Lilly's pipeline failures concern analysts

Back to TopCommentsE-mailPrintBookmark and Share

Eli Lilly and Co.’s decision to halt trials of an experimental Alzheimer’s drug last week is its third R&D failure in as many months. That recent string of misses raises pressure on Lilly to hit with the leading stars in its pipeline—most notably its diabetes drugs.

Investors shrugged at the Indianapolis-based drugmaker's June 13 announcement that a beta secretase inhibitor designed to slow Alzheimer’s disease had failed a Phase 2 clinical trial due to liver problems in patients. The drug still had a long way to go before it ever could have hit the market.

But the pattern is a bit disconcerting to some Wall Street analysts. In May, Lilly scuttled a Phase 3 trial of enzastaurin, which was aimed to treat lymphoma. And in February, Lilly pulled the plug on a Phase 3 trial of tabalumab, a highly touted treatment for rheumatoid arthritis.

“Late stage clinical failures such as enzastaurin and tabalumab in [rheumatoid arthritis], while small opportunities, are adding up and raise questions about LLY’s financial discipline," wrote Jami Rubin, a pharmaceutical analyst at Goldman Sachs, referring to the company by its ticker symbol.

She said in her May 10 note to investors that "failures like these make us wonder if LLY is pushing too many high-risk drugs into phase 3."

Andrew Baum, a Citi Research analyst, said the additional failure of the beta secretase inhibitor now reduces reasons to own Lilly stock.

“An investment thesis on LLY’s is now increasingly dependent on [operating expense] management and evacetrapib for cardiovascular disease,” Baum wrote in a June 14 research note. Investors are, of course, aware that Lilly will see billions in revenue disappear next year after the patent expirations of its antidepressant Cymbalta and its cancer drug Evista.

Evacetrapib is a drug designed to lower bad cholesterol and raise good cholesterol in patients at risk of serious heart disease. Analysts expect that, if it proves effective, its sales will reach blockbuster status.

But what really has investors’ attention now are Lilly’s experimental diabetes drugs and one cancer drug.

Lilly is due to release new clinical data on June 22 about dulaglutide, a once-weekly injection that Lilly thinks will outperform similar drugs already on the market, including Victoza, made by Denmark-based Novo Nordisk A/S.

Novo’s share price declined Monday after Bank of America Merrill Lynch analyst Sachin Jain cut his rating on Novo because he thinks Lilly’s dulaglutide will steal sales from Victoza. Some analysts predict dulaglutide could hit $1.2 billion in sales by 2018.

“Overall we believe headline data for dulaglutide suggests a profile that may be better than Victoza,” Jain wrote in a note to investors, according to Bloomberg News. “Our forecasts now assume dulaglutide launch in 2015 and Victoza slowly declining thereafter.”

In morning trading, Novo shares fell as much as 3.9 percent on U.S. markets. Lilly’s share price, meanwhile, rose as much as 1.9 percent.

Lilly also will release new data about empagliflozin, an oral diabetes medicine, and two new kinds of insulin. Collectively, analysts think those drugs could reach about $2 billion in annual sales by 2018.

In the third quarter of this year, Lilly is expected to announce Phase 3 results of its cancer drug ramucirumab, which some expect to compete with Avastin as a treatment against several kinds of cancer.

Analysts estimates for 2018 sales for that drug range from $600 million to $1.3 billion.


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. With Pence running the ship good luck with a new government building on the site. He does everything on the cheap except unnecessary roads line a new beltway( like we need that). Things like state of the art office buildings and light rail will never be seen as an asset to these types. They don't get that these are the things that help a city prosper.

  2. Does the $100,000,000,000 include salaries for members of Congress?

  3. "But that doesn't change how the piece plays to most of the people who will see it." If it stands out so little during the day as you seem to suggest maybe most of the people who actually see it will be those present when it is dark enough to experience its full effects.

  4. That's the mentality of most retail marketers. In this case Leo was asked to build the brand. HHG then had a bad sales quarter and rather than stay the course, now want to go back to the schlock that Zimmerman provides (at a considerable cut in price.) And while HHG salesmen are, by far, the pushiest salesmen I have ever experienced, I believe they are NOT paid on commission. But that doesn't mean they aren't trained to be aggressive.

  5. The reason HHG's sales team hits you from the moment you walk through the door is the same reason car salesmen do the same thing: Commission. HHG's folks are paid by commission they and need to hit sales targets or get cut, while BB does not. The sales figures are aggressive, so turnover rate is high. Electronics are the largest commission earners along with non-needed warranties, service plans etc, known in the industry as 'cheese'. The wholesale base price is listed on the cryptic price tag in the string of numbers near the bar code. Know how to decipher it and you get things at cost, with little to no commission to the sales persons. Whether or not this is fair, is more of a moral question than a financial one.