21: days of protection left for Lilly’s Zyprexa
October 3rd, 2011 // 2:41 pm @ jmpickett
Now the countdown is no longer in years or months. It is in days — just 21 more.
On Oct. 23, Eli Lilly and Co. will lose U.S. patent protection on Zyprexa, the best-selling drug in its 135-year history. On that day, generic competitors can launch low-priced versions of the powerful antipsychotic drug that doctors have prescribed to millions of patients to control hallucinations, delusions, confused thought and manic-depression.
It’s the end of an era for the biggest product at the biggest company in Indianapolis.
For patients and payers, that means they will soon be able to get the drug, known by its generic name, olanzapine, for a fraction of the $12.24 they now pay for a dose of Zyprexa.
For Lilly, it means the end to a 15-year run that has generated tens of billions of dollars in sales and profits.
And for Indianapolis — home of Lilly’s headquarters and more than 12,000 scientists, business executives and support staff — it raises questions about how successfully the company can navigate the next few years until it launches another spate of medicines.
For years, the Indianapolis drug maker has been bracing for this moment. It has laid off thousands of workers, worked furiously to advance other medicines through its pipeline with only moderate success, pushed hard to get a deeper foothold in emerging markets, invested billions in new experimental medicines and acquired experimental drugs from small biotechs.
In the meantime, Lilly is facing at least a few tough years. In recent notes to investors, the company has warned that it expects the introduction of generic versions of Zyprexa “to result in a rapid and severe decline” in Zyprexa sales. Last year, Zyprexa rang up $5.03 billion in sales, or about 22 percent of total revenues.
And to add even more financial pressure, several Lilly drugs will lose patent exclusivity in coming years, including most of its blockbusters: antidepressant Cymbalta, erectile-dysfunction drug Cialis, and diabetes drugs Humalog and Byetta.
Altogether, the company faces a slew of patent expirations over the next four years on drugs that account for more than 60 percent of its revenues. Lilly executives say they are preparing for a “trough” in profits by 2014 before enough new products can hit the market to make up the difference.
Still, no one on Wall Street is expecting Lilly to collapse. Some analysts say Lilly is on the right track and could bounce back in a few years. Lilly stock has remained in the mid- to high 30s for most of the past two years, although that’s down from the 50s four years ago.
“It’s going to be a challenge for Lilly, but survivability is not a question,” said Linda Bannister, a drug analyst at Edward Jones and Co. in St. Louis, who has a “hold” rating on the stock. “They have some interesting things in the pipeline, and if they are successful, Lilly could be a growth company again.”
The company has about 70 experimental drugs under development. They include about 10 in late-stage clinical testing for serious ailments such as Alzheimer’s disease (a medicine called solanezumab), depression (NERI), cancer (ramucirumab), schizophrenia (mGlu2/3 pro) and diabetes (BI 10773).
It’s been more than a decade since Lilly went through such a financial upheaval. In 2001, the company found itself in a crisis when it suddenly lost patent exclusivity on Prozac, its best-selling antidepressant, which accounted for 34 percent of the company’s sales.
The loss came as a huge blow. At the time, the company had no other blockbusters to fall back on, and executives were forced to cut deeply.
But over the following few years, Lilly launched a spate of drugs, including Xigris for sepsis, Forteo for osteoporosis and Strattera for hyperactivity. A few years afterward, Lilly launched such future blockbusters as antidepressant Cymbalta and cancer drug Alimta.
“Lilly has come back from big setbacks before by investing heavily in its pipeline,” said Les Funtleyder, a drug analyst at Miller Tabak + Co. in New York. “If they can deliver on their pipeline again, they’ll be OK in a few years.”
In the meantime, Lilly is not shutting down production of Zyprexa. Even though generic competitors are likely to take a big bite out of sales, the company said it expects some patients and doctors to continue with the Lilly brand.
“If you know anything about severe mental illness, you know it’s an incredible challenge to (find) a medicine that can work to the point where you can resume normal function,” said David Ricks, president of Lilly USA.
How much of the market Zyprexa can keep remains a big question. Many branded drugs lose 80 percent to 90 percent of sales within two years of losing patent exclusivity, Funtleyder said. And Lilly said it has no plans to make a generic version of Zyprexa, in keeping with its longtime strategy of developing branded drugs.
But even if Zyprexa can keep 20 percent of U.S. sales, that’s still worth more than $500 million a year to Lilly.
And Zyprexa will live on in other ways. Two years ago, Lilly won Food and Drug Administration approval to sell a long-lasting version of the drug, call Zyprexa Relprevv, under a new patent that won’t expire until late this decade. Some analysts have predicted that drug could bring in $1 billion in annual sales by 2015.
In addition, Lilly will continue to sell Zyprexa in other countries, including Japan, the world’s second-largest drug market. That patent will not expire until 2015. But in Europe, the patent on Zyprexa expired last year, cutting off most of the Western economies.
It still remains unclear which generic competitors will be first to launch a competitive version of Zyprexa. Several analysts said the first probably will be Dr. Reddy’s Laboratories, a generic drug maker based in southeastern India. The company did not return several calls last week seeking comment.
Meanwhile, Lilly said it has faith in its research laboratories and in the reputation it has earned through the long-standing sales of one of the world’s best-selling drugs.
“Although this is the end of an era for Zyprexa,” Ricks said, “it is our firm belief it is not the end of Lilly.”
