Can New Drugs Meet Lilly’s Revenue Goals If Solanezumab Fails?

New products continue to drive Lilly’s revenue growth and the company expects that to remain the case even if the final Phase III trial for Alzheimer’s candidate solanezumab fails later this year.

Eli Lilly & Co.’s third quarter sales gains were driven largely by new products that are facing high-profile competition and reimbursement pressures, but the company says it is on track to meet revenue goals through 2020 even if the potential Alzheimer’s blockbuster therapy solanezumab fails in the Phase III EXPEDITION-3 clinical trial expected to report later this year.

That’s good news for Lilly’s investors, considering the long list of failures in Alzheimer’s disease, including two previously failed Phase III studies for solanezumab. It also means that the company stands to exceed its revenue forecasts by billions if EXPEDITION-3 and follow-on treatments for Alzheimer’s succeed. However, Lilly executives discussed the reckoning that would take place in the company’s research and development pipeline if solanezumab fails under its revised clinical trial protocol. (Also see "Lilly's Leap Tests Investors' Faith In Solanezumab" - Scrip, 16 Mar, 2016.)

Lilly By The Numbers

• Q3 sales increased 5% year-over-year to $5.2bn, coming in $100m below analyst consensus of $5.3bn
• Lilly raised its guidance for full-year 2016 sales to a range of $20.8bn to $21.2bn versus a prior estimate of $20.6bn to $21.1bn
• Newer products drove sales growth, including the diabetes medicines Trulicity (dulaglutide) and Jardiance (empagliflozin), the cancer therapy Cyramza (ramucirumab) and the psoriasis drug Taltz (ixekizumab)

Lilly’s Biggest Clinical Milestone Approaches

Chief Financial Officer Derica Rice said during Lilly’s Oct. 25 earnings call that regardless of how solanezumab performs in the clinic, the company is focused on continuing to boost its revenue. Sales have sagged relative to boom years before blockbuster drugs like the antipsychotic Zyprexa (olanzapine) and the antidepressant Cymbalta (duloxetine) went off patent.

Rice reiterated Lilly’s goal of generating a 5% compounded annual revenue growth rate in each year from 2015 to 2020, even without solanezumab, while reducing operating expenses, paying investors dividends, and launching at least 20 new products through 2023.

Even so, investors are hungry for a positive EXPEDITION-3 outcome given the size of the potential market. Alzheimer’s patients account for 60%-80% of the 46m people who have dementia worldwide. Up to 131m people could be diagnosed with dementia globally by 2050.

EXPEDITION-3 recently enrolled its final patient, ensuring a top-line report on Phase III data before the end of the year. Lilly hopes to present some details from the trial during the Clinical Trials on Alzheimer’s Disease (CTAD) meeting Dec. 8-10 in San Diego, but the company said it may not be done analyzing the results in time.

The 2,100-patient study assessing cognitive benefits in people with mild Alzheimer’s disease represents a major investment and a big leap of faith for the company, which kicked off the study in 2013 after solanezumab failed in two Phase III studies enrolling mild-to-moderate Alzheimer’s patients. Lilly also recently began a 2,500-patient Phase III trial in prodromal Alzheimer’s disease and expects results in mid-2021 if the company doesn’t discontinue the study early based on a failed EXPEDITION-3.

“We continue to characterize [solanezumab] as a high-risk/high-reward program,” President-Lilly Bio-Medicines David Ricks said during the earnings call. Ricks will take over as CEO of the company on Jan. 1 following current CEO John Lechleiter’s retirement, which was announced in July. (Also see "Lilly BioMedicines Head Ricks Tasked With Overseeing Growth Phase As Next CEO" - Scrip, 27 Jul, 2016.)

A complete lack of cognitive improvement benefit versus placebo in EXPEDITION-3 “is the least probable [scenario], but it certainly could happen,” Ricks said, noting that “we’ve prepared for that contingency.” The prodromal trial is likely to be terminated early, if that’s the case, and the solanezumab program could be shut down completely.

Ricks said later that if solanezumab succeeds, “we would anticipate a rapid submission and introduction to the major markets,” and the company may speed up investment in other Alzheimer’s programs, including combination therapy approaches.

During the third quarter, Lilly and partner AstraZeneca PLC began enrolling patients with mild Alzheimer’s dementia for their Phase III drug candidate AZD3293, an oral beta secretase cleaving enzyme (BACE) inhibitor that’s being evaluated in the ongoing Phase II/III AMARANTH and Phase III DAYBREAK-ALZ studies. (Also see "10 Things You Want To Know About Alzheimer's Drug Research" - Scrip, 13 May, 2016.)

The degree of solanezumab’s effect in EXPEDITION-3 will guide further investment in combination trials.

“We’re looking at combinations and sequences of therapies that could be combined with solanezumab to further arrest the disease. That only makes sense if solanezumab works,” Ricks said, noting that the degree to which solanezumab works in EXPEDITION-3 “will have some bearing on how much of that additional investment we would trigger.”

