Eli Lilly's ($LLY) long-acting basal insulin peglispro is on the back burner now. Some analysts figure it's well on its way to being canned. But the news isn't quite as bad for Lilly as one might expect--nor quite as good for the drug peglispro was hoping to challenge, Sanofi's Lantus.
As Bernstein analyst Tim Anderson sees it, Lilly may lose the chance to roll out peglispro and compete head-to-head with Lantus this year. But the company's biosimilar version of the Sanofi ($SNY) blockbuster--developed with partner Boehringer Ingelheim--could benefit.
Without peglispro to worry about, Lilly could be more aggressive in pushing its Lantus biosim, Anderson posits. The company could undercut Lantus pricing and win its patients over, with no danger of cannibalizing another new product, he says. And Lantus is a big drug, with more than $7 billion in 2014 sales; if Lilly can grab more than 40% of that market--which is what Anderson now expects--it could boost potential sales past the currently forecasted $1.3 billion by 2020.
Plus, Lilly could redeploy the resources it's planning to put behind peglispro--and promoting the biosim promises to be a much less expensive prospect. As Anderson's Bernstein colleague Ronny Gal mentioned in a recent note, Lilly would be running the peglispro business entirely separately from the Lantus biosim, which is marketed in concert with Boehringer. "The biosimilar business will be a significantly lower cost business with only a handful of people involved negotiating deals with payors etc, not hundreds of sales reps," Gal wrote.
So, even if Lilly decides to be aggressive on discounting the Lantus biosim, the company could enjoy a nice margin, thanks to a low cost structure.
Of course, what's good news for Lilly's bottom line here could be bad news for Lilly sales reps. The company has said it's confident it can roll out its new diabetes products with the sales force it already has. But it hasn't mentioned what might happen to its sales ranks if one of those new meds didn't hit the market. There's time to think about it, in the U.S. at least: Though it's already approved in Europe, the Lantus biosim is stalled in U.S. patent court, with a launch anticipated in 2016.
And what's good news for Lilly's Lantus biosim isn't such good news for Sanofi, either. The company is counting on its diabetes business to start pumping up the growth, fueled in part by Toujeo, a basal insulin that's Sanofi's follow up to Lantus. Aggressive pricing in the basal insulin market could put some speed bumps in the way of that launch.
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