Eli Lilly has long been under pressure to replace the revenues it’s losing to generic rivals as former blockbusters such as erectile dysfunction drug Cialis and ADHD drug Strattera face low-cost competition. New launches including diabetes drug Trulicity are helping fill the hole—but Wall Street has been pressing the company to do more.
Lilly may have found one way to raise some quick cash to pour into its portfolio of growth prospects. The company may sell off a group of off-patent medicines it markets in China, according to Bloomberg, which cited anonymous sources. Lilly is working with advisers on the potential transaction, which could bring in between $200 million and $300 million, the sources said.
The news comes amid a long turnaround effort that’s just now starting to bear fruit. Lilly has launched 10 new drugs since 2014, not just in diabetes but also in high-growth markets such as cancer and autoimmune disease. Several of them turned in strong growth during the third quarter. Sales of Trulicity and cancer drug Lartruvo rose 55% and 41% year over year respectively, according to results announced earlier this month. And psoriasis drug Taltz was up a whopping 74%.
But Lilly is still facing plenty of challenges. Aside from sales lost to generic competition, the company expects to take a $200 million hit from Medicare doughnut hole changes next year.
And some of the company’s new drugs are entering extremely competitive markets. For example, Lilly’s CGRP inhibitor to prevent migraine headaches, Emgality, is up against rivals from Teva and Amgen.
Multiple competitors in the same market can present coverage and pricing challenges around the world, which Lilly is already experiencing. In October, England’s drug-cost watchdog, the National Institute for Health and Care Excellence (NICE), ruled that the company’s breast cancer drug Verzenio shouldn’t be covered in that country because it’s not as cost-effective as Pfizer’s Ibrance and Novartis’ Kisqali. Lilly planned to appeal the decision and a final determination is expected soon.
Lilly is far from the only Big Pharma that seems to be distancing itself from older, off-patent medicines. Over the summer, Pfizer announced a reorganization that included moving all of its off-patent branded drugs and generics into a separate unit with “substantial autonomy.” Some analysts speculated that the move might be a prelude to a divestiture of that business.
But even as they move away from their off-patent portfolios, several companies are making inroads into biosimilars—including Lilly. And the company has charted some success there. During the third quarter, Basaglar, Lilly’s biosimilar version of Sanofi’s insulin blockbuster Lantus, grew 38%.
A sale of Lilly’s off-patent China portfolio wouldn’t be a surprise, seeing as the company has already made one big move toward furthering its focus on more lucrative prospects. In August, Lilly filed a registration statement with the SEC detailing its plans to spin off its animal health unit, Elanco. It expects to complete an initial public offering of the company by the end of the year.
Nov 16, 2018