Watch stocks you care about
The single, easiest way to keep track of all the stocks that matter...
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
Diabetes is a diverse growth market for big pharma, inspiring differing development tactics. Eli Lilly (NYSE: LLY ) , GlaxoSmithKline (NYSE: GSK ) , and Sanofi (NYSE: SNY ) are all pursuing a well-established class of drugs called GLP-1 agonists. It's a subsector already dominated by Bristol-Myers Squibb (NYSE: BMY ) and Novo Nordisk (NYSE: NVO ) , but it offers less risk than newly emerging classes. Each of the new entrants has an agenda at play -- but who needs this win the most?
The three companies share a need to halt losses from blockbuster patent expirations, but their aims diverge from there. GlaxoSmithKline needs a strong root into the diabetes market. Sanofi's GLP-1 could help support a hit drug approaching the patent cliff. Meanwhile, Eli Lilly sits relatively pretty, watching a well-rounded diabetes pipeline flow toward release.
GLP-1 agonists stimulate insulin production and don't cause hypoglycemia , a common major side effect of diabetes treatments. Victoza from Novo Nordisk is the only current blockbuster in the GLP-1 market, with 2011 revenue of almost 6 billion Danish krone (which amounts to more than $1 billion at current exchange rates). Amylin's daily Byetta injection, which earned more than $500 million last year, and once weekly Bydureon, which received FDA approval earlier this year, were strong enough for a summer acquisition from Bristol-Myers.
For a new drug to succeed, it would need to top these drugs in both effectiveness and convenience. But a true blockbuster is unlikely for the near future.
Sanofi seemed to have failed both metrics with Lyxumia, newly approved in Europe and awaiting a domestic new drug application, or NDA, filing. The daily injection earned criticism for being a Byetta clone. The company recently lost a trio of patents, but is more concerned with 2014 -- when its $5 billion insulin drug Lantus falls off the cliff. Lyxumia is lackluster solo, but as a combination drug with Lantus, it's performing well in late-stage trials. The combination's approval would provide Lantus an extended formof patent protection.
GlaxoSmithKline lost diabetes drug Avandia to generic competition, but revenues had eroded for years after heart risk concerns that led to a sectorwide FDA crackdown. A GLP-1 approval could shake off the dust from Avandia while providing a modest income. Glaxo's once-weekly phase 3 albiglutide bested Merck's DPP-4 pill Januvia in trials and underperformed VIctoza. Analysts predict revenues of $250 million by 2016.
Eli Lilly's stronger GLP-1 entry, if approved, could earn $500 million by 2018. The once-weekly phase 3 dulaglutide outperformed Byetta, but didn't test against direct competitor Bydureon. Dulaglutide will go before the FDA next year, and it's only one piece of Lilly's overall diabetes strategy. The company has three additional diabetes drugs in the pipeline, ranging from insulin to hot new class of SGLT2 treatments.
Foolish final thoughts
The new GLP-1 developers might not reach Victoza's blockbuster status, but approval would benefit the companies in more ways than revenue. Sanofi stands to gain more from combination approval than the solo version. GlaxoSmithKline isn't a name typically associated with diabetes. With so many drugs under development, Eli Lilly has the product pipeline to follow.
Eli Lilly is currently trading about 12% below its 52-week high. Lilly's most recent quarter featured an 11% revenue loss, which isn't substantial, particularly compared to other pharma losses for the quarter. There's also the 4%-plus dividend yield to sweeten the deal. These companies are all big players with fluid late-stage pipelines, but Eli Lilly has the strongest GLP1 drug and the broadest diabetes projects coming down the line.
While you can certainly make huge gains in biotech and pharmaceuticals, the best investing approach is to choose great companies and stick with them for the long term. In our free report "3 Stocks That Will Help You Retire Rich," we name stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.