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The Dose - JK Wall

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Health Care & Life Sciences / Life Science & Biotech

Surprising heart study could bring Lilly $1B annually

August 24, 2015

Eli Lilly and Co. didn’t win approval for a new drug last week. But its latest study of an existing diabetes drug could create a blockbuster in its own right—adding as much as $1 billion a year to the coffers of the Indianapolis-based drugmaker.

That’s because Lilly’s drug Jardiance, which showed that it also improves heart health, could steal sales from competing diabetes pills.

Lilly reported on Thursday that Jardiance lowered the risk of heart attacks, strokes and cardiovascular deaths in diabetics, a group of patients who are at higher risk for heart problems. Investors were surprised by the strong results and bid up Lilly's shares more than 6 percent for the day.

That makes Jardiance, which was discovered by Lilly partner Boehringer Ingelheim GmbH and launched onto the market in September 2014, the first drug in history that lowers both blood glucose levels and severe cardiac events.

That finding could lead physicians to move Jardiance, and similar drugs known as SGLT2 inhibitors, forward in the order of medicines they use to control diabetics' blood sugar.

“This is the first positive [cardiovascular] outcomes study in the diabetes class overall, so this is a big deal and we believe should be very positive for the SGLT2 class,” wrote UBS analyst Marc Goodman in an Aug. 20 research note. He added that “we would expect Lilly would benefit more than others.”

Currently, physicians start patients at risk of diabetes on the pill metformin, then add on pills called sulfonylureas or newer medications such as Januvia, which are known as DPP-4 inhibitors. Only after those drugs failed to control a patient’s blood sugar would physicians typically try a drug like Jardiance.

Lastly, physicians have patients move to injectable drugs, such as Lilly’s Trulicity or an insulin.

But if Jardiance also affects heart health, doctors could give it to patients before Januvia and its brethren, said Mark Schoenebaum, a pharmaceutical analyst at Evercore ISI.

“After today, given the [cardiovascular] benefit from at least on SGLT2 inhibitor Jardiance, we expect doctors will be more eager to prescribe SGLT2s in front of DPP4s," he wrote in an Aug. 20 note to investors.

Jami Rubin, a pharmaceutical analyst at Goldman Sachs, predicted the news would boost sales of Jardiance (as well as a combination drug that includes Jardiance and Lilly’s drug Tradjenta) by $1 billion by 2020. Since Lilly splits the proceeds from Jardiance roughly 50-50 with Germany-based Boehringer Ingelheim, that would mean an extra $500 million per year to Lilly.

Rubin also predicted that Jardiance, which claims just 10 percent of the SGLT2 inhibitor market now, would by 2020 surpass the current segment leader, Invokana, made by New Jersey-based Johnson & Johnson. Jardiance was the third SGLT2 inhibitor launched and in the first six months of this year generated just $30.4 million in revenue for Lilly.

Rubin expects Januvia, made by New Jersey-based Merkc & Co. Inc., to lose sales to Jardiance and other SGLT2 inhibitors. J.P. Morgan analyst Chris Schott agreed, but said Jardiance and its peers could also take market share from sulfonylureas, which are generic drugs.

Goodman, the UBS analyst, forecast a smaller benefit to Lilly. He raised his 2020 U.S. sales estimates for Jardiance from $800 million to $1.5 billion, with half of that difference—or $350 million per year—going to Lilly. Goodman estimates Jardiance’s foreign sales at about $200 million in 2020.

But Morgan Stanley analyst David Risinger, who only expected Lilly to see $610 million from Jardiance sales in 2020, before the heart study results were announced, said he’s now considering tripling that estimate to $1.8 billion per year. That would be $1.2 billion a year to Lilly that wasn’t expected before.

“We believe the positive outcome could add billions to peak end-market Jardiance sales,” he wrote Aug. 20 to investors.

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