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Inside Eli Lilly’s Neuroscience Franchise

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Neuroscience franchise

Another key franchise in Eli Lilly and Company’s (LLY) Human Pharmaceuticals segment is neuroscience. Key drugs in this franchise include Zyprexa, Cymbalta, and Strattera.

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Cymbalta

Cymbalta is an antidepressant used for the treatment of depression and anxiety and, at times, for bone and muscle pain. Cymbalta sales rose ~29% YoY (year-over-year) to $314 million in 3Q16, as compared to ~$243 million in 3Q15. This includes a ~100% YoY rise to $162 million in US sales and a 31% YoY fall in international sales.

Cymbalta revenues fell due to the loss of exclusivity in Europe in 2014. But there was a positive impact of foreign exchange for sales outside US markets. US sales rose due to the reduction in return reserves following patent expiry.

Zyprexa

Zyprexa is an antipsychotic drug used in the treatment of brain disorders like schizophrenia and bipolar disorder. Zyprexa sales fell ~37% YoY to $149 million during 3Q16, as compared to $238 million in 3Q15. Zyprexa sales fell by ~84% YoY to $7.3 million in US markets, while sales for Japan markets fell ~45% YoY.

Zyprexa has been exposed to generic competition in Japan since June 2016, after the patent expiry in December 2015. Zyprexa also faces generic competition from Mylan (MYL) and Teva Pharmaceuticals (TEVA).

Other drugs

Other drugs for the neuroscience franchise includes Strattera and Prozac. Strattera, a drug for attention-deficit or hyperactivity disorder, reported a 1% YoY rise in revenues at $199 million in 3Q16, as compared to $197 million in 3Q15. US sales of Strattera fell 7% YoY, while international sales rose 16%.

Strattera competes with Shire’s (SHPG) Vyvanse and Intuniv and Johnson & Johnson’s (JNJ) Concerta. Remember, to divest risk, investors can consider ETFs like the VanEck Vectors Pharmaceutical ETF (PPH), which has 4.6% of its portfolio in Lilly, or the iShares S&P Global Healthcare ETF (IXJ), which has 1.7% of its total assets in Lilly.

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