The chances of the new drug becoming established in the UK are now much lower.
We all know that in order for big drug companies like Eli Lilly (LLY 0.32%) to make a profit, they need regulators to agree that their drugs are safe and effective. But it’s not just regulators that companies must appease before shareholders can benefit.
And in some cases, other groups can have a negative impact on the business and inhibit long-term growth. At this point, it looks like Lily may have fallen into that kind of trap. So let’s break down what’s going wrong and why its momentum may slow down slightly.
International expansion gets off to a rocky start
On October 23, Lilly’s Alzheimer’s disease drug Kisunra was approved in the UK by the Medicines and Healthcare products Regulatory Agency (MHRA), following the US Food and Drug Administration (FDA) regulator and regulator. In Japan. British regulators agreed with clinical trial results suggesting the drug had some effect in slowing or halting the rate of cognitive decline associated with the disease for up to about seven months. They also found that the side effects associated with the treatment, while potentially life-threatening, were tolerable given the benefits it offered.
At the same time, however, the UK’s National Institute for Healthcare Excellence (NICE) has concluded that the drug is not suitable for application within the country’s public healthcare system, as its efficacy is modest and it is not cost-effective to use. We have published draft guidance on this. Medical testing requirements that are burdensome for patients. NICE has asked Lilly to provide further evidence about Kisunra’s effectiveness, and a final ruling is expected on November 20. It is doubtful that there is any existing evidence that would sway the authorities’ view.
NICE estimates that around 70,000 patients living in the UK are eligible for treatment with the drug. According to Lilly, the direct cost of the drug is $32,000 per patient per year, but from the perspective of a public healthcare system like the UK, there are associated indirect costs, such as the medical monitoring that patients need to undergo. It also costs a considerable amount of money. Assuming that all eligible patients in the UK used the public system rather than purchasing Kisunra directly, Lilly was eyeing an addressable market with annual sales of more than $2.2 billion.
At this point, it seems unlikely that any potential returns will materialize. To make matters worse, it has now emerged that regulators in other countries with public health systems may agree with NICE and refuse to provide insurance to Kisunra. In other words, Lilly’s attempts to roll out the drug internationally may fail. And that would be another headwind for the company’s sales growth and, by extension, stock price growth.
Keep the big picture in mind
While the potential loss of the UK market for the drug may be harsh, Lilly is far from helpless and, while the damage is significant, it may not actually grow much if its research and development (R&D) pipeline continues. It may not be a hindrance. To provide blockbuster drugs for other indications.
Before the NICE decision, Cantor Fitzgerald’s Louise Chen estimated that Kisunra could bring in around $2 billion in annual revenue by 2029. For reference, the company’s trailing twelve month revenue was $38.9 billion. Therefore, while revenue forecasts are likely to decline, the drug will always be one of only a small component of the company’s sales, especially given the number of other drugs it will launch between now and 2029. It’s important to remember that it’s just a .
The company still has 20 programs in Phase 3 clinical trials, including one to treat Alzheimer’s disease that is based on a different molecule than Kisunra. Many of these programs will be approved for sale in the future.
In other words, while there’s no way to interpret this new development as good news for shareholders, the investment thesis for this stock is still very much alive.
Alex Karkidi has no position in any stocks mentioned. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a disclosure policy.
