The Viagra effect: Sales of Lilly's ED drug Cialis slide after little blue pill goes generic

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Eli Lilly is leaning on new drugs Trulicity, Taltz and Cyramza as it faces generic competition ahead. (Lilly)

Eli Lilly's portfolio is in the middle of a big shift, with newer diabetes drugs taking the reins of that franchise and its blockbuster erectile dysfunction drug Cialis, apparently suffering from copycat Viagra competition already, on its way to a generics battle this fall. But the drugmaker was confident enough about 2018 to hike its guidance as it reported fourth-quarter earnings.

Cialis slid by 12% in the fourth quarter, to $597.4 million, after Pfizer's Viagra finally lost exclusivity in early December. That's just a taste of what's likely to happen in September of this year, when generic Cialis versions are set to launch under a patent settlement inked last year. A full-on onslaught with multiple copycats typically drags down brand sales quite quickly, sometimes by 90% in a single year, and Cialis is expected to dwindle to just $55 million by 2022.

Lucky for Lilly, though, Trulicity surged. The GLP-1 diabetes drug, which has been stealing share from Novo Nordisk's dominant drug in that class, Victoza, brought in a whopping $649 million for the quarter, up 93%. For the year? $2 billion, more than double 2016's total. Sales handily beat analyst estimates, offsetting slight shortfalls for two fellow diabetes drugs: Jardiance, the SGLT2 therapy it shares with Boehringer Ingelheim, which fell short of Bernstein estimates by $16 million; and Tradjenta, its DPP-4 drug, which came in "a bit light," the firm said in a Wednesday note.

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And then there was Taltz, its immunology drug that's taking on Novartis' quick-selling Cosentyx, which mushroomed to $172.5 million in the fourth quarter and $559 million for the full year. The fourth-quarter number beat some analysts' forecasts, including Bernstein's.

Overall, Lilly brought in $22.9 billion in 2017, an 8% increase year over year, while fourth-quarter sales grew by 7%. Tax reform-related payments of $1.9 billion pushed official earnings into the red—$1.58 per share—though non-GAAP results came in at $1.14 per share.

That's not to say 2018 won't present challenges for those products and Lilly's other launches, including recently approved breast cancer drug Verzenio, which is going up against Pfizer's fast-growing blockbuster, Ibrance. Taltz has a task ahead; its fourth-quarter results fell short for some pharma watchers. And though the drug could see a boost this year, thanks to a new indication in psoriatic arthritis—Lilly's hopeful that some specific data can give it more marketing firepower against the Novartis blockbuster—Novartis, of course, has its own ideas about that.

Perhaps more important on the competitive front, however, is Novo Nordisk's Ozempic. Novo is gearing up to launch the drug, its own weekly GLP-1 drug, and it's armed with head-to-head data showing it beat Trulicity itself at blood sugar reductions and weight loss. Ozempic, formerly known as semaglutide, also boasts some cardiovascular data that Trulicity so far doesn't have.

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"[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 last month.

Still, partly because of cost cuts, Lilly raised its non-GAAP earnings forecast for the year to $4.81 to $4.91 per share, up from the $4.39 to $4.49 it announced last month in its annual look at the year ahead. The company said in September that it would cut 3,500 jobs to save $500 million in annual costs. In November, a spokesperson told FiercePharma the company had accepted 2,300 retirements, with the job-cutting program expected to be mostly done by the end of 2017.

One big question remaining? Elanco, the company's animal health unit, which turned in some not-so-stellar numbers this quarter. Lilly has been mulling a spinoff of that unit, but the company didn't release much in the way of information about that strategic review.