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Lilly Down on Mixed Pipeline Data

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Eli Lilly and Company’s (LLY) shares were down 2.98% with the company reporting mixed data on its late-stage oncology candidate, ramucirumab. The company reported top-line results from two studies – one in advanced gastric cancer patients and the other in metastatic breast cancer patients.

The positive news came from the phase III RAINBOW study that was conducted in patients with advanced (locally advanced, unresectable or metastatic) gastric cancer refractory to or progressive after initial chemotherapy. Ramucirumab met the primary endpoint of improved overall survival as well as the secondary endpoint of improved progression-free survival.

The global, randomized, double-blind study compared ramucirumab plus paclitaxel to placebo plus paclitaxel. Common adverse events occurring more frequently in the ramucirumab arm included neutropenia, leukopenia, hypertension, fatigue/asthenia and abdominal pain. Additional data will be presented at an upcoming scientific meeting. Eli Lilly intends to file for approval of the ramucirumab - paclitaxel combination.

We note that Eli Lilly is currently filing a rolling biologics license application (:BLA) for ramucirumab as a monotherapy for gastric cancer and expects to finish the BLA submission by year end.

Meanwhile, Eli Lilly reported disappointing data on ramucirumab from ROSE/ TRIO-012, a phase III study being conducted in women with unresectable, locally recurrent or metastatic HER2-negative breast cancer. The randomized, double-blind study compared ramucirumab plus Taxotere (docetaxel) to placebo plus Taxotere as a first-line treatment.  Apart from failing to achieve the primary endpoint, an interim analysis for overall survival showed no benefit for ramucirumab. Common adverse events occurring more frequently in the ramucirumab arm included fatigue/asthenia, neutropenia, febrile neutropenia, hypertension and stomatitis.

The ROSE/TRIO-012 study is being conducted with TRIO (Translational Research in Oncology), an international cancer research group. Eli Lilly said that it will be working with TRIO to determine the next steps for the patients participating in this study. The company does not intend to seek regulatory approval for the breast cancer indication based on these data.

Eli Lilly is studying ramucirumab for additional indications like colorectal, hepatocellular and lung cancer with results due next year.

Our Take

Like many of its peers, Eli Lilly is facing stiff generic competition and its pipeline needs to deliver to make up for the revenues lost to generic competition. Although Eli Lilly reported positive data on ramucirumab for the gastric cancer indication, shares were down due to the disappointing breast cancer data. The failure represents another pipeline setback for Eli Lilly.

Some pipeline failures in the past few months include the termination of the development of oncology candidate, enzastaurin, the termination of a mid-stage study being conducted with Alzheimer’s disease candidate, LY2886721, Alimta’s failure to achieve the primary endpoint in the randomized, open-label phase III superiority study – PRONOUNCE and the discontinuation of the phase III rheumatoid arthritis program for tabalumab.

On the brighter side, the Animal Health business and the diabetes franchise should offer some downside support. We are also pleased to see Eli Lilly pursuing small acquisitions and in-licensing deals to boost its pipeline. Share buybacks and cost control should help Lilly achieve its 2013 guidance despite the presence of generic competition for key products.Eli Lilly is a Zacks Rank #2 (Buy) stock. Large-cap pharma companies that currently look well-positioned include Roche (RHHBY) with a Zacks Rank #1 (Strong Buy), Bayer (BAYRY) and Novo Nordisk (NVO) with both being Zacks Rank #2 stocks.

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