last fall, to prove itself. Pfizer plans to start a direct-to-consumer advertising campaign in the second quarter of this year. It has also hired hundreds of diabetes educators to explain the product to patients and doctors.
"The focus is on getting people familiar with the product as it exists now," said Rick Chambers, a spokesman for New York-based Pfizer. "At this point, we're satisfied with how the process is moving. The feedback we're getting from patients and physicians is positive."
In Terre Haute, Pfizer has hired nearly all 450 people it promised to bring aboard as part of its $170 million expansion. Its 800 workers there turn bulk insulin into blister packs of dry powder for use in an inhaler.
Exubera recorded 10,000 prescriptions in the United States last year, according to data from IMS Health, a health care information company. The drug had U.S. sales of $18.9 million.
There are two main hurdles for Exubera to surmount, said Dr. Rattan Juneja, an endocrinologist at the Indiana University School of Medicine: the awkwardly large size of the dispensing device and the uncertainty about its effect on patients' lungs.
Exubera is a fast-acting insulin designed to be taken at mealtime. Its delivery device, developed with Pfizer by California-based Nektar Therapeutics, is about the size of a half-liter bottle and requires the patient to wrap his or her lips around the end of it to breathe in. The device forces the powdered insulin into the patient's mouth.
"The Pfizer product has been described as a bong," Juneja said. "And when you see it being used, it looks, umm, different, let's put it at that--particularly when women are using it."
"It's not very discreet," said Close, herself a diabetic. "People don't want to announce to the world that they have this disease."
By contrast, Lilly's inhaler is about twice the size of a lipstick tube. It doesn't force the insulin out. Instead, when patients breathe, they pull the insulin into their lungs.
That approach works because Lilly's partner on the project, Massachusetts-based Alkermes Inc., took the large, sticky insulin molecules and puffed them up like popcorn, which allows them to move more easily through the air.
Lilly CEO Sidney Taurel said the company is watching Pfizer's launch of Exubera "very closely." There's room for another product, "especially if you come with a better mousetrap, which is the case," Taurel said at a March 14 question-and-answer session with reporters in Boston.
"The device that Alkermes is working on is a much smaller, more convenient device than the big thing that Pfizer has," Taurel said. "That will make a difference."
In addition to concerns about size, doctors are unsure about the long-term effects of inhaling insulin into the lungs. As a result, the U.S. Food and Drug Administration recommends that doctors watch if Exubera affects their patients' breathing capability.
But even before doctors can test for breathing impairment, they need to conduct a test that determines breathing capacity, Juneja said. Such tests can cost hundreds of dollars, and patients with higher insurance deductibles are reluctant to pay for them.
The company that clears up concerns about lung health with the FDA, Juneja said, will be the one most successful with inhaled insulin.
Other companies developing inhaled insulin include Denmark-based Novo Nordisk, working in partnership with California-based Aradigm Corp., as well as MannKind Corp. and England-based Andaris.
Exubera hasn't gotten favorable treatment from health insurers, either. Indianapolis-based WellPoint Inc. and Minnesota-based UnitedHealthcare, the nation's two largest insurers, placed Exubera in the third tier of their drug formularies. Co-pays at that level run $40 to $50 per prescription at UnitedHealthcare.
Insurers are shying away because of cost. According to WellPoint, Exubera costs $300 more per year than Lilly's Humalog and Humulin insulin, and nearly $600 more per year than Novolog and Novolin insulin made by Novo Nordisk.
"There appears to be modest demand so far for inhaled insulin, period," said Les Funtleyder, a health care analyst at Miller Tabak & Co. in New York.
Funtleyder now expects Exubera to miss his estimate of $200 million in sales this year. He has yet to make a prediction about inhaled insulin sales for Lilly or Novo Nordisk.
Tim Anderson, an analyst at Prudential Equity Group, foresees Lilly's reaping just $80 million in sales of inhaled insulin in 2010, the first year its drug could be available.
Jason Fox, a health care analyst at H&R Block in Detroit, doesn't think any inhaled insulin product will become a blockbuster. But he expects Lilly to do best, in part because of its delivery device. He projects the product ultimately reaching $250 million to $300 million in annual sales.
Shrinking market share
Lilly is looking in several directions to reverse its fortunes in the insulin business, a sector the company dominated for 80 years. In 1923, Lilly was the first company to make insulin.
It continued to dominate the market as insulin changed from being derived from pigs and cows to human insulin produced through biotechnology methods.
Five years ago, the company's share of the insulin market hovered near 80 percent. Last year, it was down to nearly 40 percent. In January, Lilly announced it was halting construction of a new insulin plant in Virginia.
What happened? Lilly shifted its insulin sales force to promote other drugs it was launching. And at the same time, Lilly's competitors launched revolutionary new insulin products.
In 2000, France-based Sanofi-Aventis launched a 24-hour insulin called Lantus, which could be taken once a day instead of several times a day. It won over endocrinologists and became a vital part of diabetes therapy. Novo Nordisk launched an equivalent of Lantus, called Levemir. But Lilly has not been able to follow suit.
Lilly is doing well in other areas of diabetes care, particularly in making treatment easier for patients. It launched an insulin pen in February that records patients' previous 16 doses to help them administer the correct dose at the right time.
In addition, Lilly has gotten a huge response to Byetta, a product it launched in 2005 with San Diego-based Amylin Pharmaceuticals Inc. Byetta helps a patient's pancreas produce the insulin it needs--possibly eliminating the need for insulin therapy. Byetta had U.S. sales last year of $219 million.
Only with innovations like that can Lilly return to its dominant position, said Fox, the H&R Block analyst.
"Some of those delivery technologies are helpful, but at the end of the day, probably 70 percent is driven by the medicine itself," Fox said.