Eli Lilly and Company (LLY)

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See all Bulls Reasons Bulls: Reasons To Buy Zyprexa incredibly profitable 0% agree Zyprexa incredibly profitable Zyprexa is bringing in a significant amount of money for Lilly currently, and though patent protection will expire by 2011, there are a few promising drugs in the "product pipeline" that may enter the market in the near future. View or Edit Reason 0 votes 0% agree See all Bears Reasons Bears: Reasons To Sell Zyprexa will lose patent protection in 2011 0% agree Zyprexa will lose patent protection in 2011 Lilly's most lucrative drug, Zyprexa, will lose patent protection by 2011, which makes Lilly's revenue streams very uncertain. View or Edit Reason 0 votes 0% agree Send the authors a comment or suggestion Be the first to make a suggestion See All Suggestions

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Eli Lilly and Company (NYSE: LLY) is the seventh largest pharmaceutical company with total sales of $18 billion, of which more than a quarter came from Zyprexa, a schizophrenia and bipolar disorder drug.^[1][2] Although the patent for Zyprexa will expire in 2011, Eli Lilly has one of the youngest product portfolios in the industry -- the company has $6.64 dollars coming from new products (those launched within the last five years) for every dollar lost from patent-expiring ones, compared to an industry average of only 77 cents.^[3]

Lilly's most promising pipeline products are Effient (prasugrel), a blood-thinner, and Byetta LAR, a long-acting-release version of the diabetes drug Byetta. Compared to Sanofi-Aventis and Bristol-Myers Squibb's Plavix, Effient is more effective at reducing heart attacks but also increases the risk of major bleeding, but for a net benefit.^[4] Byetta's biggest advantage over competitors is that it is just as effective but causes weight loss instead of gain, and there are indications that the long-acting version may be even more effective.^[5]

2007 sales grew by 19 percent to $18.6 billion, and was mainly driven by a 60% growth in the depression and pain-management drug Cymbalta and 9% growth in Zyprexa.^[2]

[edit] Corporate Overview

[edit] Major Products

Eli Lilly's top six products have each generated net sales of more than $1 billion for 2007.^[2]

Eli Lilly 2007 product sales^[2]

• Zyprexa (25.6% of 2007 sales), Eli Lilly's best-selling product, is an antipsychotic drug used for the treatment of schizophrenia, bipolar disorder, and other psychological disorders. It has also been used off-label for depression and dementia.^[6] A 2005 study showed that Zyprexa was the most effective of its class, but causes significant weight gain -- 30 percent of patients gained more than 22 pounds after a year on the drug -- which leads to an increased risk for diabetes.^[7][6] Since 2005, Eli Lilly has spent $1.61 billion to settle 31,200 lawsuits from patients who claimed that Zyprexa caused diabetes or other illnesses.^[8] The patent for the drug expires in 2011.^[9]

• Cymbalta (11.3% of 2007 sales) is a treatment for depression, anxiety, and pain management for diabetics. Sales of the drug grew 60% in 2007 to $2.1 billion due to expansions into new indications, making it Lilly's fastest growing and second largest product.^[2]

• Gemzar (8.5% of 2007 sales) is a chemotherapy drug for lung cancer, pancreatic cancer, and breast cancer. Gemzar mimics a DNA building block, preventing DNA replication and tumor growth.^[10] Like many other chemotherapy drugs, this also stops the division of healthy cells, leading to severe side effects.

• Humalog (7.9% of 2007 sales) is an insulin analog used for managing diabetes.

• Cialis (6.1% of 2007 sales) is the newest and longest-lasting erectile dysfunction drug on the market.

• Evista (5.9% of 2007 sales) is an osteoporosis drug only approved for postmenopausal women.

Lilly's animal health division operates independently of its main pharmaceutical business and had sales of $995.8 million in 2007.^[2]

[edit] Upcoming drugs

• Forteo is another osteoporosis drug that is approaching blockbuster status, growing 19% to $709 million in 2007.^[2] Unlike most osteoporosis drugs on the market, which only inhibit bone reabsorbtion, Forteo also promotes new bone formation.^[11] The drug is usually reserved for advanced cases of osteoporosis since it requires expensive daily injections.^[7]

• Effient is a blood thinner that Eli Lilly is jointly developing with Daiichi Sankyo Co., a Japanese pharmaceutical company.^[12] A 2007 study compared it to the blood thinner Plavix by Sanofi-Aventis and Bristol-Myers Squibb and showed that Effient reduced heart attacks but increased risk of major bleeding -- for every 1000 patients on Effient, there were 23 less heart attacks but 6 more cases of major bleeding.^[4] Effient is under priority review by the FDA.^[4]