New Products Boost Sales As Competition, Payer Pressure Looms

Lilly’s R&D machine has generated new products in key therapeutic areas with launches that have contributed significant revenue to the company’s balance sheet since the beginning of 2016, but they have quickly faced new competition and pressure to discount costs in large, expensive indications. (Also see "Lilly Executes Growth Strategy As New Products Drive Sales Gains" - Scrip, 27 Apr, 2016.)

However, Credit Suisse analyst Vamil Divan said in an Oct. 25 report that the investment bank maintains a positive view of Lilly because its growth is “driven by the diverse and relatively de-risked group of recently launched products and products in the late-stage pipeline.” The company’s below-consensus third quarter revenue total, which was hurt by a one-quarter slide in animal health sales, “does not change our view on Lilly being well-positioned to drive top-line and bottom-line growth over the next several years as these products mature,” Divan wrote. (See table for select sales figures.)

Product	3Q16 Sales	3Q15 Sales	Change
Humalog (insulin lispro)	$604.8m	$705m	-9%
Alimta (pemetrexed)	$570.4m	$628.5m	-9%
Humulin (insulin)	$322m	$316.7m	2%
Trulicity (dulaglutide)	$243.6m	$73.7m	NM
Cyramza (ramucirumab)	$159m	$111.2m	43%
Jardiance (empagliflozin)	$47.5m	$15.4m	NM
Taltz (ixekizumab)	$32.5m		NM
Basaglar (insulin glargine)	$19.4m	$3.8m	NM
Portrazza (necitumumab)	$5.3m		NM

NM = Not meaningful, because the drugs were launched during or after third quarter 2015.

Source: Eli Lilly & Co.

Lilly has a trio of targeted cancer therapies – Alimta, Cyramza and Portrazza – that are feeling the impact of immuno-oncology (IO) drugs approved during the past year and a half to treat lung cancer and competition from PD-1/PD-L1 inhibitors has grown just in the past few weeks.

The FDA approved Roche/Genentech Inc.’s Tecentriq (atezolizumab) in second-line non-small cell lung cancer (NSCLC) earlier this month. (Also see "Genentech’s Tecentriq Stakes New Claim With FDA Lung Cancer Approval" - Scrip, 19 Oct, 2016.) That was followed by the Oct. 24 approval of Merck & Co. Inc.’s Keytruda (pembrolizumab) in first-line NSCLC. (Also see "It’s Here: Merck’s Keytruda Cleared For First-Line Lung Cancer" - Scrip, 25 Oct, 2016.)

Rice noted that “we continue to see strong uptake of IO agents in first-line squamous non-small cell lung cancer, which is clearly affecting use of Portrazza,” which was approved in November as a first-line treatment for metastatic squamous cell NSCLC. (Also see "Lilly's Lung Cancer Drug Portrazza OK'd" - Scrip, 25 Nov, 2015.)

Cyramza and Alimta also are facing competitive pressures in the US from IO therapies. However, Alimta and Cyramza both have the opportunity for growth because of IO agents, since the drugs are being tested in combination with Merck’s Keytruda.

Lechleiter noted that recently presented Phase II results for Keytruda plus Alimta and carboplatin were “at the top end of results we’ve seen for any combination trial in a broad population of first-line non-squamous non-small cell lung cancer patients.” (Also see "Merck's Keytruda Chemo-Combo Data Has Big Implications For Future Of Immuno-Oncology" - Scrip, 10 Oct, 2016.)

In diabetes, Lilly reported mixed results, including a 14% revenue decline in the US for Humalog, despite increased demand as payers continue to exert their influence over drug costs.

However, Jardiance sales growth is expected to gain momentum within the next few months pending FDA approval of an amended label to account for positive cardiovascular outcome trial (CVOT) results. (Also see "Lilly Awaits New Rewards For SGLT-2 Diabetes Drug Jardiance" - Scrip, 26 Jul, 2016.) Also, the company’s Lantus (insulin glargine) biosimilar Basaglar already is gaining preferred positions with payers ahead of its US launch later this year. (Also see "UnitedHealthcare Prefers Basaglar Biosimilar At Lantus' Expense" - Scrip, 22 Sep, 2016.)

Despite payer pressures on inflammatory and autoimmune drug costs, Lilly was optimistic about Taltz, which was approved to treat psoriasis in March. (Also see "Remicade Most Cost-Effective Biologic For Psoriasis In ICER Analysis" - Pink Sheet, 30 Sep, 2016.) (Also see "Indication-Based Pricing Could Be Windfall For Interleukin Inhibitors" - Scrip, 13 Sep, 2016.)

The company will submit Taltz for FDA approval to treat psoriatic arthritis in the first half of 2017 and seek approval in the EU later in the year based on positive results from the Phase III SPIRIT-P2 study, in which Taltz improved psoriatic arthritis signs and symptoms in patients who failed prior treatment with a TNF inhibitor. (Also see "FDA OK's Lilly's Taltz; Rival To Novartis' Cosentyx " - Scrip, 22 Mar, 2016.)