Eli Lilly (LLY 2.09%) and Boehringer Ingelheim's supplemental New Drug Application for Jardiance tablets to treat adult patients with chronic kidney disease (CKD) was recently accepted for review by the Food and Drug Administration.
With the type 2 diabetes and heart failure drug on the verge of what would be its third indication, this raises the following question: What impact could a CKD indication in the U.S. have on Eli Lilly's overall sales?
Let's look at Jardiance's phase 3 clinical trial results and the CKD market to find out.
NYSE: LLY
Key Data Points
A potent treatment for a stealthy and deadly condition
CKD is a disease that causes a progressive loss of kidney function. The disease is typically diagnosed with blood and urine tests. This is because the kidneys are responsible for filtering waste products and excess fluids from the blood, which is removed in urine.
What makes CKD such a dangerous medical condition is that it often flies under the radar, causing no symptoms in the early stages. By the time that CKD progresses to more advanced stages, the symptoms can include nausea/vomiting, dry and itchy skin, muscle cramps, and decreased mental acuity.
And if the disease isn't properly treated in time, devastating complications such as heart disease, anemia, and end-stage kidney disease can occur. Aside from lifestyle changes like a healthier diet, the first-line treatment for CKD is angiotensin-converting enzyme (ACE) inhibitors. These can sometimes preserve kidney function. And for patients whose condition progresses despite lifestyle changes and treatment with ACE inhibitors, many pharmaceutical companies are working on other treatments.
Chief among those companies are Eli Lilly and the Germany-based Boehringer Ingelheim. The two companies enrolled patients with CKD (and with and without diabetes) in a phase 3 clinical trial. Patients were randomly assigned to two groups; the first received a combination of the standard of care (i.e., ACE inhibitors) and Jardiance, while the second took the standard of care and placebo.
The risk of CKD progression in the treatment group was demonstrated to be 28% lower than the placebo group. Progression was defined as end-stage kidney disease, a continued decline in the measure of kidney function called the estimated glomerular filtration rate (eGFR), or kidney death.
Image source: Getty Images.
The sales potential is significant
Jardiance appears to have proven an effective treatment for CKD. So how much of an impact could that have on Eli Lilly's sales?
There are approximately 37 million individuals living with CKD in the United States. And as the prevalence of the condition rises, Verified Market Research believes that the global CKD drug market will grow 4.7% each year from $12.2 billion in 2022 to $18.4 billion in 2030.
Given that the U.S. accounts for roughly 45% of global pharmaceutical spending, the U.S. share of the global CKD market will be worth around $8.3 billion by 2030.
Due to competition from the likes of AstraZeneca's Farxiga, I will use a 12% market share. This equates to $1 billion in peak annual sales potential for the indication in the U.S. market for the company to split with Boehringer Ingelheim.
Compared to the $30.5 billion in sales that analysts expect from Eli Lilly in 2023, this is a decent lift to revenue. Alongside its dozens of other projects that are in clinical trials, this is why analysts are projecting 17.9% annual earnings growth from the company over the next five years. For context, this is far higher than the drug-manufacturing industry average of 6.6%.
Eli Lilly over the long run
Eli Lilly is a company that is firing on all cylinders. With that in mind, it comes as no surprise that the stock's forward price-to-earnings (P/E) ratio of 42 is well above the industry average forward P/E of 15. The valuation isn't a bargain. But even with its lofty valuation, Eli Lilly could still be a millionaire-maker stock over the long run.
