Memorandum

Lilly 1Q15 – Humalog up 5% to $684 million; Strong post-launch trajectory continues for Trulicity – April 23, 2015

Executive Highlights

  • Total sales for Lilly’s diabetes portfolio increased 6% year-over-year (YOY) as reported to $1.15 billion in 1Q15; flagship product Humalog grew 5% to $684 million.
  • Trulicity posted $18.3 million in sales in its first full quarter on the market, achieving 11% new-to-brand share with ~50% market access so far; SGLT-2 Jardiance franchise sales grew sequentially from $6 million to $19 million.
  • R&D milestones expected in 2015 include: data from Jardiance’s CVOT, phase 3 data presented on peglispro (BIL), and decisions on Trulicity (Japan), the Humalog U200 Kwikpen (US), and an empagliflozin/metformin IR combination.

Lilly provided its 1Q15 update this morning in a call led by CFO Mr. Derica Rice. Total sales for the company’s diabetes portfolio increased 6% year-over-year (YOY) as reported, supported by 5% reported growth (11% in constant currencies) for flagship rapid-acting insulin analog Humalog (insulin lispro) and fairly strong performances for new products Jardiance (SGLT-2 empagliflozin) and Trulicity (once weekly GLP-1 dulaglutide). Trulicity in particular generated significant of discussion during Q&A; management shared that the product has achieved 11% new-to-brand share within the GLP-1 agonist class and that discussions with payers are progressing faster than anticipated – some Part D coverage has already entered the mix. Jardiance sales more than tripled sequentially (with some help from the recently launched SGLT-2/DPP-4 inhibitor combo Glyxambi, which is included in Jardiance sales).

Some key data is on its way in 2015 from Lilly’s pipeline, including phase 3 data on the recently delayed novel basal insulin peglispro – this will be presented at ADA. Topline data from Jardiance’s CVOT is expected around the middle of the year, and during Q&A Diabetes President Mr. Enrique Conterno speculated that the trial has a “decent” shot of demonstrating cardioprotection. The insulin glargine biosimilar Basaglar/Abasaglar is on track to launch late this summer, with a court date for Sanofi’s patent lawsuit in the US set for September. Read on below for an item-by-item overview of the highlights from the call.

Financial results for Lilly’s major diabetes products

Product

1Q15 Revenue (millions)

Year-Over-Year Reported Growth

Sequential Reported Growth

Humalog

$684

5%

-6%

Humulin

$316

0%

-20%

Tradjenta

$82

7%

-1%

Jardiance/Glyxambi

$19

-

245%

Trulicity

$18

-

-100%

Glucagon

$26

22%

6%

Actos

$9

-24%

-12%

Total Diabetes

$1,154

6%

-8%

 

Financial Highlights

  • Total sales for Lilly’s diabetes portfolio increased 6% year-over-year (YOY) as reported to $1.15 billion in 1Q15. The comparison here was not too challenging, as the portfolio was flat as reported in 1Q14. By product, Lilly’s flagship rapid-acting insulin Humalog (insulin lispro) was responsible for the largest portion (42%) of growth, with new arrivals Trulicity (dulaglutide) and Jardiance (empagliflozin) each accounting for slightly over 20%. Performance was significantly stronger in the US (18% growth) than ex-US (8% decline), likely due to the effects of foreign exchange rates – for the whole endocrinology portfolio, growth in constant exchange was around 6% better than growth as reported. Sequentially, sales for the portfolio declined 8% as reported against a fairly middle-of-the-road comparison (4Q14 sales grew 3% sequentially). See the table above for an overview of financial results for Lilly’s major diabetes products.

