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.


Post a comment to this story

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

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. Of what value is selling alcoholic beverages to State Fair patrons when there are many families with children attending. Is this the message we want to give children attending and participating in the Fair, another venue with alooholic consumption onsite. Is this to promote beer and wine production in the state which are great for the breweries and wineries, but where does this end up 10-15 years from now, lots more drinkers for the alcoholic contents. If these drinks are so important, why not remove the alcohol content and the flavor and drink itself similar to soft drinks would be the novelty, not the alcoholic content and its affects on the drinker. There is no social or material benefit from drinking alcoholic beverages, mostly people want to get slightly or highly drunk.

  2. I did;nt know anyone in Indiana could count- WHY did they NOT SAY just HOW this would be enforced? Because it WON;T! NOW- with that said- BIG BROTHER is ALIVE in this Article-why take any comment if it won't appease YOU PEOPLE- that's NOT American- with EVERYTHING you indicated is NOT said-I can see WHY it say's o Comments- YOU are COMMIES- BIG BROTHER and most likely- voted for Obama!

  3. In Europe there are schools for hairdressing but you don't get a license afterwards but you are required to assist in turkey and Italy its 7 years in japan it's 10 years England 2 so these people who assist know how to do hair their not just anybody and if your an owner and you hire someone with no experience then ur an idiot I've known stylist from different countries with no license but they are professional clean and safe they have no license but they have experience a license doesn't mean anything look at all the bad hairdressers in the world that have fried peoples hair okay but they have a license doesn't make them a professional at their job I think they should get rid of it because stateboard robs stylist and owners and they fine you for the dumbest f***ing things oh ur license isn't displayed 100$ oh ur wearing open toe shoes fine, oh there's ONE HAIR IN UR BRUSH that's a fine it's like really? So I think they need to go or ease up on their regulations because their too strict

  4. Exciting times in Carmel.

  5. Twenty years ago when we moved to Indy I was a stay at home mom and knew not very many people.WIBC was my family and friends for the most part. It was informative, civil, and humerous with Dave the KING. Terri, Jeff, Stever, Big Joe, Matt, Pat and Crumie. I loved them all, and they seemed to love each other. I didn't mind Greg Garrison, but I was not a Rush fan. NOW I can't stand Chicks and all their giggly opinions. Tony Katz is to abrasive that early in the morning(or really any time). I will tune in on Saturday morning for the usual fun and priceless information from Pat and Crumie, mornings it will be 90.1