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Eli Lilly Officially Puts Merck on Notice

By Sean Williams - Sep 22, 2015 at 7:36AM

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Eli Lilly and partner Boehringer Ingelheim release their highly-anticipated EMPA-REG OUTCOME data on Jardiance, and it doesn't disappoint.

Source: National Cancer Institute.

Cancer and hepatitis C research may have received the bulk of investors' attention in recent years, but whether you realize it or not, we've witnessed quite an improvement in treatments for type 2 diabetes.

Diabetes itself comes in two forms: type 1 and type 2. Type 1 is the inherited portion of the disease that affects about 5% of all diabetes patients and is characterized by the pancreas being unable to produce insulin. Type 2, on the other hand, involves the body not understanding how to fully utilize the insulin that has been produced. With an estimated 29.1 million people in the U.S. with diabetes, and 95% of them with type 2 diabetes, it's a serious and costly disease that needs proper attention.

One of the most popular type 2 diabetes therapies is Merck's (MRK 0.83%) Januvia. Januvia is part of a class of drugs known as DPP-4 inhibitors that work by stimulating the release of incretin in the pancreas and suppressing glucagon in the liver. Januvia has a storied past, and its estimated $6 billion in full-year sales in 2015 demonstrates that it's among one of a handful of staples in treating type 2 diabetics.

Next-generation diabetes therapies take aim at Januvia
However, a number of possible improvements have hit the market in recent years. MannKind hasn't had much success with its inhalable diabetes therapy Afrezza (Afrezza can treat type 1 and type 2 diabetes) early on, but it represents a considerably more convenient delivery system than injections, and it metabolizes through the body a lot faster than traditional insulin injections, thus reducing a patient's chances of hypoglycemia.

Source: Merck.

But, the next-generation type 2 diabetes class that's really turning heads is SGLT-2 inhibitors, such as Eli Lilly's (LLY 3.20%) and Boehringer Ingelheim's Jardiance, Johnson & Johnson's Invokana, and AstraZeneca's Farxiga. Instead of effecting biologic change within the pancreas or liver like previous type 2 diabetes therapies, SGLT-2 inhibitors block the absorption of glucose in the kidneys, allowing patients to excrete excess glucose through their urine.

The big question has been how these next-generation therapies would co-exist with existing diabetes juggernauts like Januvia. Until now, it's been believed that Januvia would hold its ground. Merck has been spending heavily to promote its type 2 diabetes powerhouse, and Januvia has built years of rapport with physicians around the globe. On Thursday, Sept. 17, Eli Lilly officially put Merck on notice that its dominance in the diabetes space could be coming to an end.

Eli Lilly puts Merck on notice
In August, Eli Lilly and its development partner Boehringer Ingelheim announced that its long-term cardiovascular outcomes study, known as EMPA-REG OUTCOME, had met its primary endpoint and demonstrated that it was superior to the current standard of care regarding cardiovascular event risk reduction in patients with a high risk of a cardiovascular event. A cardiovascular event would be described as a non-fatal heart attack or stroke, or even a fatal cardiovascular event.

What we didn't know at the time of the August announcement was exactly how significant this outperformance was, because the data wasn't released. We only knew that, for the first time ever, a diabetes therapy had led to a cardiovascular event risk reduction.

Source: Boehringer Ingelheim Pharmaceuticals.

On Sept. 17 we received the full gambit of data from the EMPA-REG OUTCOME trial, and it was every bit as impressive as Wall Street and investors believed it would be. Jardiance reduced deaths from heart complications by 38%, lowered hospitalizations due to chronic heart failure by 35%, and most importantly, reduced deaths from any cause by 32%.

Another interesting statistic from EMPA-REG is that about 80% of the 7,020 patients were already taking standard of care blood sugar control therapies. The fact that Jardiance made such a dramatic impact on type 2 diabetics that are considered high-risk cardiovascular patients and who were already on standard care therapies bodes very well for future sales of Jardiance.

If there was one minute head-scratcher, it was that non-fatal heart attacks and non-fatal strokes in the study declined by just 14%. I certainly don't want to make light of the improvement Jardiance brought in reducing hospitalizations and cardiovascular-related deaths, but the magnitude of improvement in non-fatal CV events will merit further study.

Has Januvia peaked?
The key takeaway from the EMPA-REG study data release is that Jardiance, at least for the time being, is the superior SGLT-2 inhibitor of the group, and it very likely stands to benefit from improved sales of the drug. But, keep in mind that Invokana and Farxiga are expected to report their cardiovascular outcome trial results in 2017 and 2019, respectively.

Let's not also forget that SGLT-2 inhibitors offer a non-label advantage over DPP-4 inhibitors like Januvia: weight loss. In clinical studies, SGLT-2 inhibitors led to patients losing weight, which is a welcome side effect for most type 2 diabetics. Although not all diabetics are overweight or obese, there is a high correlation between the two diseases.

Source: Centers for Disease Control and Prevention.

So, what of Januvia? My suspicion is that the EMPA-REG study has indeed placed a ceiling on demand for Januvia, leaving Merck with the option of increasing the price of the drug in order to boost its revenue and profits over the near term.

However, Januvia isn't exactly doomed for the scrap heap, either. Until Invokana and Farxiga report their cardiovascular outcomes data, they'll essentially be on a level playing field with Januvia.

SGLT-2 inhibitors have had their own mini-safety concerns, with the Food and Drug Administration warning in May that 20 cases of ketoacidosis, or a buildup of acids in the blood that requires hospitalization, had been reported for patients taking SGLT-2 inhibitors between March 2013 and June 6, 2014. This isn't to say Januvia isn't without its own warnings -- the FDA recently cautioned that Januvia could lead to rare instances of severe joint pain -- but it could be enough to hold back consumers or physicians from going all-in on SGLT-2 inhibitors like Jardiance.

To be clear, the type 2 diabetes space is evolving rapidly, and what holds true today may not hold true a year from now. But, based on the data released by Eli Lilly and Boehringer Ingelheim concerning Jardiance, the importance of Janvuia and DPP-4 inhibitors may slowly erode in the coming years.

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