Insulins (Humalog and Humulin)

  • Humalog sales rose 5% YOY as reported and 11% in constant currencies to $684 million in 1Q15. As with the diabetes portfolio as a whole, sales were significantly stronger in the US (up 12%) than ex-US (down 4%). Sequentially, sales declined 6% overall (-1% in the US and -14% ex-US). Management attributed the positive US growth to wholesaler buying patterns and price increases and suggested that the ex-US decline was driven by the impact of foreign exchange rates and partially offset by increased volume. The results in the US were reassuring and suggest that the product’s decline in 4Q14 (when Humalog fell 2%) was indeed attributable to one-time effects (e.g. wholesaler buying patterns and adjustments to Medicaid/Medicare utilization). However, as evidenced by the recent pricing competition between Sanofi and Novo Nordisk in the basal insulin market, growth driven by increased prices is less likely to happen in 2015, primarily due to an increasingly cost-conscious payer environment as well as product classes that are increasingly viewed as more similar than more differentiated (with some exceptions).
    • There was no discussion during the call regarding the expected impact of formulary contracts for Humalog in 2015. While Lilly benefited throughout 2014 from a major Express Scripts formulary contract for Humalog, management commented during the company’s 2015 guidance call in January that Novo Nordisk appeared to have made the greater gains in this cycle. We expect that swings in either direction are possible as formulary negotiations continue throughout the year and imagine that both Humalog and NovoLog become more likely face pricing pressure from payers in an increasingly competitive environment. However we would have expected any major 2015 formulary contract losses to have made themselves evident in 1Q15’s results, and the absence of a major downturn lends confidence that there was no major negative. One silver lining for companies is that once payers are established with a single supplier and patients have made the switch, the supplier has greater leverage to chip away at the rebating that was necessary to win the contract.
    • Management noted that the Humalog U200 KwikPen has now launched in Europe following EU approval in 4Q14. The product is the first U200 mealtime insulin to reach the market, and Lilly has indicated that it will be targeted toward patients with high (>20 units per day) rapid-acting insulin requirements. The U200 KwikPen holds the same volume of insulin (3 ml) as the U100 KwikPen, meaning it holds the equivalent of 600 units instead of 300 units – many insulin resistant type 2 patients should see this as a major benefit. We have heard more concentrated insulin is disproportionately expensive – it seems like it should be disproportionately cheaper and we’ll be eager to continue to follow this. Lilly confirmed in 4Q14 that the product has been resubmitted in the US following a Complete Response Letter from the FDA in 1Q14 – we’re not sure of what the CRL details were. Assuming a standard review cycle, an FDA decision would be expected in late 2015.
  • Sales of Lilly’s human insulin Humulin were flat YOY as reported and rose 5% in constant currencies to $396 million in 1Q15. Again, there was a substantial discrepancy between US (16% growth) and ex-US (16% decline) performance – while exchange rates accounted for part of this change, the disproportionately strong US performance was a surprise. Sequentially, sales declined 20% against a challenging comparison (18% sequential growth in 4Q14). We noticed at the exhibit hall at this year’s ENDO meeting that Humulin U500 received bigger chunk of Lilly’s booth and a more showy presence, reflecting what we have heard from management that Humulin U500 has been a driver of growth for the Humulin franchise. This is due at least in part to price, growth, which we would assume would be hard to maintain.

