Monday, March 17, 2008

The Business of Diabetes: Indy Star Reports that "Lilly returns to its roots" (in diabetes)

I don't post twice in a day very often, but sometimes I cannot help myself. I have said this before, but for whatever reason, people never seem to believe me, so I'll say it again: I told you so!

Yesterday's Indianapolis Star has a story about its hometown pharma giant, Eli Lilly and Company. They write that the company, faced with expiring patents on key medicines, Lilly is investing hundreds of millions of dollars into its diabetes business, its oldest franchise.

While I do not believe that some of the company's investments will have a material impact on the business, such as the launching of 5 new insulin pens, as I wrote in November 2007, other moves do suggest that Lilly is re-thinking its diabetes business strategy, particularly on type 1 diabetes.

What do you think? Do my original comments ring true today?

Lilly returns to its roots
By John Russell, Indianapolis Star
Call Star reporter John Russell at (317) 444-6283
March 16, 2008

With renewed focus on its diabetes franchise, drug maker is bolstering research and investment as disease casts ever-growing shadow over Americans' health

Its top-selling products are just a few years away from generic drug competition. Its research labs haven't launched a new drug for humans in nearly three years. Its late-stage pipeline is thinning out because of regulatory setbacks on several drugs and management's decision to pull the plug on an experimental product, inhaled insulin. Its stock is sliding, closing Friday at $47.81, its lowest level in nearly 11 years.

What's a pharmaceutical company to do?

Eli Lilly and Co., for part of the solution, is going back to its roots.

The Indianapolis drug company is investing hundreds of millions of dollars into its diabetes business, its oldest franchise, in an effort to find better treatments for what is becoming a worldwide epidemic of the debilitating disease.

In the past 18 months, Lilly has launched five new injection pens, including one with computerized memory, to try to boost sales of its insulins. It has given more than $30 million in grants to hospitals and foundations for diabetes research and programs. It has expanded its marketing outreach program targeting people at high risk for the disease.

Meanwhile, it is replenishing its diabetes pipeline with a batch of licensing deals. Last fall, Lilly bought the rights to a molecule being tested by a Maryland biotechnology company for treatment of Type 1 diabetes. On Thursday, Lilly said it has bought the rights to develop the therapies being developed by a Toronto biotech company specializing in diabetes research. And it is pushing ahead with testing of its own compounds for treatment of Type 2 diabetes.

"There's a resurgence of interest in diabetes going on," said Dr. David Moller, Lilly vice president of endocrine and cardiovascular research and clinical investigation. "I would hate to promise that a cure is right around the corner, but that is the long-term goal we have."

The resurgence follows a sharp downturn in Lilly's commitment to diabetes. Six years ago, facing a cash crunch when its antidepressant Prozac was stripped of U.S. patent protection, Lilly dramatically cut back its insulin sales force and saw its U.S. market share drop from 82% in 2000 to 43% in 2005. The company used that money to help launch about eight other products.

Today, Lilly sees diabetes as a core franchise that will help shape its future. But as the company tries to capture a larger portion of the worldwide diabetes market, estimated at $19 billion, it faces stiff competition from French drug maker Sanofi-Aventis and Danish drugmaker Novo Nordisk.

Last year, Lilly rang up about $3.2 billion in sales of insulins and other diabetes products, or about 18% of its total revenue. The company declined to say how much it hopes to grow in this area. But Catherine Arnold, a drug analyst for Credit Suisse in New York, is projecting the company's diabetes sales could grow to $4.4 billion by 2012, or about 22% of total revenue.

Some analysts hope Lilly's aggressive push back into diabetes will help it shore up setbacks in other areas. Last month, the Food and Drug Administration rejected Lilly's application to sell a once-a-month injectable version of its top-selling antipsychotic drug. Earlier this month, the company pulled the plug on a seven- year project to develop an inhaled insulin. Two years ago, Lilly's experimental drug for diabetes-related eye problems ran into a brick wall when the FDA asked for several more years of expensive clinical trials.

Under the gun

Meanwhile, Lilly has little time to waste. Starting in 2011, patents will begin to expire on its top-selling drugs, including antipsychotic Zyprexa, insulin drug Humalog, cancer drug Gemzar and antidepressant Cymbalta.

Lilly must find replacements for more than half of its revenue in the next seven years or face tough choices in cutting back its huge operation to match its smaller revenue base.

