Eli Lilly and Co. and Patent and 2011 Year in Review

Patent expirations up pressure on Lilly

December 24, 2011
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Eli Lilly and Co. lost patent protection on its $5-billion-a-year best-seller Zyprexa in October, plunging the company into the long-awaited zone of uncertainty that it calls “Years YZ.”

But instead of pursuing a merger, CEO John Lechleiter kept the Indianapolis-based drugmaker’s chips bet entirely on the ability of its research and development teams to launch new drugs to offset the massive revenue losses the company is now suffering.

Starting with cancer drug Gemzar in late 2010, Lilly began to lose patent protection on a string of five blockbuster drugs, ending with Cymbalta in 2013, which have accounted for nearly half of Lilly’s annual revenue. Zyprexa, an antipsychotic, was the biggest.

Lilly’s top brass no longer makes an effort to suggest that the next three years won’t be ugly for Lilly’s balance sheet: Revenue and profits will almost certainly decline. The company’s stock price, already stagnant for three years, likely will remain so.

Instead, executives now take the Paul Harvey approach, constantly telling the rest of the story. They point to how sales of Lilly’s products in animal health, emerging markets and Japan are growing rapidly, which will offset some of the losses from its blockbuster drugs.

Some, but by no means all. To help patch up the rest of the revenue hole, Lilly has been slashing staff: 5,500 workers worldwide and nearly 2,000 in Indianapolis.

After 2014, Lilly officials promise, its pipeline will have produced new medicines that will put the company back on a path to growth.

It had certainly better, because if Lilly hasn’t generated anything new by 2016 and 2017—when it will lose patent protection on its newer star drugs—Alimta, Strattera and Cialis—the company will be in serious trouble.

Lechleiter constantly touts the historic number of molecules Lilly is testing in humans. (Currently 66.) But Lilly’s pipeline production has been disappointing since at least the 2005 launch of the diabetes injection Byetta.

Lilly did launch in Europe this year the potential blockbuster Byrdueon—a sister drug to Byetta—with California-based partner Amylin Pharmaceuticals Inc. But after a legal dispute between the companies, Lilly sold the rights to Bydureon back to Amylin for current and future payments up to $1.5 billion.•

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