Trulicity

  • New once-weekly GLP-1 agonist Trulicity posted $18.3 million in sales in its first full quarter on the market. This total (compared to $10.2 million in 4Q14) includes $14.9 million in sales in the US, where the product was launched in mid-November, and $3.4 million outside the US. Management did not specify in which European countries Trulicity has been launched; the product received EMA approval in late November, and Lilly indicated in 4Q14 that the European rollout would begin in Germany and the UK.
    • Lilly continues to characterize Trulicity as a catalyst for growth of the overall GLP-1 agonist class – we agree. During Q&A, management noted that growth of the class (based on total prescription share) is now 16%, up from 6% in 1Q14 and continuing to accelerate. Lilly echoed previous commentary suggesting that growth of the class is key for Trulicity’s long-term prospects and that the product is expected to be a major player. Novo Nordisk management offered similar commentary in 4Q14, suggesting that the Trulicity launch would likely increase uptake of the class rather than solely drawing share from market leader Victoza (liraglutide) – that said, we do anticipate that a successful Trulicity launch would challenge Victoza’s dominance in the class at least to some degree, especially given that Trulicity is the only GLP-1 agonist to have demonstrated non-inferiority to Victoza (in terms of A1c reduction) in phase 3. That said, we also expect Victoza to continue to grow, partly due to the Saxenda launch (Saxenda will not accessible to most patients, and some who have diabetes will try to move to Victoza).
    • Trulicity has achieved fairly strong early penetration within the GLP-1 agonist class, and management suggested that coverage discussions are progressing faster than expected – that was very positive to hear. Lilly Diabetes President Mr. Enrique Conterno shared during Q&A that Trulicity has achieved 11% new-to-brand share (NBRx) within the GLP-1 agonist class, compared to 23% for AstraZeneca’s Bydureon (exenatide once weekly) and 51% for Victoza. He stressed that this figure should be viewed in the context of approximately 50% market access: Trulicity had ~65% coverage in the commercial insurance segment (accounting for ~75% of the expected market) in 1Q15 and no Medicare Part D coverage. However, Mr. Conterno indicated that commercial coverage has continued to expand (it is now closer to 70%) and that the Medicare discussions have progressed faster than expected – whereas the company originally did not expect coverage until 2016, Trulicity has already gained some limited Part D access since the end of 1Q15.
    • Trulicity has initially been targeted primarily to endocrinologists, but management suggested that uptake among primary care physicians is increasing rapidly. Mr. Conterno shared that NBRx is currently 18% among endocrinologists and in the high single digits in the primary care segment, where the launch began approximately 2.5 months ago. He stressed that uptake among PCPs has been improving week to week and is expected to rise further with increased access. We expect that many PCPs will find Trulicity to be one of the more appealing GLP-1 agonists on the market given its very user-friendly delivery device – an auto-injector that requires a single button push and hides the needle from patients’ view –  and the convenience of once-weekly administration. The chief barrier will be PCP’s lack of familiarity with the class as a whole compared with options like metformin and DPP-4 inhibitors, but that can be overcome in time with proper education and more patient-friendly options. We believe the durability of Trulicity is also an advantage, compared to other drugs used earlier in disease progression.

Jardiance

  • Lilly/BI’s SGLT-2 inhibitor Jardiance (empagliflozin) and the newly launched fixed-dose combination Glyxambi (empagliflozin/linagliptin; see below) collectively brought in $19.3 million in sales in 1Q15. This represents a healthy increase from $5.6 million in sales in 4Q14, Jardiance’s first full quarter on the market. Most of the sales ($15.2 million) came from the US, where Jardiance has been on the market since last August and Glyxambi for almost exactly a month. Ex-US sales totaled $4.1 million; as with Trulicity, management did not specify in which countries the product has launched, but Lilly had indicated in 2Q14 that the UK and Germany were likely to be early European launch markets. Jardiance was also approved in Japan in 4Q14, but we assume that market has not yet contributed meaningfully to sales.
    • The SGLT-2 inhibitor class continues to post impressive growth overall, with J&J’s first-in-class Invokana (canagliflozin) largely maintaining its dominant position. J&J recently reported very strong results ($278 million in sales and ~40% sequential growth) for Invokana in 1Q15, essentially ensuring that the drug will reach blockbuster status by the end of this year. We were interested to hear J&J management comment during that update that Invokana is outperforming its competition and continuing to gain market share despite the arrival of newer entrants; while Jardiance and AZ’s Farxiga (dapagliflozin) have performed well over the past few quarters, we imagine that it may take time to make headway against such an established product. However, one major advantage for both Lilly/BI and AZ is their SGLT-2 inhibitor/DPP-4 inhibitor combinations, which J&J (for the moment) is not pursuing. We hope to hear more discussion of the three products’ performance and potential differentiating factors during AZ’s 1Q15 update tomorrow morning.
    • Management suggested that Jardiance has a “decent” chance to show cardiovascular benefit in the ongoing EMPA-REG-OUTCOME CVOT. That trial is expected to complete this month and report topline results toward the middle of the year. Whether any type 2 diabetes drugs (particularly SGLT-2 inhibitors and GLP-1 agonists) could potentially produce cardiovascular benefit is a matter of enormous interest and debate in the field. The potential for benefit with either class is certainly plausible from a mechanistic standpoint, but the consensus seems to be that the design of most ongoing CVOTs (i.e., short duration, high-risk populations) is not the most conducive to demonstrating superiority. Making a rough estimate, assuming recruiting was roughly linear from the time recruitment began (mid-2010) and ended (mid-2013), the median follow-up through mid-2015 (primary completion) should be around three years, but probably not more than four – this would be better than SAVOR and EXAMINE, though still possibly not enough for a cardioprotection indication – we’ll be very interested to learn more, particularly regarding whether there is “passive follow up” planned.
    • Jardiance was named in a recent open letter from a consumer advocacy group to the FDA protesting the inclusion of weight loss claims in marketing for diabetes drugs. In our view this claim was ill informed given how important weight changes are for diabetes patients, and we believe the FDA will see the issue in this way as well though that is speculation.

