Positive Data on Lilly Diabetes Candidate

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Eli Lilly and Company (LLY) recently announced top-line data on its type II diabetes candidate, dulaglutide. The company said that dulaglutide met its primary endpoint in two phase III studies (AWARD-2 and AWARD-4) which are a part of the AWARD program.

Dulaglutide is a glucagon-like peptide 1 (GLP-1) analog which is being developed for the once-weekly treatment of type II diabetes.

Eli Lilly said that with dulaglutide (1.5 mg) meeting the primary efficacy endpoint of non-inferiority to insulin glargine, superiority for lowering HbA1c levels was also evaluated. Dulaglutide 1.5 mg achieved a statistically superior reduction in HbA1c level compared to insulin glargine at 52 weeks in type II diabetes patients on metformin and glimeperide (AWARD-2). Moreover, results from AWARD-4 showed that dulaglutide 1.5 mg plus insulin lispro demonstrated a statistically superior reduction in HbA1c levels compared to insulin glargine plus insulin lispro at 26 weeks.

Gastrointestinal events were the most frequently reported adverse events. This has been observed in other GLP-1 agonists as well.

We note that positive top-line results from the other three AWARD studies were presented in Oct 2012. Results from the AWARD program will be used to support dulaglutide regulatory filings, which are scheduled for this year.

While we are encouraged with the phase III data, we note that the GLP-1 market is getting pretty crowded. While approved products include Novo Nordisk’s (NVO) Victoza and Bristol-Myers Squibb’s (BMY) Bydureon and Byetta, other big pharma companies also have GLP-1 candidates in late-stage development.

Eli Lilly currently holds a Zacks Rank #3 (Hold). 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 US and EU exclusivity. The generic threat will continue to pose challenges for Eli Lilly with Cymbalta slated to lose patent protection in late 2013 and Evista in 2014. On the flip side, 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.

UCB (UCBJF) currently looks attractive with a Zacks Rank #1 (Strong Buy).

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