Eli Lilly R&D Pipeline Overview: Driving a Market Cap Surpassing $300 Billion Through Internal Innovation

Recently, Eli Lilly's oral Selective Estrogen Receptor Degraders (SERDs) Imlunestrant has been registered for the first clinical trial in China. This is the Chinese segment of the global multicenter Phase III clinical trial, the EMBER-3 study, which plans to enroll 120 participants in China. The aim is to compare the progression-free survival (PFS) improvement in ER+/HER2- locally advanced or metastatic breast cancer patients treated with Imlunestrant versus investigator-selected endocrine therapy, as well as Imlunestrant combined with Abemaciclib versus Imlunestrant monotherapy.

Abemaciclib is one of the "three giants" of global CDK4/6 inhibitors. This combination therapy of CDK4/6 inhibitor with SERD represents the synergy of in-house pipeline products from Eli Lilly and Company, which is consistent with their long-standing approach of deep cultivation in the pharmaceutical field.

Eli Lilly and Company was founded by the formidable Colonel Eli Lilly in the years following the Civil War. Later, his successors propelled it to the throne of dominance in the insulin field. What has driven Eli Lilly's rise through the thorny competition among pharmaceutical giants in the United States? Is it the advantageous geographic location, the excellent corporate culture, or the robust R&D capabilities and extensive product pipeline?

Market Value Exceeds 300 Billion USD, What Makes Eli Lilly and Company Stand Out?

Figure 1: Eli Lilly (LLY) Stock Price Candlestick Chart

Source: Sina Finance

Eli Lilly and Company was founded by Colonel Eli Lilly in the United States on May 10, 1876. With a history of over 140 years, the company's headquarters is located in Indianapolis, Indiana, a small city in the American Midwest. In contrast, most large American pharmaceutical companies are concentrated on the East and West Coasts, with biopharmaceutical firms clustered in the Boston area and the San Francisco Bay Area. Clearly lacking a geographically advantageous position, Eli Lilly's success can only rely on high R&D investment combined with strong research capabilities, establishing a robust pipeline. Historically, this is indeed what Eli Lilly has done.

Currently, Eli Lilly and Company mainly focuses on five segments: diabetes, oncology, immunology, neuroscience, and others. On February 3, 2022, Eli Lilly released its 2021 annual financial report, achieving total revenue of $28.318 billion (+15%) and adjusted net profit of $7.437 billion (+20%) in 2021; including Q4 2021 revenue of $8 billion (+8%) and adjusted net profit of $2.268 billion (+8%). Revenue in China reached $1.661 billion, increasing by 49% compared to $1.117 billion in 2020, making China the fastest-growing market for Eli Lilly globally.

Eli Lilly's flagship product, the GLP-1 receptor agonist Trulicity (dulaglutide), maintained a stable high growth rate of over 20% in 2021, with full-year sales reaching $6.472 billion.

Figure 2: Revenue Breakdown of Eli Lilly's Product Segments Over the Years

Source: Guosheng Securities

Diabetes has always been a key focus and area of strength for Eli Lilly. In 2021, a portfolio of eight products, including dulaglutide, Humulin (recombinant human insulin), Humalog (insulin lispro), and Jardiance (empagliflozin), contributed a combined $13.188 billion, accounting for 46.6% of Eli Lilly's total revenue in 2021, serving as the core growth driver of its performance.

Oncology drugs are the second largest revenue segment for Eli Lilly, contributing $5.741 billion in income. There are three products with sales exceeding $1 billion: the established product Alimta (pemetrexed, $2.061 billion, used to treat malignant mesothelioma and non-squamous non-small cell lung cancer), Verzenio (abemaciclib, $1.35 billion, used for the treatment of advanced or metastatic breast cancer and as adjuvant therapy for early breast cancer), and Cyramza (ramucirumab, $1.033 billion, used to treat advanced gastric or gastroesophageal junction adenocarcinoma, non-small cell lung cancer, and metastatic colorectal cancer).

Immunoinflammatory Drugs: Olumiant (Baricitinib, JAK inhibitor) was one of the best-performing products last year, achieving $1.115 billion with a 75% growth rate. On June 13, 2022, the FDA approved Baricitinib for the treatment of adult patients with severe alopecia areata, marking the first systemic therapy approved by the FDA for the treatment of alopecia areata.