• Byetta belongs to a new class of diabetes drugs that is based on a compound from the saliva of the Glia Monster and is jointly developed by Eli Lilly and Amylin Pharmaceuticals. As the first and only drug of its kind on the market, Byetta increases the natural production of insulin, slows digestion, and reduces appetite, which all work to lower blood glucose.^[5] Byetta's biggest advantage is that it is associated with weight loss, unlike most other diabetes drugs, which cause weight ; however, it is more likely to cause stomach problems and requires an injection.^[5] Byetta sales grew by 51% to $331 million in 2007.^[2] Eli Lilly, Amylin, and Alkermes are developing a long-acting-release (LAR) version of Byetta that is more effective and requires fewer injections, which is currently under Phase III trials and is expected to hit the market in 2009-2010.^[5][7]

[edit] Business and Financial Metrics

2007 growth of 19% was mainly driven by increases of 60% in Cymbalta sales, 9% in Zyprexa sales, and 3% in both price hikes and favorable foreign exchange rates.^[2][13]

Eli Lilly Financial Metrics^[14][15]

[edit] Acquisitions

Eli Lilly is in talks with ImClone to buy 83 percent of the biotechnology company it does not own already for $6.1 billion, or $70 per share, beating Bristol Myers' rival offer of $62 per share.^[16] ImClone makes the cancer drug Erbitux, which had sales of $1.4 billion in 2007.^[17]

[edit] Trends and Forces

[edit] Pipeline Risks

For more detailed information on the FDA approval process, see also Clinical trials.

Lilly's two most promising drugs in development are Effient, a blood thinner that will compete with Bristol-Myers/Sanofi's Plavix, and Byetta LAR, a long-acting-release version of its existing diabetes drug Byetta.

Developing a new drug is a time-consuming and costly endeavor. Hundreds of thousands of candidate compounds must be screened to identify a handful of potential drugs, and even fewer of these candidate drugs are found to be effective at treating a disease. The drug must then pass strict safety standards in several series of clinical trials. The entire process of developing a new drug and bringing it to the market takes up to 10 to 15 years and on average costs $800 million.^[18]

[edit] Young Product Portfolio

Eli Lilly has one of the youngest product portfolios in the industry -- the company has $6.64 dollars coming from new products (those launched within the last five years) for every dollar lost from patent-expiring ones, compared to an industry average of only 77 cents.^[3]

When a drug loses patent protection, generic brands of the drug can be made, breaking the monopoly that the brand-name drug originally possessed. Sales of the iconic antidepressant Prozac fell from peak sales of $2.8 billion in 2001 to a negligible amount (out of the company's annual reports) after its patent expired in 2001.^[19] The patent for Zyprexa, Lilly's best-selling drug, expires in 2011.^[9]

[edit] Competition

Zyprexa competes with Pfizer's Geodon, AstraZeneca's Seroquel, Johnson & Johnson's Risperdal, and Bristol-Myers Squibb's Abilify in the antipsychotics market. A studied showed Zyprexa to be most effective in its class,^[7] but the drug causes significant weight gain^[6] while Geodon does not.^[20]

Cymbalta competes with Forest Laboratories' Lexapro and Wyeth's Effexor in the antidepressant market, and Pfizer's Lyrica for diabetic neuropathy.^[7]

Evista and Forteo compete with Merck's Fosamax and Novartis's Zometa in the osteoporosis market.^[7] Amgen's Denosumab is a new contender in late stage clinical trials and may soon enter the market.

Gemzar competes with numerous chemotherapy agents, but is more tolerable than older drugs while retaining effectiveness.^[7]

Humalog competes with other insulin analogs made by Novo Nordisk and Sanofi-Aventis to treat diabetes.^[21] Insulin analogs mimic the role of natural insulin in regulating blood sugar and are generally all very similar in action.

Cialis competes with Pfizer's Viagra and Bayer's Levitra in the erectile dysfunction (ED) drug market. Cialis's primary competitive advantage is that it is effective for up to 36 hours on one dose, compared to the other drugs, which must be taken a short time before anticipated sexual activity.^[22]

 Eli Lilly and Company

	Select All  |  Select None Metrics Revenue by Geography - International Revenue by Geography - Europe Revenue by Geography - Asia Revenue by Geography - Latin America Revenue by Geography - Africa Net Income Operating Income Gross Profit Gross Margin R&D/Sales Ratio Number of Patents Number of Drugs Number of Drug Recalls Number of Drug Approvals New Drug Applications Return on Equity Revenue Revenue - Pharmaceuticals Revenue by Geography - United States Research and Development Expense Patents to Expire in next 5 years Number of Drugs in Phase I Number of Drugs in Phase II Number of Drugs in Phase III Cancel

