Just a couple of weeks ago, Eli Lilly (NYSE:LLY) launched its anti-diabetes drug Trulicity (dulaglutide) in India, a country witnessing epic proportions of diabetic patients in its hospitals. Trulicity is a once-a-week, non-insulin drug that is recommended for type 2 diabetes. It needs to be injected every week, instead of having to take tablets every day. Trulicity can be prescribed as a monotherapy and it increases drug adherence because patients do not have to take tablets everyday, which is why it has a greater chance of being successful. Doctors may also decide to add Trulicity to the prescription along with other glucose-reducing drugs, making it a versatile choice.
While the FDA has warned that this drug is known to have caused a type of thyroid cancer in rodent studies, the label approved in India does not carry this warning. The company insists that the drug is safe to use and its efficacy was observed in multiple clinical trials. A single dose pen costs INR 2,499 per week ($37.70), in a country where Eli Lilly has grown in double digits. Most of its sales in India depend on diabetes drugs. With the diabetes epidemic looming across South Asia, Trulicity is expected to become the next cash cow for Eli Lilly.
The Diabetes Market In India
Countries with a carbohydrate-rich diet are the worst affected, such as India, China and some countries in the Middle East. Dietary and lifestyle changes have propelled a diabetic epidemic in India, in recent years. Diabetes is increasingly being noted among youngsters as well, something that was seen as a sign of middle age previously.
The existing and future market for diabetes drugs in India is huge. Almost 70 million people in India are affected by diabetes. By 2040, 125 million people are expected to seek treatment for diabetes in India alone. People with pre-diabetes, a condition that precedes a diabetes diagnosis, are estimated to be several times higher. Without lifestyle and dietary changes, people with pre-diabetes are expected to require diabetes drugs within 2-10 years.
Shockingly, only 58.4% of urban residents and 36.8% of rural residents in India had even heard about diabetes, leave alone pre-diabetes. With little or no diabetes awareness, these people are at risk of continuing unhealthy lifestyles leading to a diagnosis. This would mean, diabetes drugs will be of utmost importance in India, a country with almost 1.3 billion people.
Diabetes Drugs In India
GlaxoSmithKline (NYSE:GSK), which recently won an FDA approval for its GLP-1 diabetes drug albiglutide, may bring it to India too. As India is a cost-sensitive market, GSK recently stated that it may need time to bring albiglutide (marketed as Tanzeum) to the Indian market. This drug too is a once-weekly GLP-1 agonist that modulates insulin production, effectively treating hyperglycemia. Indian diabetes market is currently worth $1.27 billion and this number will increase exponentially.
Dapagliflozin, which was jointly developed by AstraZeneca (NYSE:AZN) and Bristol-Myers Squibb (NYSE:BMY), is being launched in India by Sun Pharma (OTC:SMPQY), an Indian pharmaceutical giant. Sun Pharma will market the drug as Oxra while AstraZeneca already markets it in India as Forxiga. AstraZeneca will retain intellectual property rights and thus, get a share from sales made by Sun Pharma. However, Dapagliflozin comes with a lot of side effects such as dehydration, increased potential for infections, candidiasis and glycosuria.
Metformin, one of the most popular diabetes drugs in the world, has been around for decades in India, but it does not work effectively on everyone. It also needs to be taken once or more than once a day, leading to a risk of treatment non-adherence. Considering all this, Eli Lilly's once-a-week drug holds a lot of promise. First, it enables adherence because it needs to be taken only once a week. Second, the side effect profile of Trulicity is much more tolerable.
Eli Lilly's Numbers Look Great
With such a promising future, it is no wonder that most investment firms have rated Eli Lilly a clear buy, with BMO Capital Markets giving it an Outperform rating. With a market cap of around $79 billion and a profit margin of 12%, Eli Lilly is easily one of the most valuable pharmaceutical stocks. It also has a decent dividend yield with its Forward Annual Dividend Yield being 2.77% and its Trailing Annual Dividend Yield being 2.80%.
When we look at Eli Lilly's trading history, it becomes absolutely clear why it is such a great stock to invest in. In 2008, the company was trading at less than $40, before hitting a peak in September 2015, when it reached almost $90. However, since then, Eli Lilly has seen a sharp reduction in its daily trading values, which currently stands at around $75. With a five-year expected PEG ratio of 1.57, LLY may also seem like it is overvalued.
However, with the kind of treatment portfolio that the company has, and its upcoming treatments, Eli Lilly has a great future. Most importantly, the company is doing extremely well in India, a country with almost 1.3 billion people and a staggering number of people with diabetes. Considering all this and more, it might be a good time to invest in Eli Lilly before it becomes expensive again.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.