A Phase III Failure At Eli Lilly - Yes, Again

Sep.27.13 | About: Eli Lilly (LLY)

In case you didn't see it yesterday, Eli Lilly (NYSE:LLY) had yet another nasty Phase III failure. This one was ramucirumab against breast cancer (one of the Imclone projects). This was (yet again) one of the compounds that's supposed to be shoring the company up as it continues to lose patent protection on its existing drugs, and it's losing a lot of that.

I'm not going to focus on this particular antibody, but rather a larger issue. Here it is, outlined by FierceBiotech:

The crucial late-stage failure--ramucirumab has been considered one of the pharma giant's top Phase III prospects--scuttles one of Eli Lilly's chief near-term hopes for a major new drug approval application. The failure also follows several years of poor trial outcomes for Lilly, which has a reputation for taking expensive and very risky chances when it comes to late-stage development. Its shares ($LLY) immediately dropped more than 5% on the news.

Lilly does indeed have that reputation - you'll get one if you spend as much time on big Alzheimer's projects as they have, among other things. And here's my question: are they doing things wrong over there, or doing them right?

I mean, we in the drug business catch a lot of flak (often, but not always, undeservedly) for ducking the really big challenges in favor of grabbing market share from each other's established drugs. Those really big challenges, though, come with really high failure rates, and it's not like the failure rates for even the supposedly easy stuff aren't terrifying. (That's a point many outside critics miss - there are no lay-ups in this business when it comes to developing new drugs, none whatsoever). But if you don't like 80 or 90 per cent failure, try 95 per cent. Or, to a roundoff error, one hundred per cent, because that's pretty much been the historical failure rate for Alzheimer's, minus one drug that doesn't do very much. Someone who hasn't been paying attention might look at the lack of drugs in such therapeutic areas and decide that it's because the industry hasn't bothered to do anything - too busy making artificial tanning creams, you know - but it's clear that company after company has taken swings at things like Alzheimer's and just totally missed.

Eli Lilly has been taking some pretty big cuts, but they've mostly just fanned out a lot of dust the last few years. Are they (1) working with too risky a portfolio? (If so, was it by design, or did they just end up this way through attrition of other projects?) Or are they (2) working with a list that has an more appropriate balance, but doing a lousy job of prosecuting it? (A mix of 1 and 2 is also possible, of course). Do we look at Lilly's situation and say "Well, at least I wouldn't have done that", or do we say "There but for the grace of God and a few biomarkers go I?"

And some critics of the industry would do well to observe this process. Here is a big company, spending huge amounts of time and effort on some really big diseases that have a lot of unmet medical need. And they're being driven into the ground like a tent peg by the results of it all.

Disclosure: None