Eli Lilly and Company (LLY) and partner Boehringer Ingelheim Pharmaceuticals, Inc. announced that the new drug application (:NDA) for their empagliflozin−Tradjenta (linagliptin) combination has been accepted for review by the U.S. Food and Drug Administration (:FDA). The companies are looking to get the combination approved for the treatment of adults suffering from type II diabetes.

We note that empagliflozin is also under review for type II diabetes in the U.S. and the EU. Recently, empagliflozin received a positive opinion from the Committee for Medicinal Products for Human Use (CHMP) for this indication. Eli Lilly and its partner intend to launch it in 2014, if approved. Eli Lilly has another candidate, dulaglutide, under review in the U.S. and the EU for this indication.

Eli Lilly is working on strengthening its diabetes franchise. However, the market is highly crowded given the presence of players like Novo Nordisk (NVO) and Merck (MRK) among others.

Meanwhile, Eli Lilly is facing a major challenge in the form of loss of exclusivity for Zyprexa and Cymbalta. However, the Animal Health business and the diabetes franchise should provide some downside support.

We are also pleased to see Eli Lilly pursuing small acquisitions and in-licensing deals to boost its pipeline.

We expect 2014 to be a catalyst rich year for Eli Lilly with the expected filing of a number of regulatory applications and a few product launches.

Eli Lilly carries a Zacks Rank #3 (Hold). A better-ranked stock in the pharma sector is Questcor Pharmaceuticals, Inc. (QCOR), carrying a Zacks Rank #1 (Strong Buy).

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