Lilly Reports

Lilly Reports

This morning Lilly (NYSE:LLY) reported second quarter results which indicate the company has begun to turn the corner in reinvigorating their insulin franchise. According to the company Humalog® sales grew by 22% in the quarter largely due to increased demand, sales in the US grew 17% while sales outside the US grew 30%.

The company also mimicked what Amylin (NASDAQ:AMLN) said during their call, in that the discussion with the FDA for the submission of the once-weekly version of Byetta centers around the ability to manufacture the compound at commercial scale.

Getting back to the better than expected results with Humalog, it appears the company has finally found religion realizing two important facts. First, physicians will not prescribe insulin therapy without a better understanding of why insulin is needed and where it fits in with other treatment options. Second, delivery systems matter.

On the first point, Lilly is doing something that really should have be done years ago, mainly educating the physician on the benefits of short-acting insulin therapy before selling the brand. While it would seem like selling 101 to actually create a need for the product before actually selling the product Lilly to their credit now understands the benefits of educating the physician. Something rival Novo Nordisk (NYSE:NVO) has been doing very well for years.

Also following Novo’s lead, Lilly has awoken to something Diabetic Investor has been saying for years; patients prefer simple and easy to use delivery systems. It should be noted that the company indicated that contributing to their growth with Humalog sales has been the introduction of the KwikPen™. The KwikPen is a vast improvement over Lilly’s previous efforts with insulin pens being not just easy to use but much more aesthetically pleasing to the patient. For all the fancy features of other Lilly insulin pens, the KwikPen scores well on the Diabetic Investor SSE scale.

While these changes at Lilly may seem rudimentary they are actually a huge step for the company. After watching Novo basically clean their clock and become the dominate insulin company worldwide Lilly woke up to the fact that they could not sell insulin just because they were Lilly.

It will be interesting to see how the company responds to their next challenge when Liraglutide, Novo’s once-daily GLP-1 now awaiting approval at the FDA comes to market and competes with Byetta. As we already seen from Novo’s actions at the recent ADA conference, the company plans on pulling out all the stops to establish Liraglutide in the marketplace. Based on the results they are seeing with Humalog and Amylin’s comments on how they too are changing the way they sell Byetta, the company appears ready to take on Novo.

As we have seen with all the interest given to GLP-1 therapy at the ADA conference this market is on the verge of exploding. Lilly and Amylin have the lead today and in Diabetic Investor’s opinion the most promising compound in development with Byetta LAR. Novo has shown their hand and will use anything they can to fight for share. The question is will Lilly and Amylin continue their education efforts even when the fight gets nasty. With a decision on Liraglutide expected shortly we’ll soon find out.

Regardless Diabetic Investor is encouraged by Lilly’s newfound humility and emphasis on education. At this point it appears Novo may be falling into the trap of being over-confident. However, Lilly must be careful not to fall back and gain a false sense of security. Both the insulin and GLP-1 markets will be tough battlegrounds worth billions. Be warned this is not a fight for the faint of heart, the stakes are just too high.

David Kliff
Diabetic Investor
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224-715-3761 mobile