CHMP in Favor of Lilly's Cialis

Eli Lilly and Company’s (LLY - Analyst Report) Cialis (tadalafil) recently received a positive opinion from the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA). The CHMP issued an opinion in favor of approving Eli Lilly’s erectile dysfunction (ED) drug, Cialis (5 mg), for the once-daily treatment of the signs and symptoms of benign prostatic hyperplasia (BPH).

A response from the European Commission regarding Cialis’ regulatory status should be out in two months. The CHMP’s opinion was based on a review of safety and efficacy data on 1,500 patients from four clinical studies of BPH, including a study of BPH and ED.

Cialis’ label expansion would provide patients suffering from both ED and BPH with a new treatment option. Approval for the additional indication will help boost Cialis sales, which came in at $1.9 billion in 2011.

Cialis, which is approved for the treatment of ED in the EU, is approved for the treatment of ED as well as the treatment of BPH in the US.

Cialis’ main competitors in the ED market include Pfizer’s (PFE - Analyst Report) Viagra and GlaxoSmithKline’s (GSK - Analyst Report) Levitra.

The BPH market is also pretty crowded with products like Glaxo's Avodart and Jalyn, Sanofi’s (SNY - Analyst Report) Uroxatral and Watson Pharmaceuticals’ (WPI) Rapaflo (silodosin) among others.

We currently have a Neutral recommendation on Eli Lilly, which carries a Zacks #3 Rank (short-term Hold rating). 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. We expect the top-and bottom-line to remain under pressure as the contraction in Zyprexa sales more than offsets growth in Cymbalta, diabetes and new product sales.

The late-stage pipeline is also yet to deliver. 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 also pleased to see Eli Lilly pursuing small acquisitions and in-licensing deals to boost its pipeline.