Eli Lilly and Co.’s antidepressant Cymbalta always has been overshadowed by Zyprexa, whose annual sales top $5 billion—far more than any other drug in the company’s 134-year history.

So you might be surprised to learn that Cymbalta, the company’s No. 2 seller, racked up $3.5 billion in sales last year, and some analysts say it may approach $5 billion before generic competition arrives in the summer of 2013.

Eking every penny possible out of Cymbalta has emerged as a key part of Lilly’s strategy to weather a blizzard of patent expirations that will begin in late 2011 and continue through 2014. The first is a doozy, the antipsychotic Zyprexa, which loses protection this October.

Company executives have dubbed the daunting span “Years YZ.” The goal, in short, is to prevent revenue from falling off a cliff before promising compounds in the R&D pipeline would begin to hit the market mid-decade.
 

Lechleiter

So far, so good for Cymbalta. In the fourth quarter of 2010, sales spiked 18 percent, to $982 million, in part because of a U.S. price increase.

Company officials expect more good news in 2011 thanks to recent approval from the U.S. Food and Drug Administration to market Cymbalta for chronic pain. In addition to depression, Cymbalta already had approvals for diabetic nerve pain, fibromyalgia and anxiety.

“It’s obviously a very important new indication for us for a molecule that now has five or six approved indications in different countries around the world,” Lilly CEO John Lechleiter told analysts on a Jan. 27 conference call.

“Cymbalta … is going to be a very important growth driver for us in the beginning of this YZ period.”

The drug debuted in 2004, four years after a federal appeals court stripped Prozac of its patent protection. Prozac sales peaked in 2000 at $2.6 billion—a threshold Cymbalta blew past in 2009.

The drug’s share of the U.S. antidepressant-prescription market has held steady at about 10 percent since 2008, despite increasing generic competition, according to Deutsche Bank Securities. But for years, the drug hasn’t been prescribed just for depression. FDA data released last summer found that as much as two-thirds of Cymbalta’s use already was off label for the treatment of pain.

Bernstein Research projects Cymbalta sales will increase 15 percent this year and another 9 percent in 2012, reaching $4.4 billion. The firm projects the drug will account for nearly 20 percent of Lilly’s 2012 sales.

But like everything involving Lilly these days, there are plenty of risks. For starters, a lawsuit challenging Cymbalta’s patent protection is scheduled for trial this June. Analysts think Lilly will prevail, but there are no guarantees.

Analysts say the company can’t afford to stumble with Cymbalta at a time Zyprexa sales are likely to go into a free fall. BMO Capital Markets projects Zyprexa sales will fall 12 percent this year, to $4.4 billion, before plunging to $1.5 billion in 2016. Any disappointment with Cymbalta could cause Lilly shares, which are languishing around $35.50, to fall further.

“Lilly’s sales are increasingly becoming dependent on Cymbalta going forward, and any weakness in [prescription] trends may negatively impact the stock’s ability to reach our target price” of $38, Citigroup Global Markets analyst John Boris said in a report.

Analysts expect generics to gobble up Cymbalta sales quickly once competition arrives in the second half of 2013. J.P. Morgan estimates that in 2015 sales will slip below $1 billion.

If all goes well, Lilly will have some new drugs picking up the slack by then. BMO Capital Markets estimates the company’s sales that year will approach $25 billion, with nearly one-quarter from products that aren’t yet on the market.

Many of Lilly’s peers are bracing for similar transitions, as patent expirations sweep through the industry. But the challenges are most daunting at Lilly, Goldman Sachs said in a report reiterating its “sell” rating on Lilly shares.

“We maintain our view that LLY remains the most structurally challenged company in a sector facing serious decline,” Goldman Sachs analyst Jami Rubin said in the report.

Endowment sticks with stock

The Lilly Endowment Inc. continues to stand by the company, and hasn’t sold a single one of its 134 million shares since late 2008, regulatory filings show.

The foundation, founded with gifts of Lilly stock, began diversifying in 2006 but put sales on hold after the company’s swoon deepened. The stock is off about 68 percent from its 2000 peak.

Lilly’s hefty quarterly dividend—49 cents a share—takes away some of the sting. The endowment received $262 million in dividends in 2010.•