Eli Lilly Earnings, Halted Covid-19 Drug Trial Disappoint Investors -- Update
October 27 2020 - 5:46PM
Dow Jones News
By Peter Loftus
Eli Lilly & Co. reported lower-than-expected quarterly
earnings due to pricing pressure on top products, while the
drugmaker said it would proceed with plans to introduce a new
Covid-19 antibody treatment despite a setback in one of several
clinical studies of its uses.
The Indianapolis-based company said it would continue pursuing
U.S. authorization for an antibody drug to treat Covid-19 patients
in the early course of illness and with a mild to moderate version
of the disease. That comes after the National Institute of Allergy
and Infectious Diseases said late Monday that it would close a
study of a different use of that drug, later in the course of the
disease in hospitalized patients. The institute concluded the
antibody drug didn't provide a clinical benefit to hospitalized
patients.
Eli Lilly Chief Executive David Ricks said Tuesday that the
halted study doesn't signal significant concerns for LY-CoV555's
safety. "We've learned antibodies are more likely to work early in
the disease and are less likely to be effective in later stages of
the disease," he said in an interview after the company reported
its third-quarter results.
A separate study had shown that the antibody drug reduced
hospitalization rates in people with mild to moderate Covid-19, and
this is the basis for Lilly's request for U.S. regulators to
authorize its use. Eli Lilly plans to continue testing the drug in
other studies, in patients early in the course of their disease,
and in people at risk of infection, including staff and residents
at nursing homes.
Lilly shares dropped 6.9% to $131.90 Tuesday, which analysts
attributed to investor disappointment in the antibody study halt as
well as third-quarter results that missed expectations. The company
lowered its profit guidance for 2020, though it projected continued
recovery in the health-care sector despite the continuing
pandemic.
The company said it expects new prescriptions for patients to
continue to recover in the U.S. Company executives also expect
general health-care activity to accelerate following a slump
earlier in the pandemic as providers shift to telehealth.
Jared Holtz, a health-care equity strategist at
financial-services firm Jefferies, called the quarterly results
slightly disappointing and said the setback for the Covid-19
antibody drug makes Lilly a less formidable player in the hunt for
treatments.
Drugmakers and health officials believe antibody-based drugs may
fill a treatment gap for Covid-19 and provide temporary protection,
even before any Covid-19 vaccine becomes available. Regeneron
Pharmaceuticals Inc. is developing an antibody treatment that has
been shown to reduce virus levels and improve symptoms in Covid-19
patients who weren't hospitalized.
The study of Eli Lilly's drug that the NIAID halted was testing
whether adding the LY-CoV555 antibody to standard treatment --
including the antiviral drug remdesivir -- would improve outcomes
in hospitalized Covid-19 patients versus standard treatment alone.
The study was designed to isolate the effect of the Lilly
antibody.
Enrollment in the study of the drug combination had been paused
earlier this month over a potential safety concern stemming from a
difference in the clinical status between Covid-19 patients who
received the Lilly drug and those who got a placebo. An independent
board overseeing the trial that identified the disparity later said
it found no significant differences in safety outcomes between
those two sets of patients. The board instead decided to recommend
that no more trial participants be given the Lilly drug because of
"lack of clinical benefit" in hospitalized patients, according to
the NIAID.
Mr. Ricks said it was reassuring that the board didn't find
safety differences between the patients who got the antibody
treatment and those who didn't. He said he couldn't predict the
timing of an FDA decision, but "from a public health perspective we
certainly could use the therapy right now in early disease to
reduce hospitalization risk."
Lilly and federal researchers continue to test the antibody in
several different ways, including whether it can prevent disease in
staff and residents of nursing homes where an outbreak has
started.
Lilly has also requested U.S. authorization of its
rheumatoid-arthritis drug Olumiant as a treatment for Covid-19,
based on a study showing it helped hospitalized patients recover
more quickly.
The company Tuesday reported a third-quarter profit decline to
$1.21 billion, or $1.33 a share, from $1.25 billion, or $1.37 a
share, in the same three-month period a year earlier. On an
adjusted basis excluding certain items, Eli Lilly's profit was
$1.54 a share. Analysts polled by FactSet had forecast an adjusted
profit of $1.71 a share.
Revenue rose 5% to $5.74 billion from $5.48 billion a year
earlier, but was short of the analysts' forecast of $5.88
billion.
The revenue shortfall came primarily from lower-than-expected
sales of Lilly's top drug, the diabetes treatment Trulicity. Lilly
said that although it made modest list-price increases in the U.S.,
it had lower realized prices due to changes in its estimates of
rebates and discounts for the drug. As a result, sales growth was
lower than prescription volume growth.
Overall, lower realized prices reduced sales growth by 5
percentage points for the quarter, Lilly said. Higher
research-and-development expenses in the third quarter also weighed
on earnings, including $125 million for potential Covid-19
therapies. Eli Lilly said it expects its full-year expenses for
research and development related to Covid-19 to be $400
million.
The company reiterated its forecast of full-year revenue of
$23.7 billion to $24.2 billion, but said it would need moderate
revenue from potential Covid-19 treatments to hit the higher end of
the range, which is possible but not certain.
The drugmaker said it expects full-year earnings per share to be
$6.20 to $6.40 a share. The company's previous forecast foresaw
earnings per share of $6.48 to $6.68. On an adjusted basis, Lilly
reiterated a forecast of $7.20 to $7.40 per share.
--Matt Grossman contributed to this article.
Write to Peter Loftus at peter.loftus@wsj.com
(END) Dow Jones Newswires
October 27, 2020 17:31 ET (21:31 GMT)
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