Glyxambi (empagliflozin/linagliptin)

  • The US approval and launch of the first-in-class SGLT-2 inhibitor/DPP-4 inhibitor combination Glyxambi was listed as a major highlight for the quarter. Excitement for this class of fixed-dose combinations (FDCs) ran high while the class was progressing through phase 3 due to the possibility of additive or even synergistic efficacy. Phase 3 data showed A1c reductions that were not fully additive but still impressive for a single pill – in patients on baseline metformin, the higher dose of the combination led to an A1c reduction of 1.21% from a baseline of 8.0% compared to reductions of 0.64% and 0.48% for the component doses of empagliflozin and linagliptin, respectively. Beyond efficacy, Glyxambi and other SGLT-2/DPP-4 combinations offer benefits in terms of convenience and consolidating co-pays (likely benefitting adherence).
  • During Q&A, management suggested that Glyxambi should appeal primarily to patients currently on metformin. The two phase 3 trials for Glyxambi focused on patients on baseline metformin and treatment-naïve patients, so there currently is not any data on the use of Glyxambi in patients already on other oral agents. There is also clear appeal for patients who may currently be taking Jardiance and Tradjenta separately, though this is not the majority of patients on either agent. Management suggested that Glyxambi should not cannibalize Jardiance or Tradjenta sales to a large degree and could actually strengthen the two brands. Although we do think that Glyxambi may draw some patients that may otherwise have used Tradjenta or Jardiance as a primary add-on to metformin, the bigger impact will be the opportunity to strongly differentiate the product amidst two drug classes that are fairly homogenous.
  • Lilly/BI made what we see as a wise decision not to pursue sum-of-the-parts pricing for Glyxambi. Based on the phase 3 data it does not look like efficacy was truly additive, and purely additive pricing for a combination of two branded compounds could have been prohibitively expensive. According to our local Walgreens, the out-of-pocket cost for Glyxambi is $581 for 30 pills, significantly lower than the total of $825 for the two components separately ($411 for Jardiance [empagliflozin] and $414 for Tradjenta [linagliptin]).
  • Glyxambi’s closest potential competitor is AZ’s saxagliptin/dapagliflozin combination, which was filed in the US in 1Q15 and should be filed in Europe in 2Q15. Further down the line there is also the potential for an ertugliflozin/sitagliptin combination from Merck and Pfizer (ertugliflozin is currently in phase 3).

Tradjenta

  • Sales of Lilly/BI’s DPP-4 inhibitor Tradjenta (linagliptin) rose 7% YOY as reported (15% in constant currencies) to $82.3 million. The comparison is fairly challenging, as Trajenta was still on its steeper early growth trajectory in 1Q14, when it grew 81% (albeit from a lower base). The $82.3 million total revenue in 1Q15 includes $31.9 million in US sales and $4.1 million outside the US. Performance remained stronger ex-US (9% growth) than in the US (4% growth), though not to the same degree as in recent quarters. Sales were essentially flat sequentially. While we are glad to see the product return to growth after its first-ever YOY decline in 4Q14 (when sales fell 5%), we expect the overall DPP-4 inhibitor slowdown to continue throughout 2015 – of course, unexpectedly positive or negative results from TECOS (the CVOT for Merck’s Januvia [sitagliptin]) in June would likely have a significant impact on the class’ performance. Additionally, even though Glyxambi (linagliptin/empagliflozin) sales are grouped in with Jardiance, the combination represents a great use of linagliptin amidst a pretty homogenous group of DPP-4 inhibitors.
    • During Q&A, one analyst inquired about the potential implications for the DPP-4 inhibitor class of the recent FDA EMDAC meeting on SAVOR and EXAMINE. Lilly management responded only that Tradjenta had not shown any worrisome safety signals with regard to CV death or all-cause mortality in trials thus far and declined to speculate on future FDA actions. From our perspective, the meeting concluded with fairly positive outcomes for the two DPP-4 inhibitors in question (AZ’s Onglyza [saxagliptin] and Takeda’s Nesina [alogliptin]): both received positive votes from the panel on overall CV safety, and most panelists characterized the potential heart failure and mortality signals as unanswered questions rather than definite concerns. However, for a class that sold itself on a pristine safety profile, even these questions could become a drag on sales (especially for Onglyza). The presentation of TECOS results at ADA in June will provide the most instructive indication yet of whether there may be a DPP-4 inhibitor class effect on heart failure. For its part, Tradjenta is currently undergoing two CVOTs: CAROLINA (sulfonylurea-controlled) and CARMELINA (placebo-controlled; also investigating renal outcomes), both of which are expected to complete in 2018.

