Me-too diabetes drugs look good enough for Lilly

Who says the age of me-too drugs is over?

Eli Lilly and Co. is more than 15 years late to the game in the world of diabetes drugs. And it isn’t bringing much that doctors and patients haven’t already seen.

Still, with diabetes getting out of control across the globe, it looks like Lilly has arrived in time to make a few billion a year.

The Indianapolis-based drugmaker was the global pioneer in diabetes medicines when it introduced the first animal-based insulin in 1923 and the first biotech insulin in 1982.

But as I have described before, Lilly missed the boat in the late 1990s and early 2000s on non-insulin medicines for Type 2 diabetics—particularly oral medications that don’t require injections, something patients desperately try to avoid.

Lilly’s sales of diabetes medicines have been growing only about half as fast as its competitors ever since.

But Lilly appears to be staging a comeback. It rolled out a raft of data about its diabetes drugs this past weekend. The numbers look good.

Problem is, they don’t look any better than drugs that are already on the market. Lilly’s experimental drug dulaglutide will compete with Novo Nordisk A/S’ Victoza and Bristol-Myers Squibb Co.’s Bydureon. Lilly’s empagliflozin will compete with Johnson & Johnson’s Invokana, which recently won approval from U.S. regulators.

“There does not appear to be much clinical differentiation in terms of efficacy and side effects,” wrote Morgan Stanley David Risinger, in a June 24 note to investors. Marc Goodman, a pharmaceutical analyst at UBS, said the same.

Still, Lilly will likely find customers, for a couple of reasons. First, dulaglutide is a once-weekly medicine, compared with Victoza’s daily dose. Results of a head-to-head trial of the two drugs are due early next year.

Also, the new drugs will allow Lilly to offer a whole range of medicines to diabetics, not just its insulins. And that portfolio approach will help it pick up sales, since patients and doctors often like to stick with one manufacturer throughout the course of their disease.

“In our view, Lilly will benefit from having a broader portfolio of diabetes drugs that covers the entire treatment paradigm,” Risinger wrote.

By 2020, Lilly could pull in roughly $1 billion each from dulaglutide, empagliflozin and a new long-acting insulin, according to Risinger. He gives the drugs 85 percent or 90 percent chances of being approved.

Other analysts have roughly similar estimates.

Extra sales of $3 billion a year are just what the doctors at Lilly ordered. That’s because the company is in the process of losing nearly $10 billion in annual sales because of patent expirations between 2010 and 2014 on four of its blockbuster drugs.

Of course, $3 billion does not equal $10 billion. So Wall Street analysts want to see something else, such as Lilly’s experimental cancer drug ramucirumab. Lilly is trying to differentiate that drug from Avastin, which has become a $3-billion-a-year powerhouse as a treatment against numerous kinds of cancer.

Some are optimistic, but as I wrote earlier this month, recent failures made others jittery.

“With the upcoming expirations of Cymbalta and Evista, we are less than optimistic on Lilly’s late stage pipeline being able to account for the sales cliff post-2014,” Goodman wrote to investors on June 25.

But Lilly has shown a remarkable ability to wring sales out of me-too drugs. Consider its current best-seller Cymbalta. When approved in 2004, it was the umpteenth antidepressant on the market. Yet the drug has actually accelerated its sales late in its life, rising from $3 billion in 2009 to $5 billion last year.

The Lilly brass are banking more than a little that they can keep it up for a few more years until, they hope, their pipeline produces a game-changer.

What do you all think? Can me-too drugs be enough to help Lilly muddle through its challenges that lie ahead?