Eli Lilly: Climbing The Hill Of Survival And Success

| About: Eli Lilly (LLY)


Eli Lilly has a rich R&D pipeline, with a current active focus on diabetes which has a growing market in the US and internationally.

The recent research results of Dulaglutide prove the company’s constant efforts to launch innovative drugs.

Strong acquisitions in the animal health segment have helped the company move the ladder of success at a faster pace.

Following the intended takeover, Eli Lilly has become the second largest animal health player by revenue.

In light of the efforts put in by Eli Lilly, it has bright future prospects.

The ability to discover and market innovative drugs serves as the fuel for drug manufacturing industry vehicles. Large companies have the advantage of large scale and thus, comparatively lower costs of research, manufacturing, and marketing. For this very reason, the US drug manufacturing industry is highly concentrated, with the 50 largest companies accounting for more than 80 percent of total industry revenue. Eli Lilly and Company (NYSE:LLY), one of the big names in this industry, has been constantly on the move striving to launch breakthrough drugs. Recently, the company's participation at the American Diabetes Association received a lot of appreciation based on the work it continues to undertake.

Let's take a look at the company's current advancements.


Eli Lilly has recently revealed results about its Phase III research for the treatment of Type II diabetes. Dulaglutide has an extensive plasma half-life of approximately 5 days with the least renal clearance, low immunogenic potential, once weekly dosage intake and it is an injectable liquid with no reconstitution required.

Dulaglutide vs. Insulin Glargine

Dulaglutide 1.5 mg and 0.75 mg dosage showed a substantially greater progress in A1C, with weight loss and less hypoglycemia. The research revealed a major reduction in blood sugar levels of patients who are on metformin.

Dulaglutide + Mealtime Insulin Lispro versus Insulin Glargine + Mealtime Insulin Lispro

When joined with insulin lispro, the once a weekly dosage of dulaglutide 1.5 mg and dulaglutide 0.75 mg proved more efficacious in comparison to glargine. The cut in A1C levels at 26 and 52 weeks was quite evident. Dulaglutide has been observed to cause less weight gain when matched against glargine. Also, the risk of hypoglycemia to the patients was lower with dulaglutide 1.5 mg and 0.75 mg as compared to glargine.

Dulaglutide versus Novo Nordisk's Victoza (liraglutide)

The once weekly dosage of dulaglutide 1.5 mg displayed non-inferior glycemic control when weighed against once daily liraglutide 1.8 mg. Moreover, both dulaglutide and liraglutide had shown considerable cutback in A1C with the greater proportion of the patients attaining ADA A1C target of < 7.0%.

Ease Of Usage

It is a ready to use solution designed in a pen form with a small needle already attached. It also provides dose confirmation and automatically retracts the needle following injection. The injection success rate was recorded at 99.1%.

Dulaglutide is currently under regulatory review in the United States, European Medicines Agency and several other countries. If Eli Lilly receives authorization of the drug, dulaglutide will be marketed under the brand name "Trulicity."

Growing Market Size

Presently, as per the American Diabetes Association approximately 10% of the entire U.S. population is affected by diabetes with over 25% being senior citizens. Nearly 1.9 million new cases are diagnosed with diabetes every year. According to estimates, as many as 1 in 3 American adults are projected to have diabetes in 2050 if prevailing trends continue. Although this may be a major health concern for the public, it shows a ballooning market for the company's upcoming easy-to-use pen solution and is likely to prove accretive to Eli Lilly's bottom line.

Once on the market, dulaglutide will face robust competition from Sanofi and Novo Nordisk. The two companies have a strong presence in the growing diabetes market.

The Right Acquisitions Come Up Eli Lilly's Way

The combination of the best two companies, Eli Lilly and Novartis's Animal Health (NAH) segment, now makes Eli Lilly the second largest global animal health player in terms of revenue generation. The addition of NAH is complementary in terms of product portfolio (600 products) and geographical presence (in 40 countries). The company has shown an outstanding capacity to raise profits i.e. it was able to increase EBIT as a percentage of sales from 17% in 2007 to 26% in 2013 while actively planning for the future as exhibited by its burgeoning R&D pipeline with more than 40 projects underway. The segment generates revenue from diversified sources: dairy, enzymes, vaccines, with a market leadership in protein analytics. Also, the acquisition brings along nine dedicated manufacturing sites and six research sites.

The acquisition has been financed with $3.4 billion cash on hand and $2 billion debt. The company plans to service its debt through free cash flow from operations of its animal health segment. The projected positive synergies of $200 million per annum are expected to trickle down to the bottom line from 2016 onwards, with no material impact in the passing year. Moreover, the combined entity is anticipated to generate EBIT margin in the mid-20s by 2017-2018.

The drug manufacturer has also announced to take over Lohmann Animal Health, a global leader in the supply of poultry vaccines, which will once again reiterate its strong market position in this animal health market niche.

Final Call

Based on the proliferating R&D pipeline and healthy acquisitions targeted by the company, I believe Eli Lilly has bright future prospects and holds the capacity to provide a healthy return to its investors.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.