Seamus Fernandez, a drug analyst at Leerink Swann in Boston, said Lilly has the "worst patent expiration profile in the industry."

"The reality is, this company needs all the late- stage pipeline products it can get," he said.

In diabetes, Lilly is riding a wave that shows no sign of slowing. In the last 15 years, the number of people in the U.S. with diagnosed diabetes has more than doubled, reaching 14.6 million in 2005, according to the Centers for Disease Control and Prevention. The number of cases is expected to double by 2050.

Younger patients

And a growing area is the number of children getting diabetes, particularly Type 2, which is linked to obesity, poor diet and lack of exercise.

"In the '90s, it was a rarity to see a child with Type 2 diabetes," said Dr. Henry Rodriguez, a diabetes specialist at Riley Hospital for Children. "There are now places in the U.S. that are seeing over 50% of their new diagnoses of diabetes in children."

Lilly's aggressive push back into diabetes could give it that extra pipeline oomph. Five months ago, it signed a deal with MacroGenics, a Maryland biotech company, for the rights to develop and commercialize a molecule called teplizumab, which is in late-stage clinical trials to treat people with recent-onset Type 1 diabetes.

Some analysts say if Lilly could help develop a long-term treatment or cure for Type 1 diabetes, it could be a huge boon for public health.

"Type 1 is really an unmet need, and it's kind of sad because most of the patients are children," said Les Funtleyder, a drug analyst with Miller Tabak & Co. in New York. "I think there's an opportunity here for Lilly for sure, and given the company's history in diabetes, it's right in its sweet spot."


Jenny said...

Let's not forget Lilly's most creative way to expand its diabetes business, by aggressively promoting Zyprexa off label in a way that created thousands of new cases of diabetes, particularly in the young people Lilly pretends to care for so much.

The data on how Lilly convinced doctors to prescribe Zyprexa off label has been coming out in a lawsuit, and company emails laying out the strategy make it crystal clear it was intentional.

I saw Zyprexa turn a friend's previously thin, normal teenager into a diabetic blimp--a teen who was troubled, but by no stretch of the imagination schizophrenic. So I know first hand what the toll of this drug has been.

That the company's executives suppressed the information that Zyprexa causes diabetes and pushed it on teens tells you all you need to know about their ethics.

Anonymous said...


I believe it is unquestionable that (at least until recently) most Type 2's were NOT children. But does analyst Funtleyder's unqualified statement that most Type 1's are children sound just a bit off-target?

And while he contends that this 'unmet need' [is] 'kind of sad because most of the patients are children' . . . why doesn't he speak to the real travesty: these same children can expect to grow into adulthood with the same needs still unmet!


Unknown said...

Eli Lilly needs to do something since they did cause diabetes in so many people with Zyprexa. I have first hand knowledge with that as I am one of them diagnosed with it after I was put on it. And now I take Eli Lilly's insulin. Granted I am getting a lawsuit settlement out of them, but thanks to them I get to deal with a lifetime of complications now.

Scott S said...

The whole Zyprexa issue is a sad travesty of ethics. I, like many others, am watching the Alaska lawsuit with great interest, and now we can add Connecticut to the list. About 2 weeks ago, Connecticut's Attorney General Richard Blumenthal announced the state was suing Eli Lilly over the marketing of Zyprexa on the grounds that Lilly illegally marked the drug for unapproved uses and concealed risks associated with the drug. Of course, I also want to see that the FDA's proposed loosening of off-label marketing does is not allowed, or we'd see more of this, with no hope for recourse for the victims.

The reality is that Lilly has neglected this business for over a decade, and is forced to invest in it because its in such bad shape today. But whether they can do anything about it before their patents start expiring remains to be seen!

Donna said...

Unfortunately, for the little people who work at Lilly's, the big shots at Lilly are the ones making such bad decisions. I have family members who are the little people at Lilly - the workers who depend on Lilly for their income, insurance, etc. When a big company starts having problems, I start at the top with the blame. In this situation, they are not only hurting people who rely on them for their pharmaceuticals, but by doing this, they could also be untimatley hurting those workers who do the job. It's sad....

Scott S said...

Donna, It is sad and I cannot help but wonder what Col. Eli Lilly would think about how the company has been managed? My suspicion is he might be impressed with the growth, but sorry about some of the bone-headed decisions the last CEO made by letting things decline this fast in the diabetes business, or how patients have been disregarded. I'm not too optimistic about the current heir-apparent, but we shall find out ...