Lilly gets good news on insulin

March 19, 2012

Pfizer Inc.’s decision last week to abandon its generic insulin project is good news for Eli Lilly and Co.

It demonstrates that there are high barriers to the insulin market, from which Lilly derives more than $3.6 billion per year. And it gives Lilly more reason to hope its insulin revenue will keep growing even after it loses U.S. patent protection on its best-selling Humalog brand in 2013.

That’s important for Indianapolis-based Lilly because it is in the midst of losing patent protection on four other blockbuster drugs, which collectively will sap it of more than $10 billion in annual revenue.

Medicine for diabetes, a disease growing rapidly around the world, could provide a revenue boost for Lilly as it tries to bring new drugs to market.

“Although the insulin market should be highly attractive to the pharma industry, competition seems to be decreasing, rather than the opposite,” Lars Hevreng, an analyst at Denmark-based SEB Enskilda, wrote in a March 13 report. Enskilda follows Denmark-based Novo Nordisk A/S, which is the global leader in the insulin business.

New York-based Pfizer, the world’s largest pharma company, in October 2010 announced a partnership with India-based Biocon Ltd. to make and sell generic versions of mealtime and once-a-day insulins in Europe as early as this year and in the United States as early as 2015.

But after spending more than $200 million, Pfizer called it off.

"The companies have agreed that, due to the individual priorities for their respective biosimilars businesses, it is in their best interest to move forward independently," Pfizer and Biocon said in a joint statement issued March 13.

Global insulin sales total $18 billion a year, with just $3 billion of that claimed by generics, Hevreng noted.

In the United States, the 2010 health care reform law allowed, for the first time, generic equivalent versions of biotech drugs, which insulins are. The rules fleshing out the law have yet to be finalized, although the U.S. Department of Health and Human Services released draft rules in February.

Greenwood-based Elona Biotechnologies Inc. has been building a $28 million plant in order to manufacture generic insulin. It is run by Ron Zimmerman, a former Lilly researcher.

Some European countries already have regulatory pathways for generic biotech drugs, which are called biosimilars. But the paucity of generic competitors has propped up sales of some drugs that saw their patents expire long ago, such as Lilly’s Humulin, which lost its U.S. patent in 2000.

Last year, Lilly sold $1.3 billion of Humulin and $2.4 billion of Humalog. Wall Street analysts generally do not predict a drop-off in Humalog revenue even after its patent expires in 2013. And most predict flat sales for Humulin, even as late as 2017.

“We do believe that they’re going to come to the market in the U.S., sometime in the future,” Enrique Conterno, president of Lilly’s diabetes division, said of generic insulins, in a December interview.

But he added that Lilly expects the U.S. government to require some clinical testing of generic insulins—something typically not required for generic versions of chemical drugs. That raises the cost of entry.

Conterno also expects that generic insulins will not be regarded as “highly interchangeable,” meaning makers of generic insulins could not rely on pharmacists to automatically substitute cheaper generics when a physician prescribed one of the brand-name insulins.

If that proves to be the case, makers of generic insulin would also need a sales and marketing team to promote their versions of insulin.

For those reasons, Conterno said of generic insulins, “We don’t believe that they’re going to be highly successful.”


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