Eli Lilly's Market Cap Breaks $90 Billion: Can the New AD Drug Donanemab Break the 99.6% Failure Rate Curse and Lead the Market?

After in-depth analysis and careful evaluation, we found that Lilly's market cap growth has not stalled. Since its market capitalisation topped $400bn in May last year, making it the world's most valuable pharmaceutical company, its share price has continued to climb and is now more than $900bn, more than double the "peak" expected by the market. In the second quarter of 2024, Lilly showed strong growth momentum, with revenue of $20 billion in the first half of the year, up 31% year-on-year, net profit of $5.21 billion, up 68%, and full-year revenue guidance expected to increase by $3 billion.

Lilly's market value growth is mainly due to its innovative drug tilpotide in the field of blood sugar and weight loss, and the newly approved drug Donezumab for Alzheimer's disease (AD). Market analysts pointed out that the three major factors for Lilly's market value growth include: first, the growth prospects are broad, and the two major drug markets have great potential; Second, the competitive advantage is obvious, the clinical effect is remarkable, and the competitors are difficult to match; Third, other multinational pharmaceutical companies face challenges such as patent expiration and transformation difficulties, and Lilly has become the preferred choice for investors.

In the eyes of the industry, Eli Lilly is not at the top of the oncology field, but it continues to lead in the field of autoimmune and endocrine. From the authorization of the Nobel Prize drug insulin in 1923 to the listing of the slimmed-weight version of tilpotide in 2023, Eli Lilly's market capitalization ranked first in the world, which happened to experience 100 years of history.

Eli Lilly is known for its strong products, compliant operations, and prudent approach. In terms of sales strategy, Eli Lilly tends to use its strong product force and academic promotion ability, rather than pursuing excessive sales growth targets. Lilly's sales metrics are more modest than those of other drug companies, which has also made other drug companies hesitate to hire Lilly salespeople.

Although Eli Lilly is seen by some as a "retirement friendly" multinational, it has Tipotide, which could become the best-selling drug in history, and Donezumab, a new drug that can effectively treat Alzheimer's disease, and is now on the rise. The industry generally believes that the sales growth momentum of tilpotide is still strong, the market potential of Donezumab is about to be released, and Lilly's market value growth journey has not yet ended, and it is expected to reach the milestone of trillion dollars in the future.

In the field of diabetes treatment, Eli Lilly is recognized worldwide as a pioneer for its outstanding contributions to the development of insulin. In 1923, McLeod and Banting won the Nobel Prize for their discovery of insulin, and in the same year, Eli Lilly obtained the license to manufacture the drug, which began its brilliant journey in the field of diabetes treatment.

Subsequently, Eli Lilly and Novo Nordisk, Sanofi and other pharmaceutical giants wrote a chapter in the history of insulin development. From the animal insulin in the 1920s, to the recombinant human insulin in the 1980s, to the insulin analogue in the 1990s, to the advent of innovative products such as insulin glargine, insulin aspartic, and insulin Dete in the new century, every leap in insulin research and development has condensed the wisdom and efforts of these three pharmaceutical companies.

Entering the GLP-1 era, Eli Lilly's competition with Novo Nordisk was particularly fierce. Since 2005, the two sides in exenatide, liraglutide, Duraglutide, Simeaglutide and other products launched fierce competition, and constantly promote the innovation of diabetes treatment technology, its single product sales have reached 3 billion US dollars, the competitive situation is still tense.

In 2021, Novo Nordisk's Semiglutide was launched as a weight loss drug and quickly became the focus of the market. The drug is deeply affected by aesthetic, consumption, culture and other multiple factors, and has become one of the products with high enthusiasm of patients in the history of human medicine. In the domestic market, the sales performance of Semaglutide is strong, so that the working mode of medical representatives has also changed, there is a "lying flat" phenomenon, many customers have not seen medical representatives for a long time.

Simeiglutide achieved sales of $10 billion in the first year of listing, and doubled in the second year, once close to becoming the "king of medicine" status. However, this momentum was quickly surpassed by Lilly's Tipotide.

In May 2022, tilpotide was officially launched, marking the birth of the world's first GIP/GLP-1 dual-target receptor agonist. Experimental data showed that the drug had a significant advantage over GLP-1 Semaglutide in weight loss.

