How Drug Companies Need Their Patents

Today's post from burrillreport.com (see link below) is interesting because it shows us how drug companies are dependent on their patents for profits. In this case, the makers of Cymbalta (a common drug for the treatment of neuropathic symptoms), Ely Lilly have just lost their patent-exclusivity for Cymbalta and are therefore preparing for a big drop in revenue as other companies move in with alternatives to the drug. More competition is nearly always good news for the patient as it leads to greater choice and generally cheaper prices but there is another side to the story in that companies then have less revenue to invest in new research for newer drugs. It's how the pharmaceutical market works and considering their profit margins, we must be pleased when patents run out and alternatives become available. That said, neuropathy patients are still looking for the big breakthrough new drugs and that requires huge research funds, which are often generated by sales while current drugs are under patent. 

Eli Lilly Still Plans on Meeting 2014 Goals Company faces challenges, but is banking on new approvals and cost cutting.
DANIEL S. LEVINE The Burrill Report  October 03, 2013

“To reach its goals, Lilly says it is banking on targeted growth initiatives and the late-stage drugs in its pipeline.”

Eli Lilly told investors that despite the loss of revenue due to patent expirations for key drugs, it still plans on meeting its goals of generating at least $20 billion in revenue and $3 billion in profit for next year, returning to revenue growth and improving margins after that.

But to do so will be “challenging,” according to Lilly CFO Derica Rice, who noted that devaluation of the Yen and slower market growth in emerging market countries have diminished the company’s near-term expectations for sales growth. Rice says the company is finding appropriate ways to achieve its goals and will take additional actions to achieve its 2014 net income and operating cash flow targets through cutting expenses.

The comments came during a meeting with the investment community held at the company’s global headquarters in Indianapolis.

To reach its goals, Lilly says it is banking on targeted growth initiatives and the late-stage drugs in its pipeline. The company expects to launch several new drugs in 2014 with seven regulatory submissions for four different drugs made in 2013. This includes two drugs for type 2 diabetes and a drug for gastric cancer. The company also said it will make stock repurchases totaling $5 billion over time.

Lilly’s top-selling product, Cymbalta, for the treatment of major depressive disorder and general anxiety disorder, and pain associated with diabetic neuropathy, fibromyalgia and other chronic pain disorders lost patent exclusivity this year. Global sales of the drug accounted for roughly 25 percent of the company’s revenue in the last quarter, and generic selective serotonin and norepinephrine reuptake inhibitors on the market are predicted to reduce Lilly’s 2014 global revenue by 20 percent.

The company says its strategy to focus on development of innovative medicines has produced the strongest pipeline in its 137-year history, with 13 experimental drugs in late-stage clinical testing or in regulatory review and 26 more in mid-stage trials. That’s five times the number of candidates in mid-to-late-stage development than the company had in 2004.

“We’ve undertaken extensive efforts to transform our company to address the challenge of patent expirations and the demands of patients and payers for greater value from medicine,” says John Lechleiter, CEO of Lilly. “Today, we’re seeing our strategy bear fruit, backed by clinical data that strengthens our confidence in our innovation-based strategy and in our ability to return to growth.”

http://www.burrillreport.com/article-lilly_still_plans_on_meeting_2014_goals.html