Gil Roth07.18.12
#8 Eli Lilly & Co.
Lilly Corporate Center
Indianapolis, IN 46285
Tel: (317) 276-2000
Fax: (317) 277-6579
www.lilly.com
Headcount 38,080
Year Established 1876
Pharma Revenues $22,608 4%
Total Revenues $24,287 5%
Net Income $4,348 -14%
R&D Budget $5,021 3%
Top-Selling Drugs
Account for 86% of total pharma sales, up from 83% in 2010
PROFILE
Lilly got a taste of Life Without Zyprexa at the end of 2011. Its top seller when generic in the U.S. at the end of October, leading to a quarterly sales drop of 44%, shedding nearly $600 million in revenues. In 1Q12, Zpyrexa sales fell 56%, a $700 million drop year-on-year. Quarterly revenue was down 4%. Combined with the 2010 loss of Gemzar, it’s quite a hit.
In our inaugural edition of the Top Companies report (July/August 2001), Lilly’s profile began, “For several years, Lilly has been preparing for the loss of patent protection for Prozac. [. . .] Lilly has begun to prepare for the post-Prozac era, which the company ominously refers to as ‘Year X’ in its corporate communications.”
Lilly survived the precedent-making collapse of Prozac —80% conversion to generic within a week, according to one metric, and a 66% drop in revenue after one year — with a series of new drug approvals and deep cuts. With a number of those new drugs now facing expiration, including #2 seller Cymbalta, the company is referring to this period (2010 through 2014) as ‘YZ,’ short for ‘Year Zero’.
In chief executive officer John Lechleiter’s letter to shareholders in Lilly’s 2011 annual report, he writes, “Our strategy for YZ is to continue to grow sales volumes of our currently marketed products, harvest the fruits of our investments in our counter-cyclical growth engines, and supplement our internal growth with business development — while improving productivity. This will allow us to fund our innovation-based strategy and, specifically, a pipeline that can deliver long-term growth.”
Dr. Lechleiter, a 32-year veteran at Lilly, also noted, “Our company is not shifting its focus to generics or consumer products. And we’re not pursuing a big merger.” The company is sticking with its “R&D Do or Die” mentality (along with a healthy dose of general cost-cutting, last seen in a 2009 restructuring that sliced $1 billion from annual costs, along with 5,500 employees; oh, and the remaining staff will have their base pay frozen for 2012).
Overall, the company exceeded its goals by having a dozen drugs in Phase III by the end of 2011, and its R&D efforts are high risk, high reward. Lilly’s biggest bet remains in Alzheimer’s disease, where solanezumab is currently in a pair of Phase III trials. If the drug can be shown to slow progression of the disease even mildly (and safely, unlike Lilly’s previous Phase III effort, semagacestat), it’ll be a blockbuster and help the company pass this hurdle. The company has tried to downplay the “all or nothing” notion that a clinical failure here dooms the company, but since when are pharma investors rational and immune to hype?
Speaking of, evacetrapib may begin Phase III trials in 2012 for dyslipidemia. This is another in the CETP inhibitor field, testing the thesis that raising HDL and lowering LDL will reduce cardiovascular events. Once again, Lilly is not raising anyone’s hopes that this will succeed where Pfizer’s torcetrapib and Roche’s dalcetrapib failed, but if it works . . .
Meanwhile, in the lucrative field of diabetes treatments, Lilly and development partner Boehringer Ingelheim got approval for Tradjenta, a DPP-4 inhibitor, and Jentadueto, a combo of Tradjenta and metformin. The companies also have a long-acting basal insulin that got good results in Phase II and may give Lantus a run if it reaches market. Phase III data for that drug is expected next year.
Lilly’s erstwhile partner Amylin got approval for its weekly GLP-1 inhibitor Bydureon. As part of the process of becoming erstwhile, Lilly received a one-time payment of $250 million from Amylin and will receive 15% of net sales of Byetta and Bydureon, until the $1.2 billion mark is reached (on a note to Lilly paying 9.5% interest). Lilly will also get a $150 million milestone payment if Amylin’s once-monthly version of the drug gets approved. That’s quite a deal, considering Amylin was suing Lilly over the terms, and not vice versa. When BMS acquired Amylin shortly before press time, it included debt and contractual obligations to Lilly of $1.7 billion in its $7.0 billion valuation.
Biologics, including insulin products, will play a big role at Lilly going forward. On the operational side, Lilly announced plans in February 2012 to invest $442 million to expand its biopharma facilities in Kinsale, Ireland. The company spent $400 million there in 2006 to get biologics off the ground.
