Playing Hardball

Playing Hardball

Tonight, the Chicago Cubs will take on the Cleveland Indians in game one of the World Series. As everyone knows this is the first series between two teams that have not won a series in over 50 years. We thought of this not just because we are based in Chicago, a city which is flush with anticipation, but while listening to Lilly’s (NYSE: LLY) earnings calls as we see several similarities between Lilly and the Cubs.

Years ago, both the Cubs and Lilly weren’t doing all that. The Cubs were losing on a regular basis and it looked as if Lilly was on the verge of becoming irrelevant in diabetes. The Cubs under new ownership brought in Theo Epstein fresh off building the Boston Red Sox into winners to rebuild the Cubs, while Lilly embarked on rebuilding their diabetes pipeline. In both cases the results were not immediate and there was much pain and suffering before success arrived. But the fact is success has arrived not just for the Cubs but Lilly too. And in another similarity both the Cubs and Lilly have built teams that will sustain success for years to come.

Like the Cubs who have one the deepest lineups in baseball, Lilly has the most comprehensive portfolio of diabetes therapy options. While the cornerstone Humalog franchise continues to run into increasing pricing pressure, newcomers Trulicity, Jardiance and Basaglar are just beginning to show promise. The fact is no other diabetes drug company can walk into a payors office and offer a one-stop shop for all their diabetes drug needs. This puts Lilly firmly in the driver’s seat and makes their competition play defense.

But just as the Cleveland Indians won’t simply hand the title to the Cubs, nor will the competition allow Lilly to win all the battles.  Today’s call was just further confirmation of what we have been saying all along, diabetes drugs have become a commodity and price not performance is what counts.

Still Lilly has a major advantage as they are not dependent on one drug or one drug category. This allows Lilly some leeway their competitors don’t have who must protect one drug or one category.

We further believe that Lilly is ahead of the competition in understanding that lean and mean is the order of the day. The competition is getting there but Lilly is already there.

Just as it won’t be an easy path for the Cubs to the title, it won’t be easy for Lilly either. But just as we think the Cubs will win it in 6, we see Lilly winning over the long term. Both the Cubs and Lilly have suffered in the past, suffered the pain of rebuilding but both are now reaping the benefits of their efforts. More importantly both appear to be built for longer term sustained success.