Lilly is preparing for a temporary slowdown in Zyprexa growth during the introduction of Bristol-Myers Squibb's schizophrenia drug Abilify .

"During the anticipated U.S. launch phase of Abilify for schizophrenia we do expect that Zyprexa total script growth could flatten temporarily given the historical precedents for psychiatrists to experiment with new treatment options," Lilly Manager-Investor Relations Heidi Straub said during the company's third quarter conference call Oct. 23.

"The reason we said that we expect a temporary - and I emphasize a temporary - flattening of total scripts is that's pretty much what we saw when [Pfizer's antipsychotic] Geodon was launched last year," Lilly Director-Investor Relations Simon Harford explained.

Geodon (ziprasidone) has since been a disappointing product for Pfizer, generating $57 mil. worldwide in the third quarter ($54 mil. in the U.S.).

"Our experience suggests that psychiatrists will try all new products given the current situation with current therapies available. So we're expecting some experimentation," Harford said.

Lilly plans to increase promotional expenditures for Zyprexa (olanzapine) in the fourth quarter. When Abilify is introduced, "we will be ready for the launch with the leading share of voice," Straub said.

Abilify (aripiprazole) was deemed "approvable" Aug. 30. Bristol expects approval and launch in the fourth quarter. The company is conducting comparative studies with atypical antipsychotics, but does not expect a superiority claim in labeling.

Bristol plans to emphasize Abilify's safety profile. Lilly maintains, however, that efficacy is what is most important to physicians and patients. The company plans to conduct head-to-head studies with Zyprexa and Abilify to demonstrate an efficacy advantage.

"We are absolutely convinced that [Zyprexa] will continue to be the number one atypical antipsychotic out there, from an efficacy standpoint," Harford declared.

"We believe that very, very strongly and we believe that given the complexity of this disease state, that at the end of the day this will be the deciding factor rather than the side effect profile, because Zyprexa has an excellent side effect profile."

One element of uncertainty around Zyprexa's safety profile is its effect on glucose levels, particularly in diabetic patients. In Japan, Zyprexa was recently relabeled to add a contraindication against use in patients with diabetes or a history of diabetes after reports of severe hyperglycemia and death from diabetic coma.

Lilly expects that if FDA requires a diabetes-related label change for Zyprexa, the revisions would also likely be required of other atypical antipsychotics. In Japan, Janssen's Risperdal (risperidone) and AstraZeneca's Seroquel (quetiapine) received diabetes-related label changes, but were not contraindicated.

"At this stage there is absolutely no rationale for why Zyprexa would be singled out in the U.S. for a label change different from the other atypical antipsychotics," Harford said.

Lilly stressed that it has not discussed potential label changes with the agency.

"We believe that if there is going to be a label change that it would be something that would be across the whole sector of atypical antipsychotics in the U.S.," Lilly Manager-Investor Relations Craig Hartman said.

Hartman noted that the Department of Veterans Affairs is conducting a study that will provide further information about the association between diabetes and the atypical antipsychotic class.

The label change in Japan "has dampened the Zyprexa sales growth rate in that country," Lilly noted. Worldwide Zyprexa sales totaled $974 mil. for the quarter, up 20%. U.S. sales increased 18% to $683.2 mil.

Lilly's total worldwide sales for the quarter decreased 3% to $2.8 bil. The decline is attributed to continued erosion of Prozac (fluoxetine), which has faced generic competition since August 2001, as well as sales declines for the H2 antagonist Axid (nizatidine) and Lilly's anti-infective products.

Sales of Lilly's sepsis therapy Xigris (drotrecogin alfa) also remain disappointing. For the third quarter, Xigris sales fell slightly to $21.2 mil., compared with $22.6 mil. in the second quarter. Sales have been essentially flat since Xigris' launch in the fourth quarter of 2001; during that quarter, sales were $21.5 mil.

Lilly said that its expectations for Axid, anti-infectives, and the thrombolytic Reopro (marketed with J&J) contributed to its downgrade of its earnings per share guidance for the year to $2.55-$2.57 from $2.60-$2.62.

"Entering Q4 we know that Reopro as well as legacy products such as anti-infectives and Axid are likely to continue to trend lower than anticipated," Harford said. "At the same time...there will be a substantial increase in sequential expenditures after the third quarter, as we provide strong financial support for Zyprexa in light of the competitive environment."

"As far as the revised guidance is concerned, we continue to expect slightly declining sales for the full year," Harford said. "However, our sales in the fourth quarter are expected to return to growth and return to the mid-single digits driven primarily by Zyprexa, Evista , Gemzar , Humalog and Actos ."

Lilly did not provide any financial guidance for 2003 nor any information on the resolution of its GMP problems with FDA. The manufacturing issues are holding up approval of Zyprexa IM , the osteoporosis agent Forteo (teriparatide) and the antidepressant Cymbalta (duloxetine).

"For 2003, due to the uncertainty of the timing of our product launches and resolution of our manufacturing issues, we continue to be cautious about our financial assumptions," Harford said. "Assuming no significant financial penalties imposed by the FDA related to our manufacturing issues or other unusual items, our goal is to deliver some earnings growth next year."

Lilly/Icos' erectile dysfunction drug Cialis has been "approvable" at FDA since April. Although manufacturing has been one issue holding up approval, Lilly has projected a second half 2003 launch based on plans to shift manufacturing to another facility (¹ Also see "Lilly Cialis Using Alternate Manufacturing Facilities For 2nd Half 2003 Launch" - Pink Sheet, 22 July, 2002., p. 10).

In response to a patent infringement suit filed by Pfizer to block Cialis and Bayer/GlaxoSmithKline's Levitra , Lilly pointed to Pfizer's failed patent case in Europe.

"Keep in mind that this patent stems from the same patent in the U.K. that gave rise to the court decision that invalidated those over there, so we think that the courts have to decide this," Hartman said. "It's probably too early for us to talk about our strategy in terms of whether we're going to launch or not."

Lilly Expects Zyprexa Sales To Flatten During Bristol Abilify Launch In Q4

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