Lilly’s catch-up act in psoriasis is working, but now it has to catch up in cancer

Eli Lilly headquarters
Eli Lilly is revising its oncology strategy to emphasize targeted treatments and immuno-oncology.

Eli Lilly has been playing catch-up in the psoriasis market ever since it launched its drug to treat the condition, Taltz, last spring into a crowded field dominated by Novartis’ Cosentyx. But if second-quarter results are any indication, Lilly is proving to be a formidable competitor.

Sales of Taltz skyrocketed 618% year-over-year to $138.7 million, which handily beat the consensus analyst estimate of $122 million. Other new medications also outperformed, including diabetes treatments Jardiance, up 157% to $103.2 million, and Trulicity, which rose 139% to $480.2 million.

All told, Lilly’s revenues jumped 8% to $5.8 billion during the second quarter. The company’s non-GAAP net income was up 30% to $1.2 billion (95 cents a share). Analysts had been boosting their sales forecasts over the last month but were still pleasantly surprised, having expected $5.6 billion in sales.

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“Net-net, today’s earnings update is good news,” wrote Leerink analyst Seamus Fernandez in a morning note to investors. He did add, however, that the pressure will be on Lilly to continue delivering standout results to justify its stock price, which is up 15% for the year.

Towards that end, Lilly’s executives spent much of the conference call after the earnings release telling investors how it plans to be competitive in the red-hot market for cancer drugs. The company has charted some successes in oncology—notably Cyramza to treat gastric cancer, which was up 27% during the quarter to $186.3 million. But Levi Garraway, Lilly’s new senior vice president of global development and medical affairs, acknowledged during the call that Lilly would need to prioritize many more medicines that change the standard of care in cancer if it’s to compete in new treatment modes like immuno-oncology and mutation-specific tumor targeting.

Much of the company’s new strategy will hinge on testing patients in clinical trials for mutations and other molecular characteristics that will boost the chances of success and help overcome treatment resistance in targeted patient populations. So Lilly is prioritizing seven oncology drugs in its pipeline, including prexasertib, a CHK1 inhibitor being tested in high-grade ovarian cancer. In early trials, 35% of patients with a particular BRCA mutation responded to the experimental drug, Garraway said.

“Together, these assets have the potential to be foundational agents or to anchor foundational regimens,” Garraway said during the call. Lilly intends to test many of its oncology drugs in combination with other cancer drugs that are in trials or already marketed, he added. “We remain excited about the quality of our compounds but believe that the optimal development path will be best implemented in partnership with external entities that have specific or niche biological expertise,” he said. Lilly also intends to aggressively pursue acquisitions of early-stage immuno-oncology assets, executives said.

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The pressure on Lilly to continue to drive innovations out of its pipeline is only intensified by patent losses on key blockbusters. Strattera to treat ADHD, for example, was down 17% for the quarter to $186.6 million. Lilly’s $1.5 billion ED blockbuster Cialis scored a bit of a reprieve last week, reaching a settlement that will extend its patent through September of next year. But the product is showing its age: Sales were flat at $627 million, driven largely by price increases, the company said.

Lilly’s pipeline challenge has been highlighted recently by beleaguered baricitinib, its much anticipated JAK inhibitor to treat rheumatoid arthritis, which was handed a surprise “complete response” letter from the FDA in April. In a separate announcement today, the company said it would take a minimum of 18 months to address the FDA’s concerns. The agency has suggested a new clinical trial would be necessary to prove that the risk/benefit profile is acceptable, according to Lilly.

The delay was surprising to some analysts, including Tim Anderson of Bernstein, who declared in a note to investors that Lilly’s management recently “indicated it was hopeful a resubmission might occur in early 2018—not happening!”

Lilly CEO Dave Ricks said the company remains committed to baricitinib, even after one analyst pointed out that the rheumatoid arthritis field is already crowded with entrenched players. When will the company just give up, she wondered?

Ricks replied that Lilly is “a long way” from giving up. After discussions with the FDA, the company has “clarity on what the FDA’s point of view is. It’s just not our point of view,” he conceded. But give up? Not a chance, he said. “It’s definitely disappointing but we’re committed.”