Other Products

  • Sales of Lilly’s glucagon formulation rose an impressive 22% YOY as reported to $26.4 million. Sequentially, sales rose 6% after an unusual 22% sequential decline in 4Q14. The vast majority of the product’s sales are in the US. Lilly’s and Novo Nordisk’s glucagon formulations are likely to be challenged in the near future by new products from Xeris, Biodel, and Locemia, among others, that do not require reconstitution. However, Lilly has a candidate for hypoglycemia in phase 1 trials, suggesting that the company may be planning to compete in the next-generation glucagon market.
  • Lilly’s revenue from Actos (pioglitazone) sales totaled $8.5 million in 1Q15, declining 24% YOY as reported. Actos sales have been declining for some time following the loss of patent exclusivity and concerns about heart failure, bone fractures, and bladder cancer. Lilly is currently a co-defendant with Takeda in several lawsuits regarding the disclosure of bladder cancer safety data for Actos – Takeda has reportedly tentatively agreed to settle the thousands of active patient lawsuits for a total of $2.2 billion, though the company itself has yet to comment on those plans. Ten-year epidemiological data submitted to the FDA and EMA in September found no statistically significant increase in bladder cancer risk with Actos; however, the exorbitant damages levied against the companies in the first case to receive a verdict (initially ~$9 billion, later reduced to ~$28 million) may have led Takeda to conclude that settling the cases would be the wisest option.

Pipeline Updates

Table: Guidance for Upcoming 2015 Pipeline Milestones

Phase 3 internal readouts

  • Jardiance EMPA-REG OUTCOME CVOT

Phase 3 external disclosures

  • Basal insulin peglispro (BIL) for type 1 and type 2 diabetes
  • Jardiance EMPA-REG OUTCOME CVOT

Regulatory submissions

  • Empagliflozin/linagliptin FDC (Europe)

Regulatory decisions

  • Dulaglutide (Japan)
  • Humalog U200 Kwikpen for type 1 and type 2 diabetes (US)
  • Empagliflozin/metformin IR for type 2 diabetes

Basaglar/Abasaglar (biosimilar insulin glargine)

  • Lilly/BI’s insulin glargine biosimilar is expected to launch in Europe late this summer, according to management during Q&A. This will be the first biosimilar insulin to hit the market, assuming the expected timeline holds. In the US, the trial date for Sanofi’s patent lawsuit against Lilly/BI is set for this September. The filing of the lawsuit triggered a 30-month stay of full approval (the biosimilar was “tentatively” approved by the FDA in August) that extends to 3Q16, but if the case is resolved in Lilly/BI’s favor then a launch could happen sooner. Basaglar will occupy an important position in Lilly’s portfolio, as the company currently does not have a basal insulin on the market and the novel basal insulin peglispro was recently delayed (see below).
  • Pricing for biosimilars remains a major unanswered question. Lilly management has consistently stated that Basaglar is expected to compete as a branded option, a strategy that would not involve sharp discounts vs. branded Lantus (insulin glargine). However, the expectations for price reductions on the part of payers may be higher. Recently, CVS Health’s Chief Medical Officer forecast price reductions of 40%-50% with biosimilar drugs. The entry of additional biosimilar insulin glargine products may further increase price pressure – Biocon/Mylan have an insulin glargine biosimilar in phase 3 that could potentially beat Basaglar to the US market and Merck/Samsung Bioepis have an insulin glargine entering phase 3. Insulin prices have risen sharply in recent years, drawing the ire of clinicians and patients, but biosimilars are poised to reverse this trend to some extent – that said, we do not expect biosimilars to be priced anything like 50% below their current rates.
    • The delay for the novel basal insulin candidate peglispro (see below) may allow Lilly slightly more flexibility in pricing Basaglar. Previously, with peglispro on track for approval in early 2016, avoiding cannibalization of peglispro sales would have been a larger consideration in pricing Basaglar. Now, especially in Europe, Basaglar will have a period of a couple years at least on the market before peglispro arrives.

