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Big Week Ahead for Eli Lilly: Here's What to Look For

By Cory Renauer – Apr 21, 2018 at 4:33PM

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Eli Lilly and Company is about to report first-quarter results after an important meeting with the FDA.

One of America's largest pharmaceutical companies, Eli Lilly and Company (LLY -1.31%) has a lot going on next week. A panel of experts will convene on Monday to discuss a potential blockbuster's once rejected application. The next day, management is scheduled to present first-quarter results.

Is the company's recent revitalization about to kick into high gear? Here are some clues to look for in the days ahead.

Person looking at camera with binoculars.

Image source: Getty Images.

Will independent doctors side with the FDA?

Eli Lilly and its recently troubled partner, Incyte Corporation, have an important date at the FDA on April 23. The partners' new rheumatoid arthritis tablet Olumiant is for sale in Europe, but the FDA rejected an application last year citing evidence suggesting the drug could be linked to dangerous blood clots.

Lilly and Incyte's application package was backed up with seven clinical trials that enrolled around 3,100 patients. Five patients, all of which were enrolled in two of the seven trials, reported dangerous blood clots after taking the drug. Olumiant suppresses the immune system, so holding up an application over five dangerous infections would make sense. Clotting isn't a side effect you would expect from the drug, given its mode of action, which makes the FDA's stance seem downright overprotective.

Lilly wants to launch the drug with a recommended 4 mg dose that tapers to 2 mg, except for treatment-resistant patients. Unfortunately, it seems some members of the Agency don't think the company has provided enough evidence to support the specific recommendation. Running a new trial to see if certain patients given certain dosages are more susceptible to side effects would take years. In the meantime, recently-launched competitor Kevzara from Novartis and Regeneron is gaining popularity in the U.S. market.

Olumiant's European prescribing label contains detailed dosing instructions for half-a-dozen patient groups, plus a specific warning for patients with a history of blood clots. Look for signs that physicians on the panel would be satisfied with a similar solution. The FDA isn't required to follow advisory committee recommendations, but it usually does. 

LLY Revenue (Quarterly) Chart

LLY Revenue (Quarterly) data by YCharts.

Sustaining the comeback?

Lilly's recent drug launches are helping the company's top line return to growth, and investors will want to look for continued signs of strength from key products when the company reports first-quarter earnings on Tuesday, April 24. An FDA approval last December allowed Novo Nordisk to launch Ozempic, a once-weekly GLP-1 agonist that's going to compete fiercely with Lilly's main growth driver at the moment.

Sales of Lilly's drug of the same class Trulicity bounded 119% higher to $2.0 billion for all of 2018 and accelerated to a $2.6 billion annualized run rate during the last three months of the year. That's a pace that would be hard to keep without a new competitive threat. The prescribing labels for both treatments come with similar warnings, and investors will want to look for signs that Novo's drug is pressuring sales of Lilly's.

A dosing-related patent protects Cialis' exclusivity in the U.S. market until September, but fourth-quarter sales of the drug dipped 12%. The drug still makes up around 10% of total sales and another steep drop could make sustaining the company's impressive return to top-line growth difficult.

Luckily, Trulicity isn't the only recently launched product in Lilly's lineup pushing the needle forward. Sales of the company's monthly psoriasis injection Taltz surged 182% in the fourth quarter to an annualized $690 million run rate. The FDA updated its label to include patients with psoriatic arthritis late last year. Look for signs that the expanded population can keep this franchise headed toward peak annual sales estimates that top out around $2.0 billion.

Looking beyond the first quarter

New drugs delivered around 20% of total revenue last year, up from just 9% the year before. That's impressive progress, but Lilly's pipeline needs to deliver another winner if it's going to deliver impressive growth in the years ahead. It looks like it could have another blockbuster in the making with Verzenio for the treatment of breast cancer.

In February, the FDA made Verzenio available as an initial hormone-based therapy for an important group of breast cancer patients. It's going up against Pfizer's Ibrance, a drug that hit $3.1 billion last year and is expected to double sales again before it tops out. If Olumiant gets a pass in the U.S. and Verzenio catches on among its expanded population, don't be surprised if Lilly raises its full-year revenue growth expectations from 8% into the double digits.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.

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