Pfizer's Xeljanz stands to win from Lilly's baricitinib stunner

A Xeljanz information sheet highlights joint damage from rheumatoid arthritis, a disease for which treatments are proliferating—potentially leading the FDA to raise the safety bar.

Eli Lilly & Co.’s Olumiant rejection surprise Friday has one obvious beneficiary: Pfizer and its rival rheumatoid arthritis med, Xeljanz, already set to break the blockbuster barrier this year.

That’s because Xeljanz is the sole oral JAK inhibitor now FDA-approved for rheumatoid arthritis. Olumiant (baricitinib) would have been the second, and some analysts predicted the Lilly med—licensed from Incyte for $90 million up front, plus milestones and marketing arrangements—might beat Xeljanz on the efficacy side. The expectations were strong: Baricitinib had been pegged as one of 2017's biggest launches.

Now, Olumiant isn’t likely to roll out for a couple more years, giving Xeljanz more time to solidify its first-to-market lead. “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 over the weekend, positing a new FDA filing no sooner than 12 months from now and a launch in “2019 or later.”

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Plus, Olumiant’s complete response letter from the FDA raised questions about dosing, leading market-watchers to suggest that the drug’s higher dose might not see the light of day in the U.S. That higher dose was the one more likely to beat Xeljanz, which was limited to its own lower-dose formula.

“To understand the baricitinib CRL, we go back to Pfizer’s JAK inhibitor (Xeljanz) which gained FDA approval for 5mg bid but not for 10mg [twice a day],” Piper Jaffray’s Joshua Schimmer wrote in a Monday note. Only two of Lilly’s four baricitinib trials included its lower, 2mg dose, “making it difficult to fully gauge its safety/efficacy profile,” and in those studies that comprised both doses, “data were mixed” on whether the higher dose delivered increased efficacy, Schimmer went on to say.

"So now, [Lilly and Incyte] likely have to go back and further evaluate the 2mg dose and may wind up in the same position as Xeljanz, with only the lower dose approved,” the analyst said, adding, “This would eliminate any efficacy incentive for patients to switch from Xeljanz to baricitinib.”

The upshot? “Xeljanz may have dodged an important bullet,” Schimmer wrote Sunday in a follow-up note.

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And that's important for Pfizer, which collected $927 million from the drug last year and counts it among its current revenue drivers. The baricitinib delay could help compensate for a couple of disappointments on the new-indication side.

Drug sales isn’t necessarily a zero-sum game. Just consider Eli Lilly’s diabetes med Trulicity, which has stolen market share from Novo Nordisk’s class-leading Victoza; both companies have maintained that overall GLP-1 growth will keep both drugs on the upswing, and so far, that’s held true. 

But in general, beating other drugs to launch is important, even after a first-of-its-kind med has rolled out. The longer a first mover has to establish itself, the better its competitive position, McKinsey & Co. research has shown. And Duke University researchers have calculated that even the four-month lead that a priority review voucher can offer translates into a couple of percentage points of market share.

It’s not only Pfizer in line for a potential benefit, either. Other companies developing JAK inhibitors for RA could benefit as well. AbbVie might well beat Lilly to market with its ABT-494 drug, “which AbbVie would likely strongly leverage in their favor,” Jefferies analyst Jeffrey Holford reported Monday morning. The firm expects ABT-494 to win approval in the first half of next year and calls it a “potentially best in class” competitor.

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And though Gilead Sciences’ JAK inhibitor filgotinib is still likely to win approval later than Lilly’s drug, the Olumiant delay gives Gilead “a chance to catch up and levels the competitive landscape,” Schimmer said.

And then there are the currently marketed treatments, including the well-established TNF-alpha inhibitors. “[A] delay could be positive for AbbVie's Humira franchise, which has been perceived by some to be under significant threat from baricitinib, though that has not been our view to date,” Holford said.

Then again, future JAK inhibitors could see more scrutiny at the FDA now, several analysts said. Same goes for other RA prospects, Bernstein’s Tim Anderson wrote Monday: “[A]s the number of approved RA therapies increases, the safety bar at FDA moves higher.”