In that first Top Companies issue in 2001, Lilly was ranked #11 overall. Two companies that were ahead of it were bought up over the years — Pharmacia, American Home Products (Wyeth) — while Lilly passed a third — BMS — to take hold of its #8 spot. The company managed to hold its ground despite the bruising loss of Prozac, but can it survive the next few years without becoming M&A bait? A poison pill provision can help ward off hostile takeovers, but will Lilly’s revenue base dip too far for it to sustain R&D? That’s the $64 billion (or thereabouts) question.
Outsourcing News
Lilly Corporate Center
Indianapolis, IN 46285
Tel: (317) 276-2000
Fax: (317) 277-6579
www.lilly.com
Headcount 38,080
Year Established 1876
Pharma Revenues $22,608 4%
Total Revenues $24,287 5%
Net Income $4,348 -14%
R&D Budget $5,021 3%
Top-Selling Drugs
Drug | Indication | $ | (+/- %) |
Zyprexa | schizophrenia | $4,622 | -8% |
Cymbalta | anxiety, depression, diabetic peripheral, neuropathic pain | $4,162 | 20% |
Alimta | cancer | $2,461 | 11% |
Humalog | diabetes | $2,368 | 15% |
Cialis | erectile dysfunction | $1,876 | 10% |
Humulin | diabetes | $1,249 | 15% |
Evista | postmenopausal osteoporosis | $1,067 | 4% |
Forteo | osteoporosis | $950 | 14% |
Strattera | ADHD | $620 | 7% |
Account for 86% of total pharma sales, up from 83% in 2010
PROFILE
Lilly got a taste of Life Without Zyprexa at the end of 2011. Its top seller when generic in the U.S. at the end of October, leading to a quarterly sales drop of 44%, shedding nearly $600 million in revenues. In 1Q12, Zpyrexa sales fell 56%, a $700 million drop year-on-year. Quarterly revenue was down 4%. Combined with the 2010 loss of Gemzar, it’s quite a hit.
In our inaugural edition of the Top Companies report (July/August 2001), Lilly’s profile began, “For several years, Lilly has been preparing for the loss of patent protection for Prozac. [. . .] Lilly has begun to prepare for the post-Prozac era, which the company ominously refers to as ‘Year X’ in its corporate communications.”
Lilly survived the precedent-making collapse of Prozac —80% conversion to generic within a week, according to one metric, and a 66% drop in revenue after one year — with a series of new drug approvals and deep cuts. With a number of those new drugs now facing expiration, including #2 seller Cymbalta, the company is referring to this period (2010 through 2014) as ‘YZ,’ short for ‘Year Zero’.
In chief executive officer John Lechleiter’s letter to shareholders in Lilly’s 2011 annual report, he writes, “Our strategy for YZ is to continue to grow sales volumes of our currently marketed products, harvest the fruits of our investments in our counter-cyclical growth engines, and supplement our internal growth with business development — while improving productivity. This will allow us to fund our innovation-based strategy and, specifically, a pipeline that can deliver long-term growth.”
Dr. Lechleiter, a 32-year veteran at Lilly, also noted, “Our company is not shifting its focus to generics or consumer products. And we’re not pursuing a big merger.” The company is sticking with its “R&D Do or Die” mentality (along with a healthy dose of general cost-cutting, last seen in a 2009 restructuring that sliced $1 billion from annual costs, along with 5,500 employees; oh, and the remaining staff will have their base pay frozen for 2012).
Overall, the company exceeded its goals by having a dozen drugs in Phase III by the end of 2011, and its R&D efforts are high risk, high reward. Lilly’s biggest bet remains in Alzheimer’s disease, where solanezumab is currently in a pair of Phase III trials. If the drug can be shown to slow progression of the disease even mildly (and safely, unlike Lilly’s previous Phase III effort, semagacestat), it’ll be a blockbuster and help the company pass this hurdle. The company has tried to downplay the “all or nothing” notion that a clinical failure here dooms the company, but since when are pharma investors rational and immune to hype?
Speaking of, evacetrapib may begin Phase III trials in 2012 for dyslipidemia. This is another in the CETP inhibitor field, testing the thesis that raising HDL and lowering LDL will reduce cardiovascular events. Once again, Lilly is not raising anyone’s hopes that this will succeed where Pfizer’s torcetrapib and Roche’s dalcetrapib failed, but if it works . . .
