It was less than two weeks ago that Eli Lilly stunned investors with unexpected bad news about its highly anticipated rheumatoid arthritis drug baricitinib, which was spurned by the FDA even after the company was given three extra months to address safety concerns.
And that news, of course, followed the high-profile failure of Lilly’s phase 3 Alzheimer’s drug solanezumab. So, investors were in the mood for some good news—and they got a bit of it in Lilly’s first-quarter earnings report, even as concerns about the company’s pipeline cast a cloud over the numbers.
Lilly’s first-quarter sales grew 7% year-over-year to $5.2 billion, thanks to strong uptake of some of its newer drugs, including Trulicity, its once-weekly GLP-1 diabetes med, and its psoriasis drug Taltz. Its non-GAAP net income was up 18% to $1 billion, or 98 cents per share. Analysts had been expecting EPS of 96 cents on average.
But some weak spots in the quarter gave analysts pause. Lilly's diabetes news wasn't all sunny; sales of its insulin therapy Humulin fell 12% year-over-year to $314.5 million, way below the consensus estimate of $345 million. Lilly’s new SGLT2 diabetes medicine Jardiance nearly doubled in sales to $74 million during the quarter, but Credit Suisse analysts were hoping for more, telling investors in a note that “uptake remains below our expectations.”
Jardiance was expected to get a boost after Lilly won FDA approval to market the med to reduce the risk of cardiovascular death. Enrique Conterno, president of Lilly Diabetes, said during an investor conference call that the company saw a 70% increase in new patient starts during the quarter, far above the 30% growth SGLT2 drugs achieved overall.
But Conterno acknowledged that treating patients with a goal of reducing CV risk “is a paradigm shift when it comes to treating diabetes” and requires more education directed to physicians to improve uptake. “All in all we are pleased with our progress and we expect more,” he said.
During the conference call, analysts pressed Lilly’s executives for details about their response to the FDA’s refusal to approve baricitinib. Expectations had been high for the drug, co-developed with Incyte; analysts had projected it could hit $1.8 billion in sales by 2022.
But in its complete response letter, the FDA said it wanted more data to support dosing recommendations and to better characterize side effects. Lilly and Incyte plan to meet with the FDA to determine a path forward, but the delay would put Lilly far behind Pfizer’s already approved Xeljanz, as well as sarilumab, a drug from Regeneron and Sanofi that is expected to be approved by the FDA soon.
Christi Shaw, president of Lilly Bio-Medicines, said during the call that Lilly has no plans to abandon baricitinib. “We have not contemplated a scenario in which we will not pursue baricitinib for rheumatoid arthritis. We continue to believe in the safety/benefit risk profile,” she said. As for plans for future trials, Lilly will “take into account our discussion with the FDA, but we’re looking at continuing those studies and starting a phase 3 trial in psoriatic arthritis by the end of this year,” Shaw said.
No doubt investors will remain focused on other key assets in Lilly’s pipeline, including the migraine drug lasmiditan, a 5-HT1F agonist acquired along with CoLucid Pharmaceuticals for $960 million in January. That med is seen as a much-needed boost for Lilly’s pipeline. The company is expecting key data from a phase 3 trial later this year. If it succeeds, Lilly hopes to submit the drug to the FDA and win approval next year.
During the conference call, one analyst asked Lilly CEO David Ricks to reflect on the setbacks with baricitinib and solanezumab and to ponder whether the company should embark upon a major cost restructuring to get itself back on track. But Ricks dismissed the concerns.
“We see continuous top-line growth driven by new products,” he said. “The kind of performance we put up in Q1—if we just compound that out, I think we yield impressive margin gains. That’s what we’re focused on, rather than a disruptive event that would perhaps set us back on revenue growth and productivity.”
Lilly reported a GAAP loss of 10 cents per share because of its CoLucid acquisition. The deal also prompted the company to dampen its EPS expectations for the year, telling analysts to expect reported EPS of $2.60 to $2.70, vs. the $2.69 to $2.79 range it had been predicting. But it did not change its non-GAAP estimate of $4.05 to $4.15.