Lilly's baricitinib setback gives Pfizer's Xeljanz a clear shot at newer rivals

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Thanks to Lilly's Olumiant setback, Xeljanz will continue to be the only drug of its type approved for rheumatoid arthritis—though rivals in other classes, including IL-6 inhibitors, will be fighting for share, too.

Eli Lilly’s arthritis med baricitinib was pegged as one of 2017’s hottest drug launches—a threat to Pfizer’s in-class rival Xeljanz. Well, cast aside those expectations. The Lilly drug won’t launch this year, and Xeljanz is looking like the near-term winner.

Lilly revealed Tuesday that baricitinib, rejected by the FDA in April, likely needs a new round of clinical testing to back up the drug’s safety. We now know the agency pointed to a higher number of serious blood clots in baricitinib patients in clinical trials.

Analysts say the new data required means years of delay for the drug, which had carried a $1.8 billion sales estimate for 2022. Now dubbed Olumiant, baricitinib was seen as a sizable gap-filler for Lilly as sales of former blockbusters Cialis and Strattera dwindle on generic competition.

Cue the celebration for Xeljanz, which brought in $927 million for Pfizer worldwide last year, up 77% from $503 million in 2015. Thanks to Olumiant's setback, Xeljanz will continue to be the only drug of its type approved for rheumatoid arthritis—though rivals in other classes, including IL-6 inhibitors, will be fighting for share, too.

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“Xeljanz will remain the only oral JAK inhibitor on the U.S. market for several more quarters,” Credit Suisse analyst Vamil Divan said in an investor note when Lilly announced its complete response letter on Olumiant. He posited a new FDA filing in “2019 or later.” Now that new trials are needed, it’ll be later than that; Lilly says at least 18 months before a new filing, and some are predicting two years or more.

Plus, if and when Olumiant makes it to market, the safety issue holding it up now could be a disadvantage in competing against Xeljanz.

The “imbalance in thromboembolic events” is “a unique toxicity not seen with Pfizer’s Xeljanz,” Bernstein analyst Tim Anderson wrote in an investor note.

In essence, as Piper Jaffray analyst Joshua Schimmer recently put it, “Xeljanz may have dodged an important bullet” on the Olumiant delay. (Schimmer recently moved to Evercore ISI.)

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In the meantime, Pfizer has Xeljanz under FDA review in ulcerative colitis, with a target decision date in March. And according to Leerink Partners analyst Seamus Fernandez, even assuming new data “exonerates” baricitinib, Lilly’s efforts to expand into other uses beyond RA could be iffy. Those “investments behind a broadening number of programs will be difficult to value,” the analyst said. Fernandez is now figuring on an Olumiant launch in 2021.

Plus, in RA itself, competition is heating up quickly. Sanofi and Regeneron recently nabbed approval for their new entrant, Kevzara, an IL-6 inhibitor, and Johnson & Johnson is awaiting an FDA decision on sirukumab, its IL-6 med, which is up for an FDA panel discussion next month (GlaxoSmithKline just handed back its share of that drug to J&J on Wednesday, incidentally.)

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And that’s not all. AbbVie’s Humira is expected to face biosimilar competition soon enough—2018 by some estimates, though the company itself says 2020 or later. Those lower-cost competitors to Humira, now the world’s best-selling drug, could complicate Olumiant’s launch considerably.

For its part, Lilly says it doesn't agree with the FDA's conclusion that more study is needed. Regulators in other countries are noting the clot risks on the drug's label rather than pushing for data, the company says. 

"We disagree with the FDA's conclusions, and believe the existing comprehensive clinical data demonstrate there is a positive benefit/risk profile that supports baricitinib's approval as a new treatment option for people suffering from RA in the United States," Christi Shaw, president of Lilly Bio-Medicines, said in a release. "We are disappointed that resubmission will not occur this year, but are committed to bringing baricitinib to people with RA and we will work with the FDA on the path forward."