Eli Lilly's Strategy: The Long Tail in pharma?
There is a good analysis of the strengths and weaknesses of Lilly's potential long term strategy in today's Wall Street Journal. Zyprexa, Lilly's biggest product, is coming off patent in 2011 and Lilly is looking to its pipeline to replace lost Zyprexa sales. Will this strategy work? That's a good question but this author believes that Lilly maybe aware that the days of blockbuster drugs are coming to an end.
Cymbalta has had a tough time achieving the blockbuster sales status of Prozac. It seems, in order to cut costs, research is being circulated that shows that Cymbalta may not be any better at treating depression than of Fluoxetine ( generic Prozac) which is a lot less expensive. Zyprexa is also under attack with similar research studies and it's feasible to think this trend will continue as insurers look to cut the costs of prescription drugs. When I was prescribes Celebrex, for example, for my shoulder my health provider sent me a letter stating that OTV Ibuprofen was just as effective as Celebrex and a lot less expensive.
The new drugs in Lilly's pipeline do look
promising but as Pfizer learned the hard way
there is always some risk in the development of
new drugs.
One of the new drugs in development at
Lilly is
Prasugrel, a blood thinner which Lilly hopes can
rival popular Plavix. This product does have
risks and let's hope that Lilly is not too
dependent on the success of Prasugre. According
to today's WSJ:
The drug appears to create a greater risk than Plavix of causing bleeding in patients, a potential side effect since blood thinners inhibit clotting. The drug faces greater scrutiny and a tougher environment for clinical trials in light of recent disappointments from Nuvelo and Bayer AG, whose jointly developed blood thinner failed to meet targets in late-stage tests, and Pfizer's decision to stop developing the good-cholesterol drug torcetrapib. Lilly also will have to split prasugrel profits with Japanese partner Daiichi Sankyo, making the drug even "less of a long-term earnings driver for Lilly.
The analysis of the Lilly in today's WSJ is good but it's not a thorough analysis which is what I have come to expect from newspapers. In addition to the drugs in the pipeline you also need to take a look at the people who will market these products. Lilly has never been known as a marketing powerhouse and they are going to need marketers with a lot of skill to market products in this era of increases scrutiny and consumer power. One thing is for sure there is a lot of uncertainty at Lilly and in the whole pharmaceutical industry. Lilly will survive and may even prosper but they may have hit a ceiling in overall sales growth. For a while they may just be a $10-$12 billion profitable pharma company with a diversified portfolio and that is fine in the new economy where blockbusters may be few and far between.