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Encouraging Data on Lilly Drug

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Eli Lilly and Company (LLY) and partner Boehringer Ingelheim recently presented positive data on their type II diabetes drug, Tradjenta (linagliptin). The companies presented phase III data which showed that a significant reduction in hemoglobin A1c (HbA1c) levels were achieved in black or African American patients receiving Tradjenta (5mg, once-daily) compared to patients on placebo.

Patients in the Tradjenta arm achieved a reduction of 0.88% in HbA1c level compared to a reduction of 0.24% in the placebo arm at 24 weeks.

These data support the efficacy and safety of Tradjenta in the African American adult type II diabetes population and provides them with an additional treatment option.

Tradjenta is approved as an adjunct to diet and exercise for the improvement of glycemic control in adults with type II diabetes. Eli Lilly and Boehringer Ingelheim presented these results at the American Association of Clinical Endocrinologists (:AACE) 21st annual Scientific and Clinical Congress.

Eli Lilly and Boehringer’s strategic alliance, signed in January 2011, is focused on bringing new diabetes treatments to market.

Neutral on Eli Lilly

We currently have a Neutral recommendation on Eli Lilly, which carries a Zacks #3 Rank (short-term ‘Hold’ rating). The company is facing a challenging period with Zyprexa having losing patent protection in late 2011. With generic players like Teva (TEVA) and Dr. Reddy’s (RDY) launching their generic version of the product, we expect rapid erosion in Zyprexa sales.

We expect the top and bottom lines to remain under pressure as the contraction in Zyprexa sales more than offsets growth in Cymbalta, diabetes and new product sales. The generic threat will continue to pose challenges for Eli Lilly with Cymbalta slated to lose patent protection in 2013 and Evista in 2014. On the flip side, the Animal Health business and emerging markets should provide some downside support. We are also pleased to see Eli Lilly pursuing small acquisitions and in-licensing deals to boost its pipeline.

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