Peglispro (BIL)

  • Lilly referenced its announcement from February that it is delaying the regulatory filing of peglispro until beyond 2016 to study the impact of increases in liver fat seen in phase 3. Before the announcement, the guidance had been for filings as early as 1Q15. The delay was very disappointing news, as the candidate boasted an exciting set of benefits: in phase 3 it demonstrated consistent superiority in terms of A1c vs. Sanofi’s Lantus along with weight and hypoglycemia benefits. Lilly disclosed topline phase 3 data in type 1 and type 2 diabetes last year. The full phase 3 data on peglispro will be presented at this year’s ADA in June, and we will be looking closely at the liver fat and other safety data (including HDL and triglycerides, for which negative signals have also been seen with peglispro) for clues on the prospects for regulatory submission and approval down the road.

BioChaperone Lispro

  • The ultra-rapid-acting insulin BioChaperone Lispro now appears in phase 1 on Lilly’s pipeline following the formation of a partnership with original developer Adocia in January. This formulation of Lilly’s Humalog (insulin lispro) uses Adocia’s BioChaperone polymer-based platform to improve protein stability and expedite absorption. Under the terms of the licensing agreement, Lilly will be responsible for the future development, manufacturing, and commercialization of BioChaperone Lispro. In exchange, Adocia will receive an upfront payment of $50 million, with the potential for up to $280 million for future development/regulatory milestones, up to $240 million for future sales milestones, and an undisclosed amount of tiered sales royalties. Other companies developing ultra-rapid-acting insulin analogs include Novo Nordisk (FIAsp in phase 3) and Biodel; Sanofi/MannKind’s inhaled insulin Afrezza also boasts an ultra-rapid-acting PK profile.
  • Adocia reported positive results in fall from a phase 2a trial showing a faster-on, faster-off profile with BioChaperone Lispro vs. Humalog. The double-blind, randomized, crossover 12-hour euglycemic clamp trial (ClinicalTrials.gov Identifier: NCT02146651) enrolled 37 patients with type 1 diabetes who received one of three doses of BioChaperone Lispro (0.1 U/kg, 0.2 U/kg, or 0.4 U/kg) or a 0.2 U/kg dose of Humalog. Results confirmed findings from an earlier phase 2a study showing a significantly faster PK/PD profile with BioChaperone Lispro compared to Humalog; they also demonstrated a linear dose-response relationship for BioChaperone Lispro in terms of total metabolic effect and maximum glucose infusion rate. BioChaperone Lispro achieved 136% more insulin exposure in the first 30 minutes post-administration compared to Humalog (p<0.001); it also had a significantly lower time to peak insulin concentration (40 vs. 60 minutes; p=0.001) and was cleared from the blood significantly faster than Humalog. The faster absorption profile led to significantly faster pharmacodynamic action: the early metabolic effect was increased by more than 70% relative to Humalog in the first hour post-administration.
  • The agreement with Adocia also encompasses Adocia’s concentrated BioChaperone Lispro U300, which is designed for insulin pumpers and patients with a high daily insulin requirement. It does not include Adocia’s other insulin products: BioChaperone Combo (insulin glargine/insulin lispro) and HinsBet (fast-acting recombinant human insulin). We see the combo candidate as one that could be especially attractive for Lilly now that it has an insulin glargine biosimilar in its portfolio. Adocia’s BioChaperone technology allows for co-formulation of insulin glargine (which usually requires an acidic formulation) with rapid-acting analogs (which are generally formulated at physiological pH) in a way that was not possible previously.

