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Eli Lilly and Company (LLY - Analyst Report) and Boehringer Ingelheim recently announced that the European Medicines Agency (EMA) has accepted their marketing authorisation application (MAA) for LY2963016.

The companies are looking to get LY2963016 approved for type I and II diabetes under the EMA’s biosimilar pathway. LY2963016 is a new insulin glargine product.

LY2963016 has been developed under a collaboration agreement between Eli Lilly and Boehringer Ingelheim which was signed in Jan 2011. The companies had signed a global agreement for the joint development and commercialization of several diabetes compounds.

The compounds covered by the agreement include Tradjenta (linagliptin) which is currently approved in the US, Japan, Europe and other countries, empagliflozin and the new insulin glargine product. Boehringer Ingelheim also has an option to co-develop and co-commercialize Eli Lilly’s anti-TGF-beta monoclonal antibody.

We note that Eli Lilly and Boehringer Ingelheim had submitted a New Drug Application (NDA) for empagliflozin in the US earlier this year. Empagliflozin is also under regulatory review in the EU.

Eli Lilly currently holds a Zacks Rank #3 (Hold). The biggest near-term challenge for Eli Lilly will be to replace the revenues that will be lost to generic competition now that Zyprexa has lost US and EU exclusivity. The generic threat will continue to pose challenges for Eli Lilly with Cymbalta slated to lose patent protection in late 2013 and Evista in 2014.

On the flip side, the Animal Health business and the diabetes franchise should provide some downside support. We are encouraged by the company’s efforts to strengthen its diabetes portfolio. We are also pleased to see Eli Lilly pursuing small acquisitions and in-licensing deals to boost its pipeline.

Companies that currently look attractive include Santarus, Inc. , Jazz Pharmaceuticals (JAZZ - Analyst Report) and Auxilium Pharmaceuticals (AUXL - Analyst Report). While Santarus and Jazz are Zacks Rank #1 (Strong Buy) stocks, Auxilium is a Zacks Rank #2 (Buy) stock.

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