	Select All  |  Select None Companies JOHNSON & JOHNSON (JNJ) Pfizer (PFE) GlaxoSmithKline (GSK) Sanofi-Aventis SA (SNY) Abbott Laboratories (ABT) Merck (MRK) AstraZeneca (AZN) Wyeth (WYE) Eli Lilly and Company (LLY) Bristol-Myers Squibb Company (BMY) Schering-Plough (SGP) Novartis AG (NVS) Cancel

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Company	Data From	Revenue	Revenue - Pharmaceuticals	Revenue by Geography - United States	Research and Development Expense	Patents to Expire in next 5 years	Number of Drugs in Phase I	Number of Drugs in Phase II	Number of Drugs in Phase III
AstraZeneca (AZN)	2007	$29.6B[23]	$29.6B[24]	$13.4B[24]	$5.16B[23]	Add	41[25]	20[25]	10[26]
Bristol-Myers Squibb Company (BMY)	2007	$19.3B[27]	$15.6B[28]	$10.8B[29]	$3.28B[27]	Add	Add	Add	5[30]
Eli Lilly and Company (LLY)	2007	$18.6B[31]	$18.6B[32]	$10.1B[32]	$3.49B[31]	4[33]	Add	Add	Add
Novartis AG (NVS)	2007	$39.8B[34]	$24.2B[35]	$14.2B[36]	$6.43B[34]	Add	1[37]	22[37]	42[37]
Wyeth (WYE)	2007	$22.4B[38]	$18.6B[39]	$11.6B[40]	$3.26B[38]	6[41]	Add	Add	Add

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[edit] References

1. ↑ Fortune 500 2008: Industry: Pharmaceuticals.
2. ↑ ^{2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8} LLY 2007 10-k pg. 21  
3. ↑ ^{3.0 3.1} Tough Projections for Big Pharmas: Drug Revenues Don't Look Promising.
4. ↑ ^{4.0 4.1 4.2} Lilly's Prasugrel Is Granted FDA Priority Review.
5. ↑ ^{5.0 5.1 5.2 5.3} Wikipedia:Byetta
6. ↑ ^{6.0 6.1 6.2} Wikipedia:Zyprexa
7. ↑ ^{7.0 7.1 7.2 7.3 7.4 7.5 7.6} Cowen and Company. Therapeutic Categories Outlook. March 2008.
8. ↑ LLY 2007 10-k pg. 19  
9. ↑ ^{9.0 9.1} LLY 2007 10-k pg. 13  
10. ↑ Wikipedia:Gemzar
11. ↑ Wikipedia:Forteo
12. ↑ Wikipedia:Prasugrel
13. ↑ LLY 2007 10-k pg. 20  
14. ↑ LLY 2007 10-k pg. 40  
15. ↑ LLY 2005 10-k pg. 42  
16. ↑ Eli Lilly in talks to buy ImClone: sources.
17. ↑ ImClone
18. ↑ "2007 Pharmaceutical Industry Profile".
19. ↑ Eli Lilly: Life After Prozac.
20. ↑ Wikipedia:Geodon
21. ↑ Wikipedia:Insulin analogue
22. ↑ Wikipedia:Cialis
23. ↑ ^{23.0 23.1} 2007 AZN 20-F: Pg 118
24. ↑ ^{24.0 24.1} 2007 AZN 20-F: Pg 128
25. ↑ ^{25.0 25.1} 2007 AZN 20-F: Pg 28
26. ↑ 2007 AZN 20-F: Pg 29
27. ↑ ^{27.0 27.1} 2007 BMY 10-K: Pg 85
28. ↑ 2007 BMY 10-K: Pg 124
29. ↑ 2007 BMY 10-K: Pg 125
30. ↑ 2007 BMY 10-K: Pg 25
31. ↑ ^{31.0 31.1} 2007 LLY 10-K: Pg 40
32. ↑ ^{32.0 32.1} 2007 LLY 10-K: Pg 44
33. ↑ 2007 LLY 10-K: Pg 5
34. ↑ ^{34.0 34.1} 2007 NVS 20-F: Pg F-4
35. ↑ 2007 NVS 20-F: Pg F-22
36. ↑ 2007 NVS 20-F: Pg F-24
37. ↑ ^{37.0 37.1 37.2} 2007 NVS 20-F: Pg 28-31
38. ↑ ^{38.0 38.1} 2007 WYE 10-K: Pg 5
39. ↑ 2007 WYE 10-K: Pg 65
40. ↑ 2007 WYE 10-K: Pg 66
41. ↑ 2007 WYE 10-K: Pg I - 3