IBJNews

Lilly set to fall off second patent cliff

Back to TopCommentsE-mailPrintBookmark and Share

Eli Lilly and Co. on Wednesday will fall off its second “patent cliff” in as many years as its best-selling drug Cymbalta sees its U.S. patents expire.

The ensuing loss of sales, as patients shift en masse to generic copies of the antidepressant Cymbalta, is well-known and is already included in the depressed price of Lilly’s shares.

But the loss of Cymbalta’s $5 billion in annual revenue means it’s now-or-never time for the Indianapolis-based company.

“Lilly represents an execution story, in our view,” wrote J.P. Morgan & Co. analyst Chris Schott after conversations with Lilly CEO John Lechleiter in November. Referring to Lilly by its ticker symbol, he added, “While we do not anticipate near-term outperformance for the stock, we could see a longer-term opportunity for LLY shares to the extent the company is able to successfully commercialize its next-generation product portfolio and maintain cost discipline over the next several years.”

Lilly will also see the patent on another blockbuster drug, the osteoporosis medicine Evista, expire in March. Evista is on pace for sales this year of just more than $1 billion.

Combined with the 2010 patent expiration of cancer drug Gemzar and the 2011 patent expiration of the antidepressant Zyprexa, Lilly will be suffering from the disappearance of more than $9 billion in annual revenue by the end of next year, according to analysts’ estimates.

A fifth drug, the insulin Humalog, also saw its patents expire in May 2013. But since there is no generic version of insulin on the market, its sales have been unaffected. Analysts expect that to remain the case for at least another few years.

But the loss of Cymbalta sales is certain. Lilly expects Cymbalta’s U.S. sales, which exceeded $1.1 billion in the third quarter, to fall by more than half, to $500 million this quarter. That’s due to pharmacies working down their inventories and to returns that Lilly expects to receive after generic copies become available on Dec. 11.

“While it is difficult to predict the precise impact on Cymbalta sales, we expect the introduction of generics to result in a rapid and severe decline in our Cymbalta sales, which will have a material adverse effect on results of operations and cash flows,” Lilly lawyers wrote in the company’s third-quarter securities filing.

Next year, analysts expect Cymbalta’s sales to fall to as low as $1.3 billion. After Cymbalta’s exclusivity in Europe expires in August 2014, the drug’s sales could fall to as low as $700 million in 2015, according to analysts’ estimates.

After a very difficult 2014, Lilly’s sales are likely to start growing again in 2015, as the company brings as many as four diabetes drugs to market along with a potential blockbuster cancer drug called ramucirumab.

Lilly also continues to grow its Elanco animal health business rapidly. It has even been named as a possible buyer of Switzerland-based Novartis’ veterinary business.

Lilly’s sales in Japan and China continue to grow, albeit at slower rates than in recent years. And Lilly will rely on its sales force, which has been able to generate better-than-projected sales of such drugs as Tradjenta and Cymbalta.

“Given the still-skeptical view of LLY by the majority of investors, there is more ‘runway’ left should additional investors turn positive, which itself will be a function of LLY executing on various fronts, the most important of which is its pipeline,” wrote Bernstein Research analyst Tim Anderson in a Dec. 6 note to investors.

But it will likely be a long road back. Most analysts do not expect Lilly to match its 2013 revenue totals again until the year 2020. That’s because Lilly will see patents on its anti-impotence pill Cialis expire in 2017. And Lilly’s repeated pipeline failures, including its recent halting of its development of a new anti-depressant called edivoxetine, continue to scare investors and analysts.

“We are concerned that edivoxetine may be just one of more potential future failures to come from a pipeline that we view as lacking focus and discipline in terms of advancing assets into phase 3,” wrote Goldman Sachs analyst Jami Rubin in a Dec. 5 note to investors.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
thisissue1-092914.jpg 092914

Subscribe to IBJ
  1. Here are a few candidates for this new group, "ripped from the headlines." First up, that bizzaro State Senator Brent Waltz; secondly, the unethical Todd Huston, and his contractual arrangements scheme; Finally, but not least of all, the dishonorable Eric Turner. What sayeth you Greg Zoeller?

  2. Good day. I can't hide this great testimony that take place in my life I will love everyone to know it and be partaker that is why I always place it on answer, I am Mrs,Natalie Cuttaia by name, I live in Texas, United State Of America, I want to thank (Mr.Bruce Brandon) for his kindness upon my family life. I never knew that there is still nice lender like this on internet and earth here. Just some Months Back, I was in search for a loan of $100,000,00 as I was running out of money for feeding and rent. I was scammed $6,800 Dollars and I decided not to involve my self in such business again but a Friend of my introduced me to a loan firm due to my appearance and doings. And I told him that I am not interested of any loan deal anymore but he told me that there is still a nice lender who he will recommend me to, and I made a trial and I am most grateful lucky am I today, I was given a loan amount of $100,000.00usd, by this great Company (Bruce Brandon Loan Company) managed by (Mr.Bruce Brandon) If you are in need of a genuine or legit loan or financial assistance and you can be reliable and trusted of capable of paying back at the due time of the funds I will advice you to, contact him via: ( bruce.brandon071@gmail.com ) And you will be free from scams in the internet. All thanks to Mr.Bruce Brandon You are the one who remove me and my family out of poverty. The reason why i am doing this is that, i promise Mr.Bruce Brandon that if i truly got my loan, i will advertize his company and bring customers to his company. Contact him via ( bruce.brandon071@gmail.com )for the Loan you have been looking for..

  3. Hello, We are firm Organization formed to help people in needs of helps,such as financial help. So if you are going through financial difficulty or you are in any financial mess,and you need funds to start up your own business,or you need loan to settle your debt or pay off your bills,start a nice business, or you are finding it hard to obtain capital loan from local banks,contact us today via email mrsroseberrywilkinsfunds.usa@gmail.com So do not let these opportunity pass you by because Jesus is the same yesterday, today and forever more. Please these is for serious minded and God fearing People. Your Name: Loan Amount: Loan Duration: Valid Cell Phone Number: Thanks for your understanding to your contact as we Await Regards Management Email:mrsroseberrywilkinsfunds.usa@gmail.com

  4. The question is, where could they build a new stadium? It seems in the past year, all the prime spots have been spoken for with potential projects. Maybe in the industrial wasteland area a block past Lucas Oil? I think it needs to be close to the core, if a new stadium is built.

  5. Aldi is generally a great shopping experience. Still, I'm sure YOU wouldn't want to shop there, which I consider a positive.

ADVERTISEMENT