Take a look at these recent setbacks.
October 20, 2010 FDA rejects Alkermes drug: Analysts and company officials at Alkermes Inc have been taken by surprise by a U.S. Food and Drug Administration decision not to approve a drug candidate to treat type 2 diabetes, Bydureon. Last week, in an interview with the Boston Business Journal, CEO Richard Pops expressed optimism about the impending FDA decision. The drug candidate is jointly owned by Waltham, Mass.-based Alkermes, Indianapolis, Ind.-based Eli Lilly and Co. and San Diego, Cal.-based Amylin Pharmaceuticals Inc.
http://www.bizjournals.com/boston/news/2010/10/20/fda-rejects-alkermes-drug.html?ana=yfcpc So I dug some more and found this...
September 30, 2010 The One Thing You Need to Know About Eli Lilly:
The company managed to line up a whole mess of blockbusters that will see patent expirations in a very short window of time.
Drug...........2009 Sales (in billions).............Patent Expires
Zyprexa.................$4.9..............................2011
Gemzar..................$1.4..............................2013*
Humalog.................$2.0..............................2013
Cymbalta................$3.1..............................2013
This means that you basically have to throw out any valuation metric that involves trailing data... (since) none of them are really relevant when sales, earnings, and cash flow are sure to fall after generics hit the market.
The solution, of course, is to bring more drugs on the market to make up for those going off-patent -- but that's easier said than done.
http://www.fool.com/investing/general/2010/09/30/the-one-thing-you-need-to-know-about-eli-lilly.aspx And on November 3, Lilly announced...
November 03, 2010 Lilly Announces China R&D Center in Major Strategic Departure: Eli Lilly will build a bricks and mortar center dedicated
to R&D work on diabetes in Shanghai. The center represents a major strategic departure for Lilly, which has touted its partnership approach with China’s innovative life science community. Lilly says diabetes in China, which has reached epidemic proportions, has a different molecular structure than diabetes elsewhere in the world. The company hopes to discover innovative solutions to the disease.
http://seekingalpha.com/article/234308-lilly-announces-china-r-d-center-in-major-strategic-departure?source=yahoo When I piece it all together, it comes out: Lilly, desperate to replace lost revenues, makes a bold move to circumvent the FDA and moves its R&D to China, expediting the process to human testing.
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