This is NOT a big deal

This is NOT a big deal

If there is one thing people can pretty much count on it’s the main stream media making a big deal out of what really is a minor story. Diabetic Investor got a good laugh reading the following headlines;

FDA doesn’t approve Lilly-Boehringer diabetes drug- Associated Press

FDA Rejects Eli Lilly’s Diabetes Drug Empagliflozin – Motley Fool

Lilly’s Diabetes Pill Rejected by FDA Over Manufacturing- Bloomberg

To their credit Bloomberg was the least dramatic and most accurate of three examples.

Perhaps the bigger story here is that there is a story at all. Yesterday Lily (NYSE:LLY) issued a press release which stated the following:

“Boehringer Ingelheim Pharmaceuticals, Inc. (BIPI) and Eli Lilly and Company (Lilly; NYSE: LLY) today announced the U.S. Food and Drug Administration (FDA) has issued a complete response letter for the New Drug Application (NDA) of the investigational sodium glucose co-transporter-2 (SGLT2) inhibitor empagliflozin.

The complete response letter referenced previously observed deficiencies at a Boehringer Ingelheim facility where empagliflozin will be manufactured. The FDA stated these deficiencies need to be resolved before the approval of the application. The FDA has not asked Boehringer Ingelheim to complete any new clinical trials to support the approval of the application.”

While this situation is an embarrassment to Lilly and gift to Johnson and Johnson (NYSE:JNJ) who’s SGLT2 Invokana® which is performing better than expected. This is not the end of the world and as much as we hate to say it manufacturing issues happen all the time. As Lilly indicated in their release the FDA is not asking for any additional data or clinical trials.

What Lilly should be worried about is the phrase “previously observed deficiencies at a Boehringer Ingelheim facility where empagliflozin will be manufactured”. That phrase indicates that BI knew there was a problem yet they didn’t fix the problem, that as they say ain’t good news. Diabetic Investor would just love to have eavesdropped on the call between Lilly and BI when the two companies read the FDA’s letter, although we doubt we’d have any trouble hearing what Lilly was saying as they were likely screaming at the top of their lungs. Saying something like “How the f—k did you guys screw this up?”

The simple fact is while this is an embarrassment for Lilly, the drug once BI gets their act together will likely be approved and Lilly will be one step closer to having the most comprehensive diabetes drug portfolio. This quest hasn’t easy as they are already being sued by Sanofi (NYSE:SNY) over their generic version of Lantus, which unless settled means the company has to wait almost 2 ½ years before they can get approval.

The bigger issue here is once they have all the pieces in place what will the puzzle look. Diabetic Investor thinks Lilly is on the right track yet as we’ve noted before what their trying is new and no one not even Lilly knows whether this strategy will actually work. Still they needed this delay like Chicago needs more snow.