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Lilly’s Q3 earnings slump on COVID-19 development costs, pricing pressures

Earnings were particularly impacted by lower demand for top diabetes drug Trulicity

Eli Lilly third quarter earnings missed analyst expectations as a result of increased pressure on pricing for its top drugs, as well as climbing development costs for its COVID-19 clinical programmes.

In the third quarter, Lilly’s profit declined to $1.21bn compared to $1.25bn in the same period last year. Although revenues climbed 5% to $5.74bn from $5.48bn last year, this figure missed analyst expectations of $5.88bn.

The earnings were particularly impacted by lower demand for Lilly’s top diabetes drug Trulicity.

The company said that although there were modest list price increases to the drug, it had lower realised prices in the US, driven primarily by changes to estimates for rebates and discounts, which caused a decrease in sales growth.

Operating expenses in the third quarter of 2020 climbed by 9% to $3.03bn compared with the same period last year. This was due to increasing research and development costs, which rose 6% to $1.46bn – representing 25.5% of revenue.

Most of this increase was driven by approximately $125m of higher development expenses for Lilly’s COVID-19 antibody therapies development programme, as well as the research into repurposing its JAK inhibitor Olumiant (baricitinib) for the novel coronavirus.

The company maintained that it still expects full-year revenue to reach between $23.7bn and $24.2bn.

However, Lilly added that achieving the higher end of that forecast would require the inclusion of moderate revenue from its potential COVID-19 treatments – a possibility rather than a certainty, the company admitted.

On Monday, Lilly said that it had cut short a clinical trial of its potential COVID-19 antibody treatment bamlanivimab in the hospitalised setting, based on trial data suggesting that the antibody is ‘unlikely’ to help this patient group recover.

Lilly still has a number of ongoing clinical trials of the antibody in other patient populations, including for the prevention of COVID-19 in residents and staff in care homes as well as in recently diagnosed COVID-19 patients.

The company is also facing issues regarding safety concerns over a manufacturing plant based in Branchburg, New Jersey in the US, where the investigational antibody treatment is being manufactured.

Reuters had previously reported that the US Food and Drug Administration (FDA) had discovered ‘serious quality control issues’ at the plant last year. Inspectors discovered that data had been deleted from previous manufacturing processes, which resulted in an ‘Official Action Indicated’ notice being issued.

“We engaged an external firm to conduct a comprehensive independent review of systems at the Branchburg site, and we are working diligently to incorporate suggestions for improvement to our procedures,” said Lilly CEO David Ricks in an earnings call yesterday.

“We have also had this firm perform independent reviews of our manufacturing of bamlanivimab at Branchburg to examine our manufacturing batch records and quality documentation to corroborate our own batch release decisions as we submit for supply of bamlanivimab from Branchburg for the emergency use authorisation we requested,” he added.

Article by
Lucy Parsons

28th October 2020

From: Sales

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