Synjardy (empagliflozin/metformin)

  • Earlier this month, the EMA’s CHMP issued a positive opinion for Synjardy, a fixed-dose combination (FDC) of Jardiance and metformin. This places a likely approval around a month or two from now. This is an important line extension for Lilly/BI, as AZ and J&J already metformin combinations approved for their SGLT-2 inhibitors (Xigduo and Invokamet/Vokanamet, respectively). Additionally, AZ gained approval late last year for Xigduo XR, a combination using metformin XR that allows for once-daily dosing rather than the twice-daily dosing required with standard metformin. J&J is working on a canagliflozin/metformin XR combination, but we have not heard of a similar project from Lilly/BI. Although metformin combinations are less novel than SGLT-2/DPP-4 inhibitor combinations, they are still beneficial in a practical sense for many of today’s patients: they reduce pill burden and consolidate co-pays without significant additional cost compared to the branded monotherapy.

Glucagon Receptor Antagonist

  • During Q&A, management discussed Lilly’s phase 2 glucagon receptor agonist for type 2 diabetes. In clinical data so far, the candidate has demonstrated rapid reductions in A1c with minimal increase in hypoglycemia or weight – based on this profile, it is not surprising that Lilly has characterized the candidate as one of its most promising diabetes pipeline candidates. However, management acknowledged that the bar is high for new glucose lowering agents, given the number of options available today (including some that will be going generic soon). The differentiating factor for a glucagon receptor antagonist may be its lack of renal clearance and minimal dependence on residual beta cell function, making it particularly appropriate for patients with more longstanding diabetes and renal impairment. This is a group of patients with relatively few treatment options, as many existing glucose lowering drug classes carry contraindications based on renal function, and we are excited to see a new drug class emerging with potential for real differentiation.

Other Pipeline Updates

  • One undisclosed small molecule for diabetes was advanced into phase 1. There, it joins BioChaperone Lispro, three undisclosed biologics for diabetes, and an undisclosed biologic for hypoglycemia. We imagine the hypoglycemia asset is some sort of stable glucagon formulation – this would be wise given that new liquid-stable or even intranasal glucagon kits seem poised to soon take over the relatively patient-unfriendly powder kits from Lilly and Novo Nordisk. See our report on Biodel’s glucagon formulation for an overview of the glucagon competitive landscape. Very intriguingly, during Q&A in the company’s 4Q14 update, management coyly acknowledged that oral GLP-1 agonists are an area of interest for Lilly. 

Questions and Answers

Q: On Glyxambi, could you give us your thoughts on where the patients are going to come from? Do you expect cannibalization of your current products or will they be new to the Lilly franchise?

A: Clearly we are looking at the benefits this product could provide for our patients that are not achieving good control on metformin. So we see this as a very attractive option for many of those patients. And that’s basically what our clinical results also say. So we are excited. We’re in the very early stages of our launch. We launched in late March, so we are at this time basically introducing this product to healthcare providers.

We are not really thinking about the cannibalization aspects when introducing this product. We think this product is a very unique product. And if anything, we believe that this product is actually going to strengthen both Tradjenta and Jardiance as it gains acceptance in the marketplace.

Q: Can you provide any details on how the Trulicity launch is progressing?

A: So far, I think the launch of Trulicity is going well. Let me comment first on the GLP-1 market, because we had shared that we felt Trulicity could be an important catalyst for overall growth in that class, and long-term for us, this is critical as we think about the prospects for this product. A year ago in 1Q14, this class was growing 6% when we look at TRx growth. This year, this class is growing 10 percentage points higher at 16%, and importantly, the growth is still accelerating as we look at new prescriptions. So it is an important start, because we do believe that Trulicity will be a major player in this class, but we want to make sure this class is as relevant as it could be.

