China Shines For Lilly Despite Cloudy Volume Purchasing, COVID-19 Forecast
Tyvyt A Star Performer
Executive Summary
Lilly for the first time breaks out its China business after reporting whopping 93% volume growth in Q1 and a 30% rise in constant currency terms in the first major coronavirus-stricken country.
Volume-based purchasing (VBP) and the impact from the local coronavirus outbreak are high on the minds of executives with China responsibilities as major pharma companies report their first-quarter earnings, in a year that is merely four months in but has been full of surprises.
In China, the double punch of COVID-19 and VBP has hit the economy hard. In a bid to contain the outbreak, originating in the central hub city of Wuhan, the government implemented six to eight weeks of lock-downs across most of the country, while meanwhile continuing to expand a centralized drug procurement scheme from the original 11 cities and 25 products to most provinces in China.
Surprisingly, the health sector seems to be relatively less impacted and in fact volume growth from expanded reimbursement coverage and new product launches was also strong in the quarter, offsetting some of the negative impact.
Eli Lilly & Co. reported $267m in first-quarter revenues from the China market, the first time for the US drug maker to break out its sales in the country from its "international" category outside the US, Europe and Japan. This indicates the rising importance of China to the Indianapolis, IN-based company, which reported a $250m group revenue increase in the quarter from inventory stockpiling and early prescription renewals. (Also see "Lilly Saw Pandemic-Related Benefits In Q1, Expects Headwinds Long Term" - Scrip, 23 Apr, 2020.)
Oncology Strong
A major diabetes market player, Lilly reported revenue in China was driven by its oncology products Alimta (pemetrexed) and the PD-1 checkpoint inhibitor Tyvyt (sintilimab), jointly developed with Suzhou-based Innovent Biologics Inc. The immuno-oncology drug, first approved in December 2018 in China for classic non-Hodgkin’s Lymphoma, quickly gained reimbursement coverage in 2019 via a listing in China’s National Reimbursement Drug List (NRDL).
The first anti-PD-1 antibody to be included in the NRDL among four competitors, including front runners Opdivo (nivolumab) from Bristol-Myers Squibb Co. and Merck & Co. Inc.'s Keytruda (pembrolizumab), Tyvyt was included after Innovent agreed to a deep 63.7% price concession in exchange for the rapid reimbursement coverage.
This move and inclusion resulted in revenues in China increasing 30% in constant currency, driven by 93% volume growth, Lilly noted in its 23 April earnings call, in which chief financial officer Joshua Smiley hailed the “significant volume increases."
Oncology products aside, Lilly saw revenues decline, impacted by the coronavirus outbreak in China, where patients largely stopped going to hospitals and physicians had to tend to urgent medical needs. As China slowly returns to normal, the executive is “cautiously encouraged that new patient initiations and in-person customer interactions have begun to resume.”
'There was great volume growth in China for our oncology portfolio, and Tyvyt is a key part of that.' - Lilly CEO David Ricks
PD-1 From China To The World?
One day after the Lilly investor call, Innovent announced that China's regulatory agency, the National Medical Products Administration, had accepted a new drug application filing for Tyvyt for use with Alimta for first-line, non-squamous non-small cell lung cancer (NSCLC).
The filing is based on the double-blind Phase III ORIENT-11 study in which the combination with Alimta and platinum therapy demonstrated a statistically significant improvement in progression-free survival (PFS) compared with placebo plus Alimta/platinum, and met the pre-defined efficacy criteria. Median PFS was 8.9 months for the control group versus 5.0 months for placebo and the safety profile of sintilimab in the trial was consistent with previous studies.
The acceptance of the NDA marks another milestone for Tyvyt as nearly half of the non-squamous NSCLC patients in China are negative for driver genes, meaning they are not responding to targeted therapies and thus have limited options, noted Li Zhang of Sun Yet-Sun University Cancer Center and the primary investigator of the ORIENT-11 study.
When asked about whether Lilly is planning to bring Tyvyt to the US and other major markets, CEO David Ricks said the short-term focus for the PD-1 antibody remains on China, but that there have been several notable developments to influence the company’s outlook to potentially go beyond that market.
“One is that Tyvyt was the only PD-1 put on the PDL [reimbursement list] nationally in China, so that does change the economic profile of it for us and certainly through the Chinese business. And the second is the positive data that was released in the combination with pemetrexed in first-line small cell lung cancer, which is very encouraging. And I think those change the trajectory of that [Tyvyt plans], certainly in China,” he said. “And today we're breaking out China for the first time, so maybe that's the third thing that's changed."
“Of course, right now we're very focused on the Chinese opportunity and that remains our focus in the short term,“ stressed the executive. "There was great volume growth in China for our oncology portfolio and Tyvyt is a key part of that. So, anyway, a great partnership with Innovent.”