Although tilpotide's indication for obesity was not officially approved until November 2023, its sales in 2023 have exceeded the $5 billion mark, far exceeding the $286 million Simeaglutide was initially marketed as a hypoglycemic drug in 2018.

Entering 2024, sales of tilpotide continued to grow at an impressive rate, contributing $6.658 billion in revenue in the first half alone, accounting for 33% of Lilly's revenue in the same period. Among them, the slimmed down Zepound has already generated more than $1 billion in revenue in the second quarter of 2024, just three quarters after it went public.

This rapid sales momentum even exceeded the company's expectations. Eli Lilly CEO David Ricks says the company is not doing a big marketing campaign.

In the field of weight loss, tilpotide is rapidly rising along the successful trajectory of Semaglutide. Although there is still a gap compared with Simeglotide's sales of $13 billion in the first half of the year, according to the revenue growth trend analysis, tilpotide is gradually narrowing the gap with Simetide.

The industry expects that based on the current growth trend, the sales curve of tilpotide and Semaglutide may converge in the fourth quarter of this year, and the sales of tilpotide in a single quarter are expected to exceed semaglutide.

Thanks to the powerful indication engine of weight loss, Eli Lilly has risen at an astonishing speed and become the focus of the global pharmaceutical industry.

Although Semaglutide has a first-mover advantage in the market, the empirical evidence of the clinical effects of new drugs still needs to be strengthened. Capacity supply is also a key factor in whether tilpotide can surpass Semaglutide.

Due to "exceeding expectations" in the area of weight loss demand, the supply shortage of Semaglutide and tilpotide has been widely known, even affecting diabetes patients. In this regard, tilpotide, with its advantages in chemical synthesis, is more convenient in terms of capacity expansion.

In May, Eli Lilly announced an additional $5.3 billion investment in the construction of a manufacturing site in Lebanon, Indiana, to further expand tilpotide's capacity. Together with the previous $3.7 billion investment, Lilly's total investment in tilpotide has reached $9 billion, the largest investment in the company's history. In fact, Eli Lilly is also well on its way to building new global capacity in places like Germany.

The "Limited Supply" label for Telpotide has been removed from the FDA's shortage catalog. However, some in the industry believe that the production capacity of tilpotide is being solved faster than expected, the growth of the diabetes field has leveled off, and the market ceiling of weight loss indications may also appear soon. With the rapid expansion of production capacity, Telpotide may no longer face a supply problem in the future, but a new overcapacity problem.

On the "volume" issue of tilpotide, Eli Lilly is trying to promote its entry into Medicare in the United States, which will undoubtedly improve tilpotide's affordability and accelerate its market penetration. But it also means that telpotide may face the risk of price cuts caused by the "American version of Medicare negotiation" IRA plan, and the uncertainty of the drug's marketing life cycle increases.

In addition, from the perspective of the competitive landscape, the patent of Simeaglutide in China is about to expire in 2026, the biosimilar drugs of Jiuyuan Gene, Lizon Group and other enterprises have been declared in the listing stage, and more than ten domestic generic drugs are in the clinical stage. The market advantage of Simaglutide is about to weaken, the price war is about to start, and the competitors of Telpotide will no longer be limited to Simaglutide one.

In late July, Roche, Viking and other companies have announced their latest progress in the field of weight loss drug research and development, which has a significant impact on the market value of Eli Lilly and Novo Nordisk and other "defenders", the industry once rumored that "Lilly's market value has disappeared $120 billion" news.

However, Lilly has also made new breakthroughs in the field of weight loss drug development, and it has not fully placed the future of GLP1 on tilpotide. At present, the GLP-1R/GIPR/GCGR triple agonist retalutide is in the phase 2 clinical stage, and the preliminary experimental results show that its clinical effect is better than tilpotide.

In the face of intense competition, there are still many uncertainties about new opportunities in the field of weight loss indications. In order to maintain the current market confidence, Lilly needs to further consolidate its market position and inject more solid momentum into the "world number one" position. The AD (Alzheimer's disease) drug Donezumab is the new engine.

In July this year, Lilly's market value exceeded $900 billion, mainly thanks to the approval of the new AD drug Donezumab in the FDA. Industry experts believe that Lilly with its deep research and development foundation in the field of neurology, as well as long-term continuous investment, to achieve a breakthrough like donezumab is not surprising.

