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Eli Lilly (NYSE:LLY) made a bid to establish itself as the first one-stop shop across all the established and novel diabetes product classes in its wide-ranging collaboration with Boehringer Ingelheim. In return for €300m ($390m) Lilly gains access to two Boehringer products – a DPP-IV inhibitor and a SGLT-2 inhibitor – while putting more development and commercial muscle behind its own long-acting insulin products in development.

Importantly, however, nearly all of the products under the partnership will trail or are forecast to trail the leaders in their classes - for example Merck & Co’s (NYSE:MRK) DPP-IV inhibitor, Januvia, was launched in 2006 and sold $2.4bn last year - so Lilly’s challenge will be in differentiating its products to gain decent market share. The Indiana pharma giant’s late arrival to the party leaves investors to wonder what difference a deal like this one might have made five years ago (see table below).

Differentiation hopes

In a call with investors, Lilly executives acknowledged the lack of first-in-class potential for the products under the deal, touting them instead as potentially best-in-class. Differentiation for Ondero, Boehringer's DPP-IV inhibitor filed for approval in the US, Europe and Japan, may be for patients with renal impairment because a lower percentage of the drug is excreted through the urine.

For payers looking to rationalise their formularies, marginal safety claims may not necessarily be the most convincing of arguments, but Enrique Conterno, president of Lilly’s diabetes business, said the company is up for it; for example Lilly has recently been successful in persuading United Healthcare, the second-largest US health plan, to provide more generous tier I coverage for Humalog when it previously had been tier III.

“We feel we have the clinical profile to be able to offer value to the payers and be able to have meaningful discussions,” Mr Conterno says.

Competitive outlook for Boehringer-Lilly diabetes collaboration
Candidate Class Forecast launch First-in-class Launch or forecast launch
Ondero DPP-IV inhibitor 2011 Januvia 2006
BI10773 SGLT-2 inhibitor 2014 dapagliflozin 2011
LY2605541 Basal insulin analogue 2015 insulin degludec 2013
LY2963016 Insulin glargine 2015 Lantus 2000
Anti-TGF beta 1 MAb (LY2382770) Anti-TGF beta 1 MAb first in class potential

Therapeutic range

The strength of the deal, as pitched by the companies, is the wide range of therapeutic classes being unlocked by both companies. In addition to the aforementioned Ondera, the deal includes Boehringer’s SGLT-2 inhibitor BI10773, now in phase III trials; two mid-stage Lilly insulin analogue products, LY2605541 and glargine competitor LY2963016; and a co-development option for Lilly’s anti-TGF-beta 1 monoclonal antibody planned for diabetes patients with chronic kidney disease.

Lilly's rationale is that payers are more attracted to companies offering products which cover the entire progression of the disease. For Lilly, this is a key strategic component – its existing insulin franchise of Humalog and Humulin ReliOn are big, if not particularly growing, earners that will pull down a combined $3.1bn in 2016, while GLP-1 agonist Byetta needs to hold its own for the near future as Bydureon undergoes more clinical work before approval (FDA crashes party of three with Bydureon rejection, October 20, 2010).

Playing in potentially five classes could certainly earn them a place on the diabetes podium alongside Novo Nordisk (NYSE:NVO) and Sanofi-Aventis (NYSE:SNY), companies which are cleaning up in the insulin market but have only really expanded into the GLP-1 space. Certainly, the revenue prospects are promising: EvaluatePharma forecasts put worldwide sales of Ondero at $961m in 2016. A UBS note published today estimates sales of the linagliptin franchise, including Ondero and a linagliptin-metformin combination, at $955m.

Lilly does have a need to fill its late-stage pipeline; picking up a filed product and a phase III product appear to be good bets for a company with as steep and deep a patent cliff as the one it faces. Still, the late entry – along with the unproven nature of the SGLT-2 class, ultralong-acting insulins and the regulatory path for an insulin glargine competitor – leaves some doubt hanging over the commercial promise of the deal.