On Feb. 18, Eli Lilly (LLY -0.64%) announced impressive results from its first phase 3 clinical trial of mirikizumab in patients with moderately to severely active ulcerative colitis (UC) who didn't benefit from conventional therapies.
Eli Lilly also stated that data from the second trial would be shared in the first half of 2022. With the pharma stock set to file with the U.S. Food and Drug Administration (FDA) for approval of mirikizumab in the first half of this year, this raises the following question: Could approval for a UC indication in the U.S. create another blockbuster drug for Eli Lilly?
Let's dig into the results from the first phase 3 clinical trial and the UC market in the U.S. to try to answer this question.
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A potent treatment for a potentially disruptive condition
UC is an inflammatory bowel disease (IBD) that results in damage to the gastrointestinal (GI) tract. The condition affects only the colon and the rectum, which is a contrast to the other form of IBD called Crohn's disease. The symptoms of UC like abdominal pain, weight loss, and fatigue overlap with Crohn's disease. But the latter can impact any part of the GI tract from the mouth to the anus.
Healthcare professionals are able to determine the severity of UC by the number of a patient's bowel movements per day and whether the condition affects their daily life. Disease severity is often classified as mild if the patient has less than five bowel movements a day and is able to adapt to the disease. On the other hand, moderate-to-severe disease entails up to 10 bowel movements a day and can interfere with work or school attendance.
It's estimated that in any given year, 21% to 22% of the approximately 900,000 UC patients in the U.S. have moderate-to-severe disease activity. The good news is that mirikizumab looks like it will provide a significant improvement in the quality of life for many patients experiencing moderate-to-severe UC.
Eli Lilly enrolled over 1,000 patients in its first phase 3 study with moderate-to-severe UC that either never tried a biologic treatment or didn't benefit from biologic therapies in the past. Patients receiving mirikizumab achieved a much higher rate of symptomatic remission at week 12 than those taking a placebo. More specifically, 45.5% of patients treated with mirikizumab had their symptoms clear up at week 12 compared to 27.9% of patients treated with placebo at week 12.
The drug boasted an exceptional safety profile to boot. Only 2.8% of patients receiving mirikizumab reported serious adverse events, which was well below the 5.3% of the placebo group that reported serious adverse events during the clinical trial.
The indication would be a big boost for Eli Lilly
Based on the data from its first phase 3 clinical trial, mirikizumab is an overwhelmingly safe and effective treatment for UC on its way to an eventual FDA approval. But what will that mean for Eli Lilly's sales?
There are roughly 200,000 moderate-to-severe UC patients in the U.S. in a given year. Factoring in mirikizumab's efficacy and safety profile, my best guess is that the drug can conservatively capture 8% of the patient share or 16,000 patients. While the drug's efficacy and safety profile are major selling points, there are numerous drugs on the market.
Although an annual list price for the drug won't be announced until its potential launch, drugs like AbbVie's (ABBV 0.25%) Humira and Johnson & Johnson's (JNJ 0.67%) Stelara could be good gauges for what mirikizumab's annual list price may be. The former two drugs have respective annual list prices of approximately $80,000 and $150,000.
But I'll assume that mirikizumab will be priced at a lower annual price of $70,000 to try to establish itself in a crowded field. Factoring in insurance adjustments and patient assistance programs, I end up with a net annual price of $50,000 per patient (likely paid mostly by the insurer).
This would work out to just short of blockbuster status at $800 million in annual sales potential. Even for a large-cap pharma stock like Eli Lilly, this is enough to move the needle. If approved, mirikizumab's UC indication would be a 3% bump over Eli Lilly's $25.9 billion in 2022 sales that analysts are forecasting.
Eli Lilly offers investors a deep pipeline
A potential UC indication alone for mirikizumab will probably fall short of blockbuster status for Eli Lilly. But with the drug also in phase 3 clinical trials for Crohn's disease, there's a good chance it will be the next blockbuster for the company.
Even without it, Eli Lilly has a pipeline of dozens of compounds. These include the immunology drug lebrikizumab, potential diabetes mega-blockbuster tirzepatide, and a host of other promising drugs. This is why I believe Eli Lilly will deliver low-double-digit annual non-GAAP (adjusted) diluted earnings per share (EPS) growth over the medium-term.
At a forward price-to-earnings ratio of 29.6, Eli Lilly appears to be a buy for growth investors with a long-term investing mindset.
