Why Eli Lilly Is Gouging Diabetes Drug Share From Dow's J&J, Others

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Why Eli Lilly Is Gouging Diabetes Drug Share From Dow's J&J, Others

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Eli Lilly (LLY) is gouging share from Johnson & Johnson (JNJ) and Novo Nordisk (NVO) in two classes of diabetes drugs, an analyst said Monday, though he suggested Lilly's second-quarter metrics would just meet consensus views.

Prescription trends show Lilly's sales and earnings will be roughly in line with Wall Street views, Leerink analyst Seamus Fernandez wrote in a note to clients. The consensus expects Lilly to report $1.04 in adjusted earnings per share on $5.59 billion in sales.

But Fernandez upped his price target on Lilly stock to 93 from 90, noting that diabetes drugs Taltz and Trulicity are doing well. Meanwhile, Lilly's Jardiance and Trulicity are displacing drugs from Dow's J&J and Novo Nordisk in the SGLT-2 and GLP-1 classes of diabetes drugs, respectively.

U.S. prescriptions of SGLT-2 diabetes drugs grew 17% year over year and 6% sequentially in the second quarter, Fernandez said. At the same time, prescriptions from the GLP-1 class of diabetes drugs grew 24% vs. the year-earlier period and 108% quarter over quarter.

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In the SGLT-2 space, Lilly's Jardiance is taking share from J&J's Invokana. A study by J&J showed Invokana can reduce cardiovascular events in diabetes patients, but it also comes with a greater risk of amputation.

The study "validated the class' (cardiovascular) benefit," Fernandez said. But it also "provided a clear tailwind to Lilly's Jardiance which saw accelerated growth in Q2 of 74% year over year and 19% sequential growth compared with 68% year-over-year and 14% sequential growth in Q1."

He expects Jardiance to overtake Invokana in the SGLT-2 class by 2021. The risk of amputation wasn't seen in a separate Jardiance trial by Lilly.

Meanwhile, Trulicity is "nipping at the heels of Novo Nordisk's Victoza with the latter's market share at 43% vs. Trulicity's 33%," Fernandez said. He expects Trulicity to overtake Victoza as the leader of the GLP-1 drug space in the 2018-19 time frame.

Fernandez expects Novo Nordisk's overall diabetes business to decline 2% in 2017 and 4%-6% in 2018-20 as competition intensifies in the insulin arena. But he raised his estimates on Novo Nordisk's semaglutide, a competitor in the GLP-1 space.

He has a market perform rating on Novo Nordisk stock, and outperform ratings on Lilly and Sanofi (SNY) stocks.

In afternoon trading on the stock market today, Lilly stock was up a fraction, near 82.40, Novo Nordisk stock was up 0.6%, near 42.30, and Sanofi stock was flat, near 47.90.

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