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Analyzing Eli Lilly’s Blockbuster Endocrinology Drugs

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Endocrinology franchise

As we discussed earlier, Eli Lilly and Co.’s (LLY) Human Pharmaceuticals segment reported an increase of ~10% at ~$4.5 billion for 2Q16—compared to ~$4.1 billion for 2Q15. This segment deals with different therapeutic areas including endocrine, neuroscience, oncology, cardiovascular, and others. A few of the blockbuster drugs in this franchise are Humalog, Humulin, and Forteo.

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Humulin

Humulin’s portfolio consists of concentrated insulin products used to lower blood sugar levels in patients with type-1 and type-2 diabetes mellitus. The products are used in cases where patients require a higher dosage of insulin. The sales of Humulin products increased by ~5% to $332 million in 2Q16—compared to ~$316 million in 2Q15. This includes an ~9% increase in US sales and nearly flat revenues from international sales. The increase was due to higher volumes.

Humalog

Humalog’s portfolio consists of different meal-time insulin products used to lower blood sugar levels in patients with diabetes. The sales for Humalog products rose by 7% to $701.9 million during 2Q16—compared to $654 million for 2Q15. This included a 5% increase in US sales to $420 million and an 11% increase in international sales at $282 million. The increase was driven by higher demand and volumes traded. It was partially offset by lower realized prices and a negative impact of foreign exchange.

Humalog competes with Novolog from Novo Nordisk (NVO), while Sanofi (SNY) is developing biosimilar for Humalog.

Forteo

Forteo is another blockbuster drug from Eli Lilly. It’s used to treat osteoporosis. Forteo sales rose by ~12% to $368 million in 2Q16—compared to ~$328 million in 2Q15. This includes an increase of ~29% in US sales, partially offset by a 1% decline in international sales. The volume growth and favorable impact of foreign exchange substantially offset the decline due to lower realized prices in international markets.

A few other drugs for osteoporosis include Allergan’s (AGN) Actonel and Roche’s (RHHBY) subsidiary Genentech’s Boniva. To divest the risk, investors can consider ETFs like the Vanguard S&P 500 ETF (VOO). VOO holds ~0.4% of its total assets in Eli Lilly.

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