"If solanezumab is shown to work in mild Alzheimer's disease then the pathway would be to take that earlier and earlier, and we would be able to do it because we would have confidence that it would have an effect." Eric Karran, MD
The company, which is betting the house on Solanezumab, has just suffered another setback to its neuroscience franchise with its depression drug candidate Edivoxetine (LY2216684) failing to outperform a placebo in Phase 3 clinicals.
Lilly, which hoped that the norepinephrine reuptake inhibitor could be successful as an add-on therapy in depression and provide a much needed boost to its neuroscience franchise, has decided to move Edivoxetine to the trash bin.
The pharma giant, which is still trying to recover from the loss of its Zyprexa patent, is bracing itself for the looming perfect storm that it is about to face as Cymbalta loses U.S. patent exclusivity this week.
Cymbalta's U.S. patent exclusivity expires December 11th and, if history is a guide, the product is bound to lose more than 70% of its revenue, estimated at $5 billion per year, before the end of 2014.
Since Cymbalta currently accounts for 24% of Lilly's global revenue and the company's attempt to launch another antidepressant in the space did not result in a viable product, Solanezumab will need to prove both a clinical and commercial success to save the neuroscience business unit.
Solanezumab will need to deliver peak revenue within the $5 billion bracket to compensate Lilly for Cymbalta's loss of revenue. If Solanezumab approval is delayed or it fails to achieve blockbuster status, Lilly will have to contemplate painful cost cuts and layoffs to streamline its neuroscience division.
Solanezumab, a monoclonal antibody that binds to the amyloid-β peptides that make up the protein plaques seen in the brains of people with Alzheimer's disease, has already been investigated by Lilly in the Expedition Phase 3 clinical trials with disappointing results.
Lilly decided to go for double or nothing on the drug. It launched Amyvid, a radiopharmaceutical diagnostic imaging agent indicated for tracing brain beta-amyloid plaque density, but failed to get Medicare coverage for it. Lilly acquired Amyvid and its developer Avid Radiopharmaceuticals for $300 million in November 2010.
The company then went ahead with an even bigger Phase 3 trial of Solanezumab in a carefully selected population of patients with mild Alzheimer's with the hope of demonstrating a benefit.
Lilly's reasoning is that an estimated 25% of the patients studied in the earlier Expedition trials might have actually been Alzheimer's free with no beta-amyloid deposits, which is why solanezumab did not help.
Many patients were enrolled in the earlier trials on the basis of symptoms only, without undergoing sophisticated diagnostic procedures to confirm the presence of beta-amyloid deposits. In the new study, Lilly is screening candidates for the trial using Amyvid.
Eli Lilly Valuation
Lilly's share price seems unchanged from its level at the beginning of the year, however it is currently down by 13% from its peak for the year, which was achieved in April.
Edivoxetine Phase 3 failure is just the latest in a streak of Phase 3 flops that counts among its victims pomaglumetad methionil in schizophrenia, Ramucirumab in breast cancer and of course Solanezumab's Expedition.
Lilly's current P/E ratio of 11.6 and price-to-sales ratio of 2.5 are relatively favorable. However, with the prospects of a $4 billion dive in Cymbalta's revenue in 2014 and no immediate substitute to drive growth, these ratios might not hold.
Lilly has promised to purchase $5 billion of its own shares under a recently authorized program and continue paying dividends at the current level in 2014 and beyond. This might come as consolation to Lilly's shareholders, but without a clear win on the Solanezumab front Lilly's future does not look that bright.