Lilly Foresees No Zyprexa Diabetes Warning In U.S.; Pfizer Sees Opening

Lilly does not anticipate a diabetes contraindication in U.S. labeling for Zyprexa (olanzapine) in the wake of a likely relabeling in Japan.

"Based on discussions as recently as the end of last week" between Lilly regulatory affairs staff and the neuropharm review division at FDA, the company continues "to believe that our label" will "support the continued use of Zyprexa in patients with diabetes," Lilly Director-Investor Relations Simon Harford told an April 15 conference call.

Lilly expects the updated Japanese label to "include a contraindication for patients with diabetes or a history of diabetes."

Lilly "received indication" on April 12 from the Ministry of Health, Labor and Welfare in Japan "that there likely will be a label change for Zyprexa in the Japanese market due to nine reported cases of severe hyperglycemia," Harford said.

The "majority" of the Japanese patients with hyperglycemia had "known or suspected diabetes," Harford noted. The nine cases (including two deaths from diabetic coma) occurred among 137,000 patients treated with Zyprexa since the Japanese launch in June, Lilly said.

The diabetes labeling is important because it affects Lilly's largest product - and because other antipsychotic marketers have been searching for a chink in the Zyprexa product profile.

Zyprexa sales for the first quarter were $819.4 mil., up 29% from $637.1 mil. in 2001. The $182 mil. in net new sales contributed by Zyprexa dwarfed the next largest contributor of new sales, Evista (raloxifene), which generated $29 mil. in new sales to climb to $177.9 mil.

Pfizer maintains that the hyperglycemia issue raised with Zyprexa will create a better environment for a market reconsideration of Geodon (ziprasidone).

In an April 17 discussion of first quarter results, Pfizer declared its intent to turn around the disappointing launch of the antipsychotic. First quarter sales were $36 mil. in the U.S., down 44%.

With its first quarter performance, Geodon produced less sales for Pfizer than three days of Lipitor (atorvastatin). Yet Pfizer management offered an extensive analysis of its competitive position, especially vis-à-vis Zyprexa.

"Our point of view is the gloves are off on Geodon," Pfizer Senior VP-Worldwide Marketing Patrick Kelly declared.

Alluding to Lilly's aggressive counter-detailing mentioned by Pfizer in previous months, Kelly indicated that Pfizer is ready to try to strike back.

"If you want to look for cardiovascular risk associated with the use of antipsychotic drugs," Kelly told the analysts, "we'd point you to Lilly's Zyprexa, where just recently they've been relabeled in the EU with a special warning on hyperglycemia and exacerbation of diabetes, as well as in Japan where the government just announced two deaths in diabetics that were treated with Zyprexa." Kelly said that Pfizer is expanding the sales force behind Geodon during the second quarter.

Pfizer also believes that the recent relabeling of Geodon in the U.S. to expand the list of drugs specifically involved in the QT prolongation warning will help clarify confusion surrounding the QT safety concerns (¹ (Also see "Pfizer Geodon QT Drug Contraindication Expanded, Clarified In New Labeling" - Pink Sheet, 8 Apr, 2002.), p. 17).

Kelly said the revised Geodon labeling has allowed psychiatrists, nurses, pharmacists and pharmacy databanks "to revise their databases as well as to revise their notion of when and where Geodon can be used."

Pfizer claims that a database of over 600,000 patient users of Geodon in the U.S. "demonstrates that we have seen no difference in in-market experience versus that which was experienced in clinical trial studies." Kelly said that Geodon has recently been accepted to the Veteran's Administration national formulary.

The investment community is watching Zyprexa for signs of a slowdown due to pressures on state Medicaid budgets.

Lilly said it is "well positioned" to continue Medicaid reimbursement. Even with the "mounting pressures across the states," Harford said, "Zyprexa to date has been very well-positioned to the strength of the data around its efficacy and therefore the feeling that it should not be part in many of these states' prior authorization lists."

An expanded indication for Zyprexa as a single agent in the U.S. is about two years away. The firm "plans to conduct an additional study of Zyprexa as monotherapy for bipolar depression and submit to the FDA in early 2004." The drug received a recommendation for acute mania associated with bipolar disorder from Europe's Committee on Proprietary Medicinal Products, Lilly reported.