The field of neurological drugs is also a key area for Eli Lilly. In other areas, revenue reached $2.239 billion due to the rapid increase in COVID-19 neutralizing antibodies, and COVID-19 Antibodies became one of the top three best-selling products for Eli Lilly last year.

Table 1 Sales Details of Eli Lilly's Major Products in 2021

Source: Guosheng Securities

Diversified Pipeline Layout Advances in All Fields Simultaneously

Figure 3: Eli Lilly's R&D Pipeline

Source: Eli Lilly and Company Official Website

The already marketed drugs mentioned above have brought substantial profits to Eli Lilly, which were then reinvested into the R&D of innovative drugs. In 2021, Eli Lilly's R&D investment reached $7 billion, accounting for 25% of its sales revenue, making it the highest proportion among the top 10 global pharmaceutical companies in terms of R&D investment. Eli Lilly's long-term success hinges on its ability to continuously discover or acquire, develop, and commercialize innovative new drugs. According to Eli Lilly’s 2021 annual report, approximately 45 new drug candidates are currently in clinical development or under regulatory review. Among them, 23 indications for 14 products are in phase 3 clinical trials, multiple products are in phase 2 clinical trials, and even more projects are in the clinical discovery stage.

Table 2: Eli Lilly's Product Pipeline in Late-Stage Clinical Trials by Therapeutic Area

Source: Eli Lilly's official website, 2021 Annual Report

Key Product in Diabetes Treatment: Tirzepatide, the World's First GIP and GLP-1 Receptor Agonist

On May 13, 2022, the US FDA approved tirzepatide injection, the world's first glucose-dependent insulinotropic polypeptide (GIP) and glucagon-like peptide-1 (GLP-1) receptor agonist. It is administered once weekly, in conjunction with diet and exercise, to improve glycemic control in adults with type 2 diabetes. Eli Lilly stated that tirzepatide is the first new class of diabetes medication introduced in nearly a decade.

The approval of Tirzepatide was based on the positive clinical trial results from the SURPASS program. This clinical research began at the end of 2018 and included five global registration trials, as well as active comparator studies against semaglutide (1mg), insulin glargine, and degludec insulin. The study evaluated the efficacy of Tirzepatide when used alone or in combination with commonly prescribed diabetes medications, including metformin, SGLT2 inhibitors, sulfonylureas, and insulin glargine. Clinical results showed that participants receiving a 5 mg dose of Tirzepatide experienced an average A1C reduction of 1.8%-2.1%, while those on 10 mg and 15 mg doses saw an average A1C reduction of 1.7%-2.4%. Participants treated with the maximum recommended dose (15 mg) achieved an A1C reduction that was 0.5% greater than with semaglutide, 0.9% greater than with degludec insulin, and 1.0% greater than with insulin glargine.

Weight change was a key secondary endpoint in all SURPASS studies, with participants receiving various doses of Tirzepatide experiencing an average weight loss of 12 to 25 pounds. Clinical trials assessing Tirzepatide's efficacy in weight management are ongoing. Recently, in the Phase III SURMOUNT-1 trial, treatment groups receiving tirzepatide (5mg, 10mg, 15mg) demonstrated significantly greater weight loss at week 72 compared to the placebo group, with an average weight reduction of up to 22.5% (24kg). Notably, 63% of patients in the 15mg high-dose group achieved a weight loss of over 20%.

Figure 4: Tirzepatide's SURMOUNT Clinical Program

Source: Eli Lilly and Company Official Website

Immunology Field: Lebrikizumab and Baricitinib Expected to Drive New Growth

Lebrikizumab is a novel monoclonal antibody (mAb) that binds to soluble IL-13 with high affinity, featuring high bioavailability, a long half-life, and the ability to block IL-13 signaling. In the Phase 3 clinical trial named ADvocate 1, 79% of patients treated every four weeks and 79% of patients treated every two weeks maintained over 75% improvement in skin symptoms (EASI-75) after one year. In the Phase 3 clinical trial named ADvocate 2, 85% of patients treated every four weeks and 77% of patients treated every two weeks sustained EASI-75 relief. Based on these data, Eli Lilly plans to submit a Biologics License Application (BLA) for lebrikizumab in the second half of this year. Previously, lebrikizumab had received Fast Track designation from the U.S. FDA for treating adult and adolescent patients with moderate-to-severe atopic dermatitis.

