Eli Lilly's biotech strategy calls for the creation of a pipeline that will yield one new biotechnology-based drug launch each year beginning in 2011, the company announced.

Management outlined an aggressive biotech R&D initiative, strengthened by the addition of ImClone, during an analyst update meeting in New York City Dec. 11.

While the company's early- to mid-stage pipeline contains interesting opportunities in oncology, diabetes, Alzheimer's disease, inflammation and other areas, the late-stage pipeline hinges on the clot buster prasugrel and line extensions like Byetta LAR and a long-acting form of Zyprexa .

Lilly needs R&D successes - and soon - with the drug industry's equivalent of the grim reaper waiting in the wings. Zyprexa is scheduled to go off patent in 2011, followed by Cymbalta , Evista and Gemzar in 2013 to 2014, known as the "YZ years."

During the analyst meeting, CEO John Lechleiter set out to assure investors the company is addressing the pending portfolio gap with a sense of urgency. "Our highest priority is to speed the flow of innovative medicines to patients," Lechleiter said. It seems unlikely, however, that the stacked early pipeline and the addition of ImClone, gained for a pricey $6.5 billion, will be enough to convince investors that Lilly is ready to confront the hefty lost revenue stream.

"New line extensions by Lilly should support near-term growth, but they and the novel mid-late stage pipeline do not appear to collectively possess enough potential to provide sufficient revenues in years YZ," Credit Suisse analyst Catherine Arnold said in a Dec. 11 report.

Leerink Swann analyst Seamus Fernandez agreed, stating in a Dec. 12 research note, "Lilly's expanding biotech pipeline with six ImClone compounds was impressive. However, we believe declining sales and earnings per share post '10 are highly likely without several major new blockbusters."

Prasugrel Fate Uncertain, Byetta LAR On Track

Lilly provided little in the way of updates on two of its most high-profile late-stage opportunities, prasugrel, a potential competitor to Bristol Myers-Squibb's blockbuster Plavix (clopidogrel) and Byetta LAR.

Prasugrel has been pending at FDA with a missed PDUFA since Sept. 26. The company said it remains in discussions with the agency and has not received notification that the application will be reviewed by an advisory committee.

Speculation that prasugrel will be subject to an advisory panel review is growing, with sources recently telling "The Pink Sheet" that members of FDA's Cardiovascular and Renal Drugs Advisory Committee have been contacted about their availability for a meeting on the product (¹ Also see "Prasugrel Delay Could Extend Well Into 2009; FDA Eyes February Cmte. Review" - Pink Sheet, 20 October, 2008., p. 3).

Regarding Byetta LAR, a long-acting form of the glucagon-like peptide-1 analogue exenatide for type 2 diabetes, Lilly confirmed that it is on track to complete a regulatory filing by the end of the first half of 2009.

That comes as welcome news after its partner, Amylin, reported in November that it might not meet that target. Concerns over the future of Byetta LAR are still weighing on investors' minds, however, after cases of pancreatitis were linked to the short-acting form.

A long-acting injectable version of the antipsychotic Zyprexa is another important near-term line extension for Lilly. The company hopes to switch patients to the long-acting form ahead of the patent expiry of olanzapine. The formula was deemed "not approvable" by FDA earlier this year, however, due to excessive sedation side effects. Lilly said it has submitted a "complete response" to FDA and is awaiting further action.

NMEs Are The Name Of The Game Long Term

Prasugrel, Byetta LAR and Zyprexa LAI, along with the novel Phase III selective estrogen receptor modulator arzoxifene for osteoporosis, comprise the bulk of Lilly's near-term launch plan. The company is aiming to launch at least one late-stage molecule per year from 2009 through 2012, Lechleiter said.

Longer-term, the company's focus is on launching new molecular entities and novel biologics. The goal is to have 10 new molecular entities and novel biologics in Phase III development by 2011, up from five currently. That will position Lilly to launch two novel medicines per year beginning in 2013, the chief exec added.

