Lilly’s path to redemption: Turn new drugs into sales

Back to TopCommentsE-mailPrintBookmark and Share

The numbers this year will be bad for Eli Lilly and Co.; there’s no getting around that.

In the past 2 1-2 years, the Indianapolis-based drugmaker has watched patents expire on not one, but two $5 billion-a-year drugs. That will send Lilly profit tumbling an estimated 32 percent this year.

But 2014 will also give Lilly an opportunity it hasn’t really had for nearly a decade: to grow sales and profit by launching new drugs.

Wall Street analysts say Lilly could win approval from the U.S. Food and Drug Administration for four new drugs: ramucirumab for gastric cancer, necitumumab for lung cancer, and dulaglutide and empagliflozin—both for diabetes.

“We continue to view Lilly as an earnings recovery story and 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,” Chris Schott, a pharmaceutical analyst at J.P. Morgan, said in a Jan. 30 note to investors.

Since 2005, Lilly has launched just three new drugs—none of them remarkable. The blood thinner Effient, once expected to be a blockbuster, had 2013 sales of $509 million. The diabetes pill Tradjenta, developed by Lilly partner Boehringer Ingelheim GmbH, had sales last year of just $249 million.

Lilly also helped a Japanese firm launch a cholesterol drug, Livalo, in 2010, but that relationship ended.

Some of the things that limited those drugs could hamper Lilly’s new drugs: Competing products, some already in a cheap generic form, do similar things.

Also, state-run health plans in foreign countries and private health plans in the United States are scrutinizing new drugs more aggressively before agreeing to reimburse patients, and narrowing their formularies to favor generic drugs and drugs discounted by the companies that make them.

Also, far more U.S. physicians are now employed by hospital systems, which are also pushing drugmakers to prove their drugs are superior before agreeing to allow their doctors to use them.

All those factors mean it will take Lilly longer to ramp up sales of new drugs—if it’s able to ramp them up at all.

Jami Rubin, a pharmaceutical analyst at Goldman Sachs, expects Lilly’s four new drugs to bring in sales this year of $261 million, with that total rising to $1.9 billion in 2017.

But that same year, Lilly stands to lose its patent on Cialis, its $2 billion-a-year pill for impotence, which would offset gains of the drugs launched this year.

Analysts have been repeatedly impressed with Lilly’s ability to wring additional revenue out of existing products. In the fourth quarter of 2013, for example, Lilly raised U.S. prices 10 percent, helping hold overall revenue fairly flat—even though U.S. patents on its bestseller Cymbalta expired in December.

Lilly will have to apply some of that magic to its new products if it hopes to reverse generally negative views on Wall Street. Twelve of 20 analysts rate Lilly a hold or worse, according to a Thomson/First Call survey.

“Given the still-skeptical view of LLY by the majority of investors, and what still seems to be under-ownership of the name, 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,” Tim Anderson, a pharmaceutical analyst at Bernstein Research, wrote in a Jan. 31 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. If what you stated is true, then this article is entirely inaccurate. "State sells bonds" is same as "State borrows money". Supposedly the company will "pay for them". But since we are paying the company, we are still paying for this road with borrowed money, even though the state has $2 billion in the bank.

  2. Andrew hit the nail on the head. AMTRAK provides terrible service and that is why the state has found a contractor to improve the service. More trips, on-time performance, better times, cleanliness and adequate or better restrooms. WI-FI and food service will also be provided. Transit from outlying areas will also be provided. I wouldn't take it the way it is but with the above services and marketing of the service,ridership will improve and more folks will explore Indy and may even want to move here.

  3. They could take the property using eminent domain and save money by not paying the church or building a soccer field and a new driveway. Ctrwd has monthly meetings open to all customers of the district. The meetings are listed and if the customers really cared that much they would show. Ctrwd works hard in every way they can to make sure the customer is put first. Overflows damage the surrounding environment and cost a lot of money every year. There have been many upgrades done through the years to help not send flow to Carmel. Even with the upgrades ctrwd cannot always keep up. I understand how a storage tank could be an eye sore, but has anyone thought to look at other lift stations or storage tanks. Most lift stations are right in the middle of neighborhoods. Some close to schools and soccer fields, and some right in back yards, or at least next to a back yard. We all have to work together to come up with a proper solution. The proposed solution by ctrwd is the best one offered so far.

  4. Fox has comments from several people that seem to have some inside information. I would refer to their website. Changed my whole opionion of this story.

  5. This place is great! I'm piggy backing and saying the Cobb salad is great. But the ribs are awesome. $6.49 for ribs and 2 sides?! They're delicious. If you work downtown, head over there.