Donezumab could be used to treat early-stage Alzheimer's disease, rather than just relieve symptoms, and its approval is significant. The AD market has huge potential, with approximately 50 million patients worldwide, and is expected to grow to hundreds of millions over the next 20 years. Nevertheless, the field of AD has long been regarded as an "R&D black hole" due to the complexity of its pathogenesis, the difficulty to determine, and the lack of drugs that can actually slow or reverse the disease process.

According to the data of the American Drug Manufacturing and Research and Development Association, from 2000 to 2017, the cumulative R&D investment of major pharmaceutical companies in the AD field has exceeded 600 billion US dollars, but during this period, only 4 AD drugs were approved, and more than 300 failed drugs, with a failure rate of 99.6%.

Among the many multinational companies that have invested in AD without success, Lilly is representative of perseverance. Since the 1990s, Lilly has adhered to the "Aβ protein hypothesis", and despite the final failure of Solanezumab after ten years of clinical phase 3, Lilly did not give up, but adjusted its strategy and started clinical trials again. In 2011, Donezumab entered the clinical phase, and positive phase III clinical data was published in 2023.

Although the approval process for Donezumab was not smooth, Lilly's request for fast-track approval based on Phase II data in 2021 was rejected by the FDA on the grounds of insufficient sample size, but after the marketing application was resubmitted based on Phase III data in 2023, the FDA convened an expert meeting to discuss the safety and effectiveness of the drug. After a series of twists and turns, Donezumab was finally unanimously approved for review by the FDA Advisory Committee in June this year. Lilly has invested more than $8 billion in AD research and development.

However, at the time of the release of Donezumab Phase III data, Lilly's competitor Eisai/Bojian's AD drug lencanezumab has been the first to be approved by the FDA. In the second quarter of 2024, the single quarter revenue after the launch of lencanetzumab reached $43 million, with good sales growth momentum.

Compared with the new AD drugs of Eisai/Bojian, Donezumab has better clinical effect and can be stopped after plaque clearance to a certain extent, which has greater market potential. According to the China Alzheimer's Disease Report 2024, there are currently nearly 17 million cases of AD in China. Industry experts believe that due to the low diagnosis rate, the actual number of patients may be more, and AD drugs have broad prospects in the Chinese market. Although the promotion of AD drugs in China will be a long-term process, the characteristics of "slow start, large volume, and eventually forming a large and stable market" are particularly suitable for Lilly's strategic development.

Donezumab is not the end of Lilly's investment in AD. Remternetug, A next-generation Aβ-monoclonal antibody targeting N3pG, is currently in Phase 3 and is expected to complete clinical trials in 2025. At that time, this drug may become the successor to Donezumab, continuing to strengthen Lilly's leading position in the AD field.

From the perspective of financial investment proportion, Eli Lilly's investment in the Chinese market is relatively small, less than 4%. In the view of the industry, compared with other multinational companies (MNCS) that actively integrate into the Chinese market and pursue performance growth, Lilly pays more attention to compliance operation and does not take growth indicators as the primary goal. Its sales growth rate in the Chinese market is relatively limited, so the investment scale has not been significantly expanded.

According to former employees of Eli Lilly, in 2012, the company established a research and development center in Shanghai Zhangjiang high-tech Park, an imposing building. However, in 2017, the research and development center was sadly closed. In the same period, Eli Lilly invested $3 billion in the development of Alzheimer's disease (AD) drug Solanezumab, but unfortunately failed again. At the same time, rival Novo Nordisk's flagship product, Semaglutide, is about to be introduced to the market, and Eli Lilly is facing external competitive pressure and internal challenges to some extent. Against this backdrop, Eli Lilly has chosen to reduce spending in the Chinese market.

In the field of diabetes treatment, Eli Lilly's insulin products in the Chinese market sales rank third to fourth, behind Novo Nordisk and Sanofi, and after the implementation of the national centralized drug procurement policy, its market position is even less than Tonghua Dongbao. Still, Eli Lilly's Tipotide has been approved in China for the treatment of diabetes and obesity, and supplies are tight. If the supply problem can be solved in the future, Eli Lilly's revenue share in the Chinese market is expected to increase.

The potential market for Eli Lilly's drugs is huge in China, which has a population of 300 million elderly people. Industry insiders point out that the core task of sales is to convert product advantages into market advantages, even in a highly competitive market environment. Eli Lilly's product strength, if the sales strategy can be more precise and powerful, its market performance will be better.