The midwest's largest pharmaceutical company, Eli Lilly (LLY -2.63%) recently made a big bet on a protein that nearly landed on a scrap heap just a couple of years ago. Today, Lilly announced its plans to acquire Dermira (DERM) a commercial-stage biotechnology company developing a potential new eczema treatment called lebrikizumab. The deal is valued at $1.1 billion.
Dermira markets disposable cloths that prevent excessive underarm sweating under the Qbrexza brand, but sales reached just $20.7 million during the first nine months of 2019. The asset Eli Lilly's really interested in is lebrikizumab, an IL-13/IL-4 inhibitor that leans toward IL-13.
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The one that got away
Dermira's developing lebrikizumab to treat patients with moderate-to-severe eczema, but this protein wasn't discovered by Dermira. Roche (RHHBY 1.20%) quickly out-licensed lebrikizumab in 2017 after it failed to provide a clear benefit for asthma patients in a mid-stage clinical trial.
Dermira stock began rocketing higher last spring after the company reported encouraging results from an eczema study with 280 patients. Although Roche probably wishes it held on to lebrikizumab, the Swiss pharmaceutical giant is still eligible to receive significant milestone payments if lebrikizumab continues to and a royalty percentage that tops out in the high teens.
Competition ahead
Regeneron (REGN 0.32%) and Sanofi (SNY 2.00%) market Dupixent, an IL-4 inhibitor that succeeded in studies with eczema patients and patients with severe asthma. Dupixent launched in 2017 and sales hit $1.6 billion during the first nine months of 2019. That suggests there's a good chance that annual lebrikizumab sales can reach $1 billion a few short years from now as a treatment for eczema alone.
