Lilly needs to sell more Effient before Zyprexa loses patent protection

Sales of Eli Lilly and Co.’s newest drug were an afterthought during its Oct. 21 report on third-quarter earnings.

The blood thinner Effient totaled up $22.6 million in sales—a mere 0.4 percent of Lilly’s total for
the quarter. The drug is approved to treat heart patients during and after they receive arterial stents
or angioplasties.

“Effient sales were insignificant as expected,” wrote Goldman Sachs analyst Jami
Rubin in a note to investors.

On the upside, the sales numbers exceeded the paltry predictions of Rubin and most
other Wall Street analysts.

Still, they’re going to have to exceed expectations by a lot more if Effient
has a chance of replacing a sizable chunk of the revenue Lilly stands to lose when its $4.7 billion blockbuster
Zyprexa loses patent protection in two years.

That’s the same year Effient’s main rival, Plavix,
will lose its patent protection, bringing cheap generic copies of Plavix onto the market. If Effient
hasn’t established a strong market presence by then, the odds of doing so will get longer as it
competes with generic Plavix.

Plavix, made by New York-based Bristol-Myers
Squibb Co. and France-based Sanofi-Aventis SA, is the world’s second-best-selling drug, with $8.6
billion in annual revenue.

Right now, the biggest trouble for Effient is coming from Europe, where the drug recorded
sales of only $1.5 million, even though it was approved there six months before it was in the United
States.

Lilly is hung up in price negotiations with the government health programs of several
European countries.

In the United Kingdom, the one European country where Effient is for
sale, Lilly priced Effient 31 percent higher than its rival Plavix. But because Effient has shown a significantly
higher bleeding risk, other countries aren’t willing to pay a price that high.

“That’s a lever
that the European governments are using against the company to try and angle better pricing,” said David Moskowitz,
a pharmaceutical analyst at Caris & Co. “It’s going slower than expected.”

Nick
Lemen, Lilly’s manager of investor relations, acknowledged that price haggling is taking time but
said things are going according to plan.

“It will be some time before pricing discussions conclude,”
Lemen said, but then added, “We’re making good progress and expect the Effient prescription volumes to build over
time.”

The governments that have approved Effient are Argentina, Australia, Denmark, Greece, New Zealand,
Switzerland and the United Kingdom. Lilly officials said they hope to fully launch Effient next year in France, Italy and
Spain.

Things seem to be moving faster for Effient in the United States. Lilly convinced St. Louis-based Express
Scripts Inc., a large pharmacy benefits management firm, to offer Effient at its Tier 2 level, which has a moderate co-payment
for patients.

Also, individual hospitals are stocking up on the drug. That’s happened at Community Heart
and Vascular in Indianapolis.

“I have used it some. Most of my colleagues have used it somewhat,”
said Dr. Richard Hahn, a general and interventional cardiologist at Community Heart. He expects Effient
to gain wider use only if the drug’s reported bleeding risk proves small.

“If
the drug proves effective, at least as effective if not more effective than Plavix, then I think, yes,
we’ll start expanding the indications,” he said.

If Effient comes through for Lilly, it will bolster
earnings that, for now, are holding their own.

In the third quarter, the company earned
nearly $942 million, or 86 cents a share, compared with a loss of $466 million, or 43 cents per share,
in the same quarter a year ago.

Lilly’s performance beat analyst expectations, but its stock was punished
because of concerns about its drug pipeline.•

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