The company has 59 NMEs and novel biologics in the clinic, including five candidates gained through the acquisition of ImClone, a deal Lilly completed in November (² Also see "Lilly’s ImClone Buy Adds Oncology Candidates And Pipeline Pressures" - Pink Sheet, 13 October, 2008., p. 3).

Lilly Turns To Biotech For Innovation

Biotech makes up a substantial portion of the pipeline, representing about 40 percent of Lilly's clinical portfolio, the firm reported.

"We see more and more that biotech is the key approach to sustaining pharmaceutical innovation," VP-Biotech Discovery Research Thomas Bumol stated.

Lilly is hardly alone among the big pharmas in shifting attention to biologics, which offer a reprieve from the patent roller coaster ride versus small molecule drugs. Most have taken steps to strengthen their biotech focus in recent years. Merck even announced an aggressive move into follow-on biologics as the first big pharma to develop an FOB business unit during its annual business briefing Dec. 9.

Lechleiter also said Lilly would consider a move into the FOB space. "We're very much considering that," he said after prompting by an analyst question, but added FOBs are not explicitly part of the current biotech strategy.

Lilly is already the fifth-ranking biologics marketer in the world based on sales of biotherapeutics, according to the firm. The company's existing biologics portfolio includes several insulins, the sepsis treatment Xigris , osteoporosis drug Forteo and Byetta.

Inflammation, Neuroscience: New Biotech Areas

The pipeline includes candidates in several therapeutic areas deemed priority, including diabetes, diabetic nephropathy, obesity, osteoporosis, atherosclerosis and oncology. New areas of biotech development include neuroscience, where Lilly is pursuing molecules for Alzheimer's disease, multiple sclerosis and pain, as well as inflammation, according to Bumol.

Late-stage opportunities in the biologics portfolio include teplizumab, a CD3 antibody in Phase III for type 1 diabetes and an immunomodulator, dirucotide, in Phase III for multiple sclerosis.

In addition to broadening Byetta, the company is also developing its own internal GLP-1 agonists for diabetes, including LY2189265, a fusion protein being evaluated as a once-weekly diabetes treatment in Phase II/III trials, and LY2428757, a pegylated analogue in Phase I.

"We were most intrigued by Lilly's efforts in autoimmunity and inflammation, where they are targeting a number of cytokines that are thought to be important disease mediators," Arnold said.

The emerging anti-inflammatory pipeline includes an IL-17 target in Phase II for rheumatoid arthritis and a B-cell Activating Factor (BAFF) in Phase II for rheumatoid arthritis and a cancer indication.

On ImClone, Wait And See

A big question for Lilly is whether its expensive investment in ImClone will pay off. The deal gave Lilly the epidermal growth factor inhibitor Erbitux (cetuximab), partnered in the U.S. with BMS and with Merck KGaA outside North America, and five clinical-stage oncology candidates, three of which will be in Phase III in 2009.

But the investigational monoclonal antibodies are in competitive classes of medicines like IMC-11F8, an EGFR target; IMC-1121B, a vascular endothelial growth factor-2 inhibitor; and IMC-A12, an IGF-1R inhibitor.

It hasn't been clear whether or not Bristol owns rights to Erbitux follow-on compounds, with Bristol contending that it does. Lilly said it is continuing to negotiate on intellectual property rights.

Lilly provided updated guidance, lowering reported earnings stemming from the acquisition of ImClone. The company expects to record a loss of $1.56 to $2.06 per share on a reported basis for 2008, down from earlier guidance of EPS of $2.44 to $2.49. The guidance includes a $4.10 to $4.50 charge per share due to the acquisition.

In 2009, the company expects EPS of $4.00 to $4.25, including a dilution impact related to the ImClone acquisition.

- Jessica Merrill (j.merrill@elsevier.com)

Lilly Plays Up Biotech But Major Pipeline Developments Are Long-Term

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