Baricitinib is a Janus kinase inhibitor that can block the activity of one or more specific enzyme families, interfering with pathways that lead to inflammation. Originally a treatment for rheumatoid arthritis, in November 2020 it was granted Emergency Use Authorization by the FDA for use in combination with remdesivir to treat COVID-19. In June this year, the FDA announced approval of a new indication for baricitinib for the treatment of severe alopecia areata in adults. This is the first systemic therapy (whole-body therapy) for alopecia areata approved by the FDA. However, due to baricitinib failing to meet the primary endpoints in two clinical studies (SLE-BRAVE-I and II) for the treatment of systemic lupus erythematosus, Eli Lilly has discontinued the Phase III clinical study of baricitinib for the treatment of systemic lupus erythematosus.

Key Products in Neuroscience: A Breakthrough is Anticipated

Alzheimer's disease is a field in which Eli Lilly and Company has been actively investing. Unfortunately, solanezumab, which Eli Lilly had high hopes for, encountered multiple clinical failures. However, donanemab, another promising new drug from Eli Lilly for the treatment of early Alzheimer's disease, was granted Breakthrough Therapy designation by the U.S. FDA in June of last year. Subsequently, in October, Eli Lilly initiated a rolling submission of a Biologics License Application (BLA) to the FDA, seeking accelerated approval.

Donanemab is a monoclonal antibody targeting N3pG (a modified type of β-amyloid). Results from Eli Lilly's TRAILBLAZER-ALZ study showed that it met the primary endpoint, with a 32% reduction in the decline of iADRS scores from baseline to week 76 compared to the placebo group. Donanemab also demonstrated consistent improvements across all pre-specified secondary endpoints measuring cognition and function, though it did not achieve nominal statistical significance for each secondary endpoint. This inevitably brings to mind aducanumab, which was the first drug approved by the FDA in 20 years amid much fanfare but has since faced a tumultuous journey marked by controversy, restricted use, and poor sales performance. Ultimately, Biogen had to face reality by disbanding its sales team and withdrawing its marketing application in Europe. Clearly, the path to approval for Alzheimer’s drugs remains arduous unless there is a breakthrough in efficacy over existing treatments.

Key Oncology Product: Abemaciclib’s Role in Early-Stage Breast Cancer Adjuvant Therapy Becomes a New Growth Point in the Anticancer Field

Abemaciclib generated $1.35 billion in revenue for the full year of 2021, representing a 48% increase compared to the full year of 2020, and has become the second highest-selling product in Eli Lilly's oncology portfolio.

Abemaciclib is a dual CDK4/6 inhibitor. As early as September 28, 2017, the FDA had already approved abemaciclib for the treatment of HR+/HER2- advanced or metastatic breast cancer. On October 12, 2021, the FDA approved abemaciclib in combination with endocrine therapy (tamoxifen or aromatase inhibitors) as adjuvant treatment for HR+/HER2-, lymph node-positive, high recurrence risk, and Ki-67 score ≥20% early breast cancer.

In March 2022, this indication was approved by the NMPA in China, becoming the first and only CDK4/6 inhibitor approved for early breast cancer patients in China.

Summary

In summary, Eli Lilly started with quinine for malaria treatment and high-quality drug capsules. In the 1920s, it formed a connection with insulin and gradually developed into a global leader in the insulin field. While expanding its diabetes treatment business, the company steadily diversified, extending its R&D pipeline to areas such as neuroscience, oncology, and immunology. It has also achieved notable success in the field of COVID-19 treatment.

Because Eli Lilly has rarely engaged in large-scale mergers and acquisitions like Pfizer or Roche, the company's R&D investment has increased year by year. Between 2000 and 2017, Eli Lilly’s average R&D investment accounted for 21.03% of its sales, significantly higher than the average level of major pharmaceutical giants. With a 140-year history, Eli Lilly has experienced almost no major setbacks. However, this step-by-step and steady business strategy has also led to Eli Lilly’s market value reaching $300 billion this year. Finally, as China’s pharmaceutical industry is now booming, which companies among the numerous pharmaceutical enterprises can be regarded as "China’s Eli Lilly"? Is the "Eli Lilly model" feasible in China?

References:

Eli Lilly's annual reports, official website, and various publicly available materials, etc.

Editor: Liuli

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