Meanwhile, in the lucrative field of diabetes treatments, Lilly and development partner Boehringer Ingelheim got approval for Tradjenta, a DPP-4 inhibitor, and Jentadueto, a combo of Tradjenta and metformin. The companies also have a long-acting basal insulin that got good results in Phase II and may give Lantus a run if it reaches market. Phase III data for that drug is expected next year.
Lilly’s erstwhile partner Amylin got approval for its weekly GLP-1 inhibitor Bydureon. As part of the process of becoming erstwhile, Lilly received a one-time payment of $250 million from Amylin and will receive 15% of net sales of Byetta and Bydureon, until the $1.2 billion mark is reached (on a note to Lilly paying 9.5% interest). Lilly will also get a $150 million milestone payment if Amylin’s once-monthly version of the drug gets approved. That’s quite a deal, considering Amylin was suing Lilly over the terms, and not vice versa. When BMS acquired Amylin shortly before press time, it included debt and contractual obligations to Lilly of $1.7 billion in its $7.0 billion valuation.
Biologics, including insulin products, will play a big role at Lilly going forward. On the operational side, Lilly announced plans in February 2012 to invest $442 million to expand its biopharma facilities in Kinsale, Ireland. The company spent $400 million there in 2006 to get biologics off the ground.
In that first Top Companies issue in 2001, Lilly was ranked #11 overall. Two companies that were ahead of it were bought up over the years — Pharmacia, American Home Products (Wyeth) — while Lilly passed a third — BMS — to take hold of its #8 spot. The company managed to hold its ground despite the bruising loss of Prozac, but can it survive the next few years without becoming M&A bait? A poison pill provision can help ward off hostile takeovers, but will Lilly’s revenue base dip too far for it to sustain R&D? That’s the $64 billion (or thereabouts) question.
The Lowe Down
You know, Eli Lilly sort of makes me feel hypocritical. I’ve inveighed against big pharma mergers for years now, because most of them just seem pointlessly disruptive, and too many of them don’t live up to expectations. So here’s a company that has deliberately avoided any of them. (I used to be able to lump them in with Merck, before that wonderful, productive Schering-Plough deal, but now they’re nearly alone). And what has it done for them?
Lilly, like AstraZeneca, is looking at the cliff, and perhaps waiting for a bulldozer blade to come scrape them off over the edge. If mergers aren’t the answer, then staying single isn’t the guaranteed cure, either. Which is what we should probably learn about this business: there is no formula, no one right way to do it. If there were, someone would have stumbled across it by now, because everyone’s been trying everything that they can think of, and a real winning strategy would have swept the industry. Instead, what we have sweeping the industry are consultants, to whom you can pay money in order to hear that you’re doing it wrong. Which is something you already knew.
—Derek Lowe
Outsourcing News
Lilly tends to be a lot more forthcoming about outsourcing partnerships than its fellow Top Companies.
In October 2011, Lilly signed a marketing and distribution agreement with Prasco to sell generic Zyprexa and its Zydis ODT version. No word on financial terms, nor how sales performed during the initial six-month exclusivity phase.
In November 2011, Lilly and AMRI formed a six-year collaboration in drug discovery. AMRI will hire more than 40 synthetic chemists to work on site at Lilly’s HQ in Indianapolis, supporting the medicinal chemistry department.
Also in November, Lilly retained Kenexa for global recruitment processes. The five-year deal includes “onboarding, recruiting, assessment, and survey solutions and employment branding,” according to Kenexa.
In December 2011, Lilly signed a license and supply pact with Ligand Pharma for its Captisol platform. Captisol is a patented cyclodextrin with a structure designed to optimize the solubility and stability of drugs. Ligand will provide clinical supplies of Captisol for an undisclosed number of Lilly drug candidates.
In January 2012, ShangPharma announced that it was expanding its facilities in order to accommodate its multi-year R&D contract extension with Lilly. The company added 110,000 sq. ft of lab and office space. Michael Xin Hui, founder and chief executive officer of ShangPharma, remarked, “Renewing our agreement to serve as a key support partner for Lilly’s discovery services is a clear indication that international pharmaceutical companies appreciate the high quality of ShangPharma’s team and the excellence of our R&D capability.”
In June 2012, Lilly and Covance signed a new deal to establish a diabetes discovery partnership in China. Covance’s wholly-owned entity in China will provide the Lilly China R&D Center (LCRDC) with services including pharmacology studies, PK screening and other preclinical research to test and evaluate potential diabetes medicines. The partnerships fits into the larger strategic deal Lilly and Covance signed several years ago.
During the year, Lilly also ended a joint venture in early-state development with Jubilant Biosys.