To give some details on our penetration within the class itself, Trulicity today has an 11% new to brand share. This is compared to Bydureon at 23% and Victoza at 51%. We are pleased with what we see. Importantly, because we have to put that in context, access discussions are going well and in 1Q15, we had 65% availability in commercial and no availability in Part D. Commercial is about 75% of the overall market, so what this basically means is that we had access to about 50% of the market for Trulicity. We need to look at 11% new to brand share in that context.

What we have shared is that we feel good about our access in commercial. We continue to advance those numbers so we’re closer to 70% now. In Part D, we had shared in the past that we were expecting access most likely starting in 2016. I’m pleased to report that we already have some limited access in Part D, and we believe that access will continue to increase through 2Q15 and 3Q15. So we’re getting access faster than expected, and this I think responds to the value that the payers see in this particular product.

Q: With that kind of growth, can you talk about how the launch in primary care is going? What percent of the business or prescriptions are being generated by endocrinologists vs. primary care?

A: With endocrinologists, which represent slightly under 30% of the overall GLP-1 market, our new to patient share is 18%, so clearly this reflects the fact that we launched in that window earlier. In primary care, our share is still in the high single digits when it comes to new patient share, but it’s increasing fast, so we feel good in terms of where we are today. I think it’s important to note that in primary care, we basically have about two and a half months since we launched, so it’s still very early. But we’re seeing week-to-week progression when it comes to our new to patient share. And clearly, the continual improved access is going to play very well for us.

Q: You’ll approach about six months post-launch about mid-year. With that kind of growth in the market, one would think a good dose of direct-to-consumer advertising might be useful in driving uptake of the product.

A: We’re not ruling out direct-to-consumer or any of those investments. There are a lot of direct-to-consumer investments in the US right now and that’s something we look very closely for all of our brands.

Q: How are you thinking about the insights you learned from the DPP-4 inhibitor FDA meeting and the impact it might have on the DPP-4 inhibitor class?

A: I think we have all seen or heard the discussion at the Advisory Committee. Clearly there was a lot of focus on both CV safety and all-cause mortality endpoints. It is difficult for me to speculate any action that the FDA might take. I think what I can say as far as Tradjenta is concerned, keeping in mind that these numbers are very low and we cannot have any conclusive interpretation from this data, when we look at randomized placebo-controlled trials, when it comes to CV mortality and all-cause mortality, our hazard ratios were below one. So we have no signals indicating that linagliptin would have an issue when it comes to either all-cause mortality or CV death. When it comes to the data for those specific DPP-4 inhibitors, you would have to ask the respective companies.

Q: Can you talk about your relative confidence in Jardiance with regard to the CV outcomes study and the possibility that the study could show a benefit for patients?

A: We are very excited to see the results from our outcomes trial. At this stage, I have characterized our chances as decent, but we have to wait and see. We will have a chance to look at these results over the summer and we expect to publish topline results when we have this data available.

Q: Could you update us on some key data sets through the balance of this year and focus on the data sets for products entering into phase 3?

A: At the ADA meeting this year, we expect to have detailed data from a large number of the phase 3 trials for basal insulin peglispro…we expect data from the CV outcomes trial for Jardiance in the middle part of this year.

Q: Could you remind us of your timing for the launch of glargine in Europe and the US?

A: We are anticipating launching in Europe late in the summer of this year, and in the US, as you are aware, we are subject to a 30-month stay. We do have a trial happening later this year in September. Assuming we have a favorable resolution of that trial prior to the 30-month stay, we would be launching earlier, but the 30-month stay takes us into 3Q16.

Q: On the glucagon receptor antagonist, can you frame what you’re trying to accomplish there and where it might fit into the broader spectrum of treatments?

A: Clearly our glucagon receptor antagonist is in phase 2. What we basically have seen is rapid reductions in A1c without increased hypoglycemia or weight gain. The way we’re thinking about the product is that it has to offer a benefit vis-à-vis a number of oral options that are available today and that in the future will be available in generic form. So we are thinking that this product could be an attractive option in the early segment for patients who have impaired renal function or whose beta cell health might not be great. We don’t see lots of options for these types of patients and GRA could be an attractive option there. The metabolism of these agents is independent of renal function, so therefore it’s suitable for patients that have some compromise in their renal function.

-- by Emily Regier, Manu Venkat, and Kelly Close