Eli Lilly-Boehringer Drug's Cost Effectiveness Questioned

Zacks Equity Research
August 29, 2014

Eli Lilly and Company (LLY) and partner Boehringer Ingelheim are facing an issue related to Jardiance (empagliflozin) in the UK. The National Institute for Health and Care Excellence (NICE) has requested for additional information to validate that Jardiance is cost-effective in comparison with other treatment options already available in the market.

Jardiance was approved in Europe in May 2014 to improve glycemic control in adults suffering from type II diabetes.

The price of Jardiance, according to the press release, stands at £36.59 (excluding VAT) per pack of 28 tablets (10 mg and 25 mg doses). The estimated annual cost of the drug is £470.30. However, the cost might vary depending on negotiations and procurement discounts. According to the draft guidance issued by NICE, Eli Lilly and its partner should provide additional evidence to show that Jardiance is a cost-effective use of the National Health Service’s (NHS) resources.

According to NICE, type II diabetes is a major health issue affecting nearly 2.5 million people in England. Importantly, 90% of diabetic people are estimated to be suffering from type II diabetes. The prevalence of type II diabetes in UK is on the rise.

Several treatments are recommended by NICE for the management of blood sugar levels in patients suffering from type II diabetes. Some approved therapies for this indication include Forxiga, Januvia and Invokana.

We remind investors that Eli Lilly launched Jardiance in the U.S. earlier this week as an adjunct to diet and exercise to improve glycemic control or blood glucose levels in type II diabetes patients.
    
Meanwhile, Eli Lilly’s dulaglutide, a glucagon-like peptide-1 (GLP-1) receptor, is under development for the treatment of type II diabetes. We note that the GLP-1 market for type II diabetes is pretty crowded with the presence of Novo Nordisk’s (NVO) Victoza and Bristol-Myers’ (BMY) Bydureon.

The biggest near-term challenge for Eli Lilly will be to replace the revenues that will be lost to generic competition, now that Zyprexa has lost U.S. and EU exclusivity. However, the Animal Health business and the diabetes franchise should provide some downside support. We are also pleased to see Eli Lilly pursuing small acquisitions and in-licensing deals to boost its pipeline.

Eli Lilly currently holds a Zacks Rank #3 (Hold). A better-ranked stock in the health care sector is Allergan Inc. (AGN), carrying a Zacks Rank #1 (Strong Buy).

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