FDA Toys With Lilly, and Investors, Again

Ever seen a cat toy with its prey? That's how the Food and Drug Administration is treating Eli Lilly (NYSE: LLY  ) , which doesn't know when the agency will pounce. Last week, the agency said that Lilly would have to wait until at least February for a decision on its potential blockbuster drug prasugrel. Now the agency is also delaying any decision on Lilly's long-acting injectable version of antipsychotic Zyprexa.

The agency turned down Lilly's marketing application for long-acting Zyprexa in February because of "excessive sedation events" seen in patients taking the drug, but the company's most latest Risk Evaluation and Mitigation Strategy (REMS) seems to have convinced the FDA that it can deal with the issue.

The risk-management tool is basically a plan to keep doctors from prescribing the drug to the wrong patients. REMS can be fairly restrictive, like the one for Elan's (NYSE: ELN  ) and Biogen Idec's (Nasdaq: BIIB  ) Tysabri, which involves enrollment in a program, or they can simply require the drug company to have a plan to educate doctors about potential side effects. That's the more likely option for long-acting Zyprexa; Adolor (Nasdaq: ADLR  ) and GlaxoSmithKline (NYSE: GSK  ) got Entereg past the FDA using this strategy last year. Lilly plans to submit its REMS in the "near future."

Should it meet the FDA's approval, the long-acting version of Zyprexa probably won't be as successful as its once-daily older brother. For comparison, sales of Johnson & Johnson's (NYSE: JNJ  ) antipsychotic Risperdal were more than double that of J&J's and Alkermes' (Nasdaq: ALKS  ) long-acting version Risperdal Consta, until Risperdal went off-patent.

Still, there's a decent market for antipsychotics that don't have to be taken daily, especially in patients prone to going off medication. Risperdal Consta logged sales of nearly $1 billion through the first nine months of last year. In the U.S., Lilly plans to call the long-acting drug Zyprexa Adhera, in the hopes of not-so-subliminally telling doctors that patients will be more likely to adhere to their medication regimen.

Eli Lilly faces a pretty steep patent cliff ahead, but if it can get a few of these delayed drugs past the FDA, and develop ImClone's pipeline successfully, it could land safely on the other side.