What Does This Rejection Mean for Eli Lilly?
By Stephen D., Simpson, | More Articles | Save For Later
March 6, 2014 |
In the extremely competitive world of Big Pharma, companies have to be careful to keep all of their ducks in neat little rows. I have made no secret of the fact that I believe Lilly (NYSE: LLY ) struggles in that regard, and yesterday's surprising announcement that the FDA rejected empagliflozin over manufacturing issues at a plant owned and operated by its partner Boehringer Ingelheim doesn't help matters.
Details matter
The FDA most often rejects new drug applications due to concerns that efficacy has not been adequately substantiated, the drug in question is not safe, or there is not a sufficient trade-off between risk and benefit. A lesser known, but still important, part of the process is that the facility in which the new drug is to be made must be in compliance with FDA rules.
It is that latter point that has tripped up Lilly. Lilly announced on Wednesday morning that the FDA had rejected its application for a new SGLT-2 inhibitor called empagliflozin due to cited deficiencies at the Boehringer Ingelheim plant where the drug is to be manufactured. BI and Lilly became partners in diabetes drug development back in 2011, with BI combining its R&D and manufacturing abilities with Lilly's marketing muscle in the diabetes space.
A BI representative later indicated that the company has responded to the previously identified issues at the plant and that an FDA reinspection was under way. Assuming that the FDA is satisfied with the response, that rejection should be reversed but it will likely take at least six months for the full inspection process to end and for the agency to reconsider the submission.
Time to market matters
With Lilly/BI's challenges, Johnson & Johnson (NYSE: JNJ ) and AstraZeneca (NYSE: AZN ) stand to benefit at least a little bit. Johnson & Johnson is nearing the one-year anniversary for the approval of its SGLT-2 drug Invokana and the drug leads the nascent space for SGLT-2 inhibitors. AstraZeneca, which got approval for Farxiga about two months ago (January 8, 2014) has actually since its new drug tracking ahead of Invokana in these very early days of the launch.
Branded drugs may have useful commercial lives of 10 to 15 years, if not longer, so does a six-month delay really matter? In the case of diabetes medications the answer may well be yes. Diabetes is not like depression, where patients will often cycle through multiple drugs before settling on one that works, and doctors and patients tend to stick with what works.
By being the third to arrive at the table, Lilly has a bigger challenge ahead in convincing doctors to switch their patients to its SGLT-2 drug. One factor that should play in Lilly's favor, though, is the ability to sell combo-drugs – combinations of empagliflozin and metformin and empagliflozin and BI's DPP-IV inhibitor Tradjenta – that Johnson & Johnson cannot match.
Ultimately the rejection of empagliflozin is likely to be a temporary glitch – BI will almost certainly get the manufacturing issues resolved, the FDA will reverse its decision and approve the drug, and everyone will go on their merry way. But it may well prove to be a headwind that has some permanent repercussions on the drug's peak sales.