Eli Lilly is betting that its new drugs will kick off an era of growth, but the company will have to contend with a tough environment in diabetes and a hefty patent expiration as it aims for 2018 revenue of $23 billion to $23.5 billion.
In its annual presentation of its outlook for the year ahead, Lilly said on Wednesday that its 2018 growth will be driven by its newest diabetes drugs—Trulicity, Basaglar and Jardiance—plus plaque psoriasis treatment Taltz and cancer offerings Verzenio, Cyramza, and Lartruvo.
Rheumatoid arthritis medication Olumiant, approved in Europe but so far spurned by the FDA, is still factored into Lilly's ambitions for the coming years, Lilly CEO David Ricks said in a statement. Ricks contends that the company is in the "early stages of a growth period" driven by those new launches.
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But it won't be smooth sailing ahead. Cialis, the erectile dysfunction drug that's long been a top performer for Lilly, is nearing the end of its patent life, and when generics hit, sales are expected to plummet, creating a big gap to fill. Lilly will also face its first full year of generic competition to ADHD drug Strattera, blood thinner Effient and testosterone med Axiron, Bernstein analyst Tim Anderson pointed out.
Plus, Lilly is likely to experience more pressure on its diabetes business next year as its key new launches are getting into gear. Sanofi has just won an FDA nod for Admelog, a follow-on biologic that will go up against Lilly's top seller Humalog, and it's facing new competition for its fast-growing Trulicity. Novo Nordisk's brand-new Ozempic, a weekly diabetes injection formerly known as semaglutide, recently won FDA approval and boasts favorable head-to-head data over the Lilly blockbuster diabetes med.
"[C]ompetitive threats from Novo's semaglutide and Sanofi’s Admelog will be important to watch over the course of the year given the importance of Trulicity and the broader diabetes business to [Eli Lilly]," Credit Suisse analyst Vamil Divan, M.D., wrote in a note.
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As industry watchers know, Lilly is among a group of drugmakers that have been hit hard in recent years by competition in diabetes as payers have pitted pharma companies against each other for better pricing. Those companies are all working to adapt and overcome the challenges.
Part of the effort to adapt at Eli Lilly is a round of 3,500 job cuts it announced in September to achieve $500 million in annual savings, with many coming from early retirements. In November, a spokesperson told FiercePharma the company has accepted 2,300 retirements. He said the program will mostly be done by the end of the year.
The Indianapolis company isn't alone, of course, as Sanofi and Novo Nordisk each have trimmed their headcount lately.
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When Lilly reported third-quarter results in October, the company told investors and analysts it's expecting 2017 revenue of $22.4 billion to $22.7 billion. If it can hit its new prediction for 2018, it would be growing in the low single digits, the company announced on Wednesday. The company further reiterated its expectation to grow at least 5% on average annually from 2015 to 2020.
The revenue forecast is slightly above consensus, and its earnings guidance for 2018 of $4.60 to $4.70 per share is in line with Street estimates, Divan wrote, adding that an FDA approval for Olumiant is "expected by July," and that the company could get approval for migraine candidate galcanezumab by October 2018.