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Health Care & Life Sciences / Life Science & Biotech

Lilly’s move into immunology poised to pay off with two blockbusters

November 16, 2015

Back in 2008, when Eli Lilly and Co.’s pipeline was bone dry, the company decided to take a bet on auto-immune drugs as one way of turning things around.

Since Indianapolis-based Lilly had no prior experience in the auto-immune market, that meant building up an entirely new business unit—a highly expensive proposition.

But after last week, it looks like that gamble is paying off.

Lilly’s drug for severe psoriasis, called ixekizumab, got a bullish new sales forecast from one Wall Street firm. And Lilly also announced test results of a drug for rheumatoid arthritis, which proved better than the existing therapy on all but one key front.

That’s significant because that existing therapy—AbbVie’s Humira—is the best-selling drug in the world, with $12.5 billion in annual worldwide sales. Only about 40 percent of those sales come from treating rheumatoid arthritis, according to a J.P. Morgan analyst, but that still represents $5 billion per year in sales.

Analysts expect Lilly’s drug, called baricitinib, to make a small dent in Humira’s lock on the market. Alex Arfaei, a BMO Capital Markets analyst, estimates baricitinib will steal 5 percent to 10 percent of Humira’s sales—or no more than $500 million a year.

But he expects the drug to do even better among patients who don’t respond well to Humira or other similar medicines, known as anti-TNF drugs.

Baricitinib, which Lilly is developing in partnership with Delaware-based Incyte Corp., is taken as a pill. That’s an advantage over the injectable Humira. But baricitinib must be taken daily, whereas Humira is typically injected once a week or every other week.

“However, a once daily oral option with seemingly superior efficacy vs. the standard of care Humira will likely take some share as well,” Arfaei wrote in a Nov. 13 note to investors. “Moreover, we believe that Bari will be competitive" among the growing number of patients who aren't adequately helped by anti-TNF drugs.

But Lilly’s drug isn’t the only oral medicine likely to be on the market. In 2012, New York-based Pfizer Inc. won approval for the the pill Xeljanz for rheumatoid arthritis, but it has struggled. Chicago-based AbbVie is also developing a daily pill for rheumatoid arthritis, which produced encouraging results in a mid-stage clinical trial.

Two other drug firms, Johnson & Johnson and Galapagos are developing drugs similar to baricitinib.

And analysts think it will take a while for baricitinib to gain traction. They say that's because physicians who treat rheumatoid arthritis aren’t known to embrace new drugs rapidly.

Chris Schott, a pharmaceutical analyst at J.P. Morgan, wrote in a Nov. 11 report that “the TNF class of drugs are well entrenched and physicians treating RA tend to be slow adopters of new therapies. As a result, we expect the rollout of baricitinib to be gradual upon approval.”

Arfaei expects baricitinib to receive approval from U.S. regulators in late 2016, and top $1 billion in sales by 2020. He expects its sales to peak at $1.6 billion in 2024.

Arfaei also expects ixekizumab, which is pending regulatory approval, to achieve $2.1 billion in sales by 2021.

In clinical trial results reported last week, 74 percent of patients taking baracitinib showed at least 20 percent improvement in their condition after 24 weeks and more than 30 percent showed at least 70 percent improvement.

By contrast, among patients taking Humira in the trial, 66 percent reported at least 20 percent improvement and 22 percent reported at least 70 percent improvement.

Rheumatoid arthritis is a condition where the body’s immune system attacks the joints, sometimes causing debilitating pain. It affects three times as many women as men and is more common among African-Americans than whites.

One key area where baricitinib didn’t prove better than Humira is in joint damage. And that could prove significant.

“We believe that physicians regard preserving joint structure to be of utmost importance and so they may be somewhat inclined to save baricitinib for patients who fail Humira,” wrote Morgan Stanley analyst David Risinger in a Nov. 11 note to investors. “However, the differences are arguably minimal ... so over time baricitinib could be more widely adopted as an early treatment.”

He expects barictinib to hit $1.1 billion in sales in 2020.

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