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Rejection of arthritis drug hits Eli Lilly and Incyte for $6bn

FDA refuses approval for Baricitinib despite European regulators giving it green light

Baricitinib had been expected to generate more than $2bn in peak annual sales by taking a share of the lucrative rheumatoid arthritis market. Photograph: PA Wire

Thu Apr 20 2017 - 16:43

Investors wiped a combined $6 billion (€5.6bn) from the market value of Eli Lilly and its biotech partner Incyte after the US medicines regulator rejected their new arthritis medicine.

In a letter to the companies, the US Food and Drug Administration (FDA) said it was unable to approve Baricitinib, and asked for more clinical data to clarify safety concerns and to determine what dose should be given to patients.

Analysts had predicted that Baricitinib would win US approval easily after European regulators gave it a green light. The once-a-day pill had been expected to generate more than $2 billion (€1.8bn) in peak annual sales by taking a share of the lucrative rheumatoid arthritis market, which is dominated by injectable drugs.

Shares in Lilly fell by as much 5.3 per cent in early trading in New York on Monday, before recovering slightly to trade 4.3 per cent lower. The price move wiped about $3.5 billion (€3.3bn) from the company's market capitalisation.

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This was the second big shock in recent months for Lilly investors, coming after the group in November revealed that its experimental medicine for Alzheimer’s had failed a late-stage clinical trial.

Royalties

The rejection was also a blow for Incyte, the biotech group that discovered Baricitinib before licensing the rights to Lilly. The company had been hoping to use royalties and other payments tied to sales of the medicine to fund the development of experimental drugs in its pipeline. Shares in Incyte fell by 11 per cent on Monday, reducing its stock market value by almost $3 billion (€2.8bn).

Lilly and Incyte said they disagreed with the FDA’s decision, and would resubmit their application after discussing a timeframe with the agency.

"The timing of a resubmission is still to be determined, but for now we assume it will take at least 12 months, pushing back a US launch to potentially 2019 or later," said Vamil Divan, an analyst at Credit Suisse.

The rejection was billed as a positive for AbbVie, which makes the world’s top-selling arthritis injection Humira, and which is also developing a pill to rival Baricitinib. – Copyright The Financial Times Limited 2017

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