The Indy Two Step
Now that Lilly (NYSE:LLY) and Amylin (NASDAQ:AMLN) have completed their divorce, and Lilly has put their trust into the Boehringer Ingelheim partnership to reestablish the company’s diabetes franchise, Lilly has completed a transition that was once unthinkable, Lilly has successfully taken a top tier diabetes company and turned it into an also-ran irrelevant player. Even if their me-too, copycat, late to market drugs in the pipeline successfully reach the market the company appears destine to be a lower tier player. The harsh reality is that Lilly can no longer be considered a serious player in diabetes and while this may be a legacy franchise, the franchise is dying a slow and very painful death.
During this morning’s earnings call, which had as many technical glitches as Lilly has issues with their diabetes franchise, it was obvious the company itself isn’t buying what they themselves are saying. The company struggled to answer questions about their pipeline as analysts are beginning to notice that this pipeline is really nothing special, that there are no best in class products and that if this franchise is too survive they better do something and do it fast.
The true irony here is that the company blew their chance to own what is becoming one of the more valuable assets in diabetes, the long-acting GLP-1 Bydureon. When the Lilly/Amylin story is finally written and Amylin is owned by someone other than Lilly; Bydureon becomes a blockbuster and the Lilly diabetes franchise is completely ruined, the real question is will Lilly’s management team be held accountable for this disaster. While it will never be admitted publicly it was the arrogance of the executives at Lilly that made working with Amylin impossible. Rather than acknowledge where the diabetes market is and where it is going, these executives stuck their heads in the sand and continued to drink the Lilly kool aid, which when this is all over will turn out to be a witches brew.
The company can talk all they want about how important the diabetes franchise is but the facts are painting a much different picture. The bottom line for Lilly is talk is very cheap and the company cannot talk their way out of the horrendous situation they themselves created. Guess this is what happens when your CEO is more interested in writing op-ed pieces and giving speeches than actually running the company.