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Lilly: Forget Alzheimer's; think diabetes

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For more than a year, Eli Lilly and Co. has been viewed by investors as a laggard stock with one, slim shot at producing a huge jackpot: its experimental Alzheimer’s drug. But now company leaders are trying to direct investor attention toward what they view as a sure-fire bet: the drugmaker’s diabetes portfolio.

Lilly brass spent significant time during an investor conference call last month talking up their diabetes pipeline. Then last week they scheduled a special 90-minute call on June 11 that will be devoted to nothing but the diabetes pipeline.

There’s good reason for this. Some analysts put the chances of success of solanezumab, Lilly’s experimental Alzheimer’s medicine, at 10 percent or less. If it succeeds, the drug could generate $10 billion in annual sales and negate challenges posed by the string of patent loses on blockbuster drugs through which Lilly is suffering.

But diabetes has a 100-percent chance of bringing Lilly significantly more revenue over the next few years, as the incidence of the chronic disease rises sharply across the globe. That will help Lilly sell more of its insulins and its latest product, called Tradjenta.

Most analysts expect Lilly’s diabetes sales to grow more than 30 percent over the next four years—even before any new drugs coming out of its pipeline. That would mean an additional $1.3 billion in annual revenue.

And if the pipeline starts producing winners, the potential is even greater.

“LLY has one of the most attractive diabetes portfolios amongst its peer group,” Barclays Capital analyst Tony Butler wrote in an April 25 research note, referring to Lilly by its ticker symbol. “While there are inherent risks in all clinical programs, we believe diabetes could be an area that offers a lower risk profile as compared to that of Alzheimer’s or oncology.”

What’s in Lilly’s diabetes pipeline? A drug called empagliflozin is designed to boost glucose re-absorption in patients' kidneys, thus reducing levels of glucose in their blood.

Another drug is a glucagon-like peptide called dulaglutide, which Lilly thinks so highly of that it sold off its rights to the pioneer of this class of drugs, Byetta, which it launched in 2005 along with the drug’s creator, California-based Amylin Pharmaceuticals Inc.

Also, Lilly is developing two once-daily basal insulins—which if approved could finally stem the losses Lilly has suffered since the 2000 launch of the first basal insulin, Lantus.

“So I think all of this augurs well for us being able to offer a broad range of products to the dietologist, to the physician to really focus on what the patient needs and not just on what we have to offer,” Lilly CEO John Lechleiter said during the April 25 conference call.

Lilly is admittedly trying to play catch up to Denmark-based Novo Nordisk A/S and France-based Sanofi-Aventis SA in the diabetes business. In 1923, Lilly was the global pioneer of insulin. But its diabetes sales in recent years have grown half as fast as the overall global market.
 

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