Eli Lilly 2013 Annual Report Download - page 36

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22
progression-free survival. We do not plan to submit an application to regulatory authorities for
ramucirumab in the first-line treatment of locally recurrent or metastatic HER2-negative breast cancer
based on the results from the ROSE study. In February 2014, we announced that the REVEL trial, a
global Phase III study of ramucirumab in combination with chemotherapy (docetaxel) in patients with
second-line NSCLC, met its primary endpoint of improved overall survival and a secondary endpoint
of improved progression-free survival. We intend to submit the first application for this indication to
regulatory authorities in 2014.
Tabalumab—In February 2013, we announced our decision to discontinue the Phase III rheumatoid
arthritis program for tabalumab due to lack of efficacy. The decision was not based on safety
concerns. The tabalumab Phase III program for lupus is continuing as planned.
Tanezumab—In October 2013, we entered into a collaboration agreement with Pfizer to jointly
develop and globally commercialize tanezumab for the potential treatment of osteoarthritis pain,
chronic low back pain, and cancer pain. Tanezumab is currently in Phase III clinical development and
is subject to a partial clinical hold by the FDA pending submission of nonclinical data to the FDA.
Pfizer anticipates submitting that data in 2014. See Note 4 to the consolidated financial statements for
additional details.
There are many difficulties and uncertainties inherent in pharmaceutical research and development (R&D)
and the introduction of new products. A high rate of failure is inherent in new drug discovery and development.
The process to bring a drug from the discovery phase to regulatory approval can take 12 to 15 years or longer
and cost more than $1 billion. Failure can occur at any point in the process, including late in the process after
substantial investment. As a result, most research programs will not generate financial returns. New product
candidates that appear promising in development may fail to reach the market or may have only limited
commercial success. Delays and uncertainties in the regulatory approval processes in the U.S. and other
countries can result in delays in product launches and lost market opportunities. Consequently, it is very
difficult to predict which products will ultimately be approved and the sales growth of those products.
We manage R&D spending across our portfolio of molecules, and a delay in, or termination of, any one
project will not necessarily cause a significant change in our total R&D spending. Due to the risks and
uncertainties involved in the R&D process, we cannot reliably estimate the nature, timing, completion dates,
and costs of the efforts necessary to complete the development of our R&D projects, nor can we reliably
estimate the future potential revenue that will be generated from a successful R&D project. Each project
represents only a portion of the overall pipeline, and none is individually material to our consolidated R&D
expense. While we do accumulate certain R&D costs on a project level for internal reporting purposes, we
must make significant cost estimations and allocations, some of which rely on data that are neither
reproducible nor validated through accepted control mechanisms. Therefore, we do not have sufficiently
reliable data to report on total R&D costs by project, by preclinical versus clinical spend, or by therapeutic
category.
Legal, Regulatory, and Other Matters
We depend on patents or other forms of intellectual-property protection for most of our revenues, cash flows,
and earnings. Cymbalta® lost patent exclusivity in the U.S. in December 2013, resulting in the immediate
entry of several generic competitors. We also expect the loss of U.S. patent protection for Evista® in March
2014 to result in immediate generic competition. We will lose our data package protection for Cymbalta in
major European countries in 2014; however, we do not anticipate the entry of generic competition in most of
these countries until 2015. The entry of generic competition in each of these markets is expected to cause a
rapid and severe decline in revenue from the affected products, having a material adverse effect on our
consolidated results of operations and cash flows.
The U.S. compound patent for Humalog expired in May 2013. The loss of compound patent protection for
Humalog has not resulted in a rapid and severe decline in revenue. To date, no biosimilar version of Humalog
has been approved in the U.S. or Europe; however, we are aware that other manufacturers have efforts
underway to develop biosimilar forms of Humalog, and it is difficult to predict the likelihood, timing, and impact
of biosimilars entering the market.
The continuing prominence of U.S. budget deficits as both a policy and political issue increases the risk that