Lilly ups the ante

Lilly ups the ante

The legal battle between Amylin (NASDAQ:AMLN) and Lilly (NYSE:LLY) is not unlike a high stakes poker game and in this case the game is no-limit Texas Hold’em. Just in case you’re unfamiliar with no-limit Texas Hold’em, this is the game made by popular by the World Series of Poker’s Main event; an event that draws thousands of players from across the global that battle to be the last person standing and claim millions of dollars in prize money. Anyone who has watched this event on television knows that the player with best hand does not always win.

Right now Lilly and Amylin are playing a high stakes game and today just upped the ante. According to a press release issued by the company; “Boehringer Ingelheim Pharmaceuticals, Inc. and Eli Lilly and Company (NYSE: LLY) today announced Tradjenta™ (linagliptin) tablets are now available by prescription in pharmacies across the United States including Walgreens, CVS, Rite Aid and many leading chain and independent pharmacies. The U.S. Food and Drug Administration (FDA) approved TRADJENTA on May 2, 2011 as a prescription medication used along with diet and exercise to lower blood sugar in adults with type 2 diabetes.”

The release goes onto to state; “Boehringer Ingelheim and Lilly are in active discussions with various insurance companies about formulary coverage and are seeking for TRADJENTA to be reimbursed at a co-pay level similar to other preferred branded products. The wholesale acquisition price for TRADJENTA is $6.77 per tablet.

A Savings Card Program for TRADJENTA is available for patients who qualify. As part of the program, most commercially insured eligible patients pay no more than $10 per month with a maximum savings of $150 per month. Eligible cash-paying patients without commercial prescription coverage receive up to $150 in savings per 30-day supply of TRADJENTA. The Savings Card Program is valid for up to 24 months and is now available in many doctors’ offices and online.”

It seems as if Lilly isn’t wasting any time taking advantage of recent court ruling that lifted a temporary restraining order which had prevented Lilly and BI from proceeding with their partnership on Tradjenta. Back when the court ruled in Lilly’s favor, Amylin noted they would “vigorously pursue the litigation to enforce our legal and contractual rights.” Based on today’s announcement from Lilly, Diabetic Investor would say that Lilly has just made a major bet and is forcing Amylin either to call or fold. Given Amylin’s response to the most recent court ruling, Diabetic Investor suspects that Amylin will not just call Lilly’s bet but raise it as well.

The simple fact is the big prize here isn’t Tradjenta, as it’s just another DPP-4 that will fail to achieve much in the way of sales. This market is dominated by Januvia and Merck (NYSE:MRK) has nothing to worry about.

The real prize here is Bydureon, the once-weekly GLP-1 that is currently awaiting FDA approval. Marketed properly when approved Bydureon has the potential to be not just game-changing technology but a mega-blockbuster; a product that could make Lilly a relevant player in diabetes and return the company to its former glory in the category.

Today’s move by Lilly also should make the upcoming American Diabetes Association (ADA) Scientific Sessions conference which begins next week in San Diego even more interesting. Taking a look at the most recent floor plan for the exhibit hall it’s somewhat ironic that Lilly and Amylin are nowhere near each other and the Lilly and BI booths are separated by the booth for Novo Nordisk (NYSE:NVO). It should not be forgotten that Novo is also sitting at the poker table with their once daily GLP-1 Victoza.

In some respects Novo stands to be the biggest beneficiary of the battle between Amylin and Lilly. Should this legal battle between Lilly and Amylin become protracted, a realistic possibility, there is a good chance it could interfere with the Bydureon launch. This gives Novo even more time to establish Victoza in the market. As we noted previously Bydureon won’t sell itself and it’s a well-known fact that physicians are reluctant to change a patient’s therapy regimen if that regimen is working.

Novo can also point to Amylin’s own study data that showed that Victoza actually outperformed Bydureon in terms of glucose control. While Victoza did not beat Bydureon by a significant margin and once-weekly administration should trump once daily, Victoza does have other advantages over Bydureon. Unlike Bydureon, Victoza is already available in an easy to use pen delivery system and requires a much smaller needle.

While Bydureon is administered just once a week, when it first gets here it will require a fair amount of patient training as the patient will be required to perform several steps before they can administer the drug plus, while the needle is not the size of a Titan missile as many believe, it will be bigger than the needle used with Victoza. Before the lawsuit Diabetic Investor did not see these differences as major obstacles to physicians prescribing Bydureon due to the fact these differences only come into play once a week. However, should Lilly and Amylin remain at odds when Bydureon gets here it’s anyone’s guess how prepared the companies will be for these issues.

Even before the lawsuit, Diabetic Investor has noted due to past mistakes with the Byetta launch, the key for Lilly and Amylin wasn’t making physicians aware of the drug; it was execution when the drug is ready.  The fact is Lilly and Amylin don’t need to hit a homerun right out of the box. Given the issues noted earlier the key when Bydureon gets here is to establish the drug in the marketplace and set the table for the future when the Bydureon pen delivery system is ready.

As we noted previously as good as Bydureon is physicians will not immediately convert all their type 2 patients to the drug. They like the fact the drug is only administered just once a week, but physicians tend to follow a pattern when a new drug becomes available. Rather than embrace a drug without reservation, they pick a select group of their patients who in effect become test pilots for the new drug. Once they see for themselves how patients are using the drug and hear back from these patients, they then either embrace or reject the drug for their type 2 patient base.

This is why the launch of Bydureon is so critical, it’s a realistic possibility that physicians will be impressed with the results but patients might come back and say that even though the drug is taken just once a week there is just too much work involved. Amylin and Lilly’s job is to prevent this from happening, something which will require a high level of interaction with the physicians and their staff. The better trained patients are the more likely it is they come back and report they love the drug; a love affair that will only get better when the pen delivery system becomes available.  The reality is Bydureon sales should skyrocket when it comes in a patient friendly pen delivery system that also comes with a smaller needle. However, this plane will never takeoff if Amylin and Lilly fail to execute in the beginning.

This is what makes this poker game between Lilly and Amylin so strange. Rather than fighting each other in court they should be working together and doing everything possible to insure Bydureon gets off to a good start. Diabetic Investor also finds it equally strange that Lilly would waste their chips on a drug like Tradjenta; this is like betting on a pair of tens when your opponent has a full house.

The bottom line here is that Lilly and Amylin are playing a very risky game and the stakes are enormous, should they overplay their hands it’s possible both will end up losing.