Manufacturing issues are stalling approval of the Zyprexa follow-on Zyprexa IM . Lilly hopes ongoing inspections help to "restore" FDA's confidence in the company.

Zyprexa clinical development is showing more success in combination with fluoxetine ( Prozac ). Harford noted that the olanzapine-fluoxetine combination (OFT) is demonstrating "an even more pronounced effect" in efficacy for bipolar depression than Zyprexa alone.

The "data was so compelling, even in difficult-to-treat patients, that we have been encouraged by the FDA to submit OFT for bipolar depression in 2002," Harford said. "OFT could therefore be the first product approved for bipolar depression," he noted.

The bipolar results for OFT are changing priorities at Lilly. The company now anticipates filing OFT for treatment-resistant depression in the second half of 2004 instead of its earlier projection of the end of 2002. "Clinical results to date have been interesting but not supportive of submission. We will conduct further studies in TRD" with olanzapine-fluoxetine, he said.

Lilly continues to report a slower than expected uptake for Xigris (drotrecogin alfa). Sales were $22 mil. for the quarter. The total narrowly exceeded the fourth quarter of 2001 ($21.5 mil.), when Xigris was launched.

Lilly must almost triple the current Xigris quarterly sales rate to make a run at the current full-year sales target of $250 mil.

The $250 mil. "consensus" estimate for Xigris is a decrease from previous expectations. During its fourth quarter earnings call in January, Lilly cited a $380 mil. consensus figure (² (Also see "Xigris Growth Tied To Patient Selection As Hospitals Wrestle With Protocols" - Pink Sheet, 28 Jan, 2002.), p. 30). At Lilly's estimated average per-dose price of $6,800, the company appears to have sold approximately 3,200 doses of Xigris during the first quarter.

Lilly needs to increase the dosage unit sales about ten-fold, selling an additional 33,000 doses in the next nine months, to meet the $250 mil. target.

For Xigris to reach that target, Lilly needs to generate a more rapid reorder rate. The company reported that since early March three of the top-target customers had purchased the biologic, expanding the uptake to 95 of Lilly's top-100 target account. The company is simultaneously reporting a high rate of accounts with reorders (86%), indicating that the size and frequency of the reorders account for the shortfall.

The fact that Lilly is highlighting the growth of Xigris to $250 mil. as a major factor in the company's 2002 full-year results is ironic given the company's recent campaign to weed out drugs with annual sales below the $300 mil. level.

At a recent Wharton healthcare conference, Lilly Director-Strategic Asset Management Jonathan Northrup noted that one of his primary responsibilities "over the last three years is really trying to exit the market from the $300 mil. type of product."

Northrup explained that the "small' drugs divert resources and attention. "In our view, there are drugs that are really too small for big pharma companies, but they are great drugs: they have a lot of patient benefit, they have a lot of potential, they fit the smaller company very, very well," Northrup said.

The most recent Lilly divestiture of the sort mentioned by Northrup was the sale of U.S. rights of the Darvon and Darvocet franchise to the aaiPharma subsidiary NeoSan Pharmaceuticals for $211.4 mil, "subject to reductions based on initial product sales performance." That family of pain products added about $62.9 mil. in sales in 2001 and $56.5 mil. in sales in 2000.

While finding it hard to break out of an annualized level not too far from the Darvon line, Xigris is clearly a high-visibility focus product for Lilly in a well-recognized area of poor existing treatments (³ (Also see "Lilly Xigris Price Is $6,800 Per Dose; Sepsis Agent Clears FDA" - Pink Sheet, 26 Nov, 2001.), p. 34).

After a slow rollout for Evista, Xigris is also another prominent test of Lilly's ability to develop a new market. The company has been using "peer-to-peer" discussions about positive experiences with Xigris to energize sales of the product (⁴ (Also see "Lilly Focuses Xigris Promotion On Physician “Peer-To-Peer” Discussions" - Pink Sheet, 4 Mar, 2002.), p. 29)