Eli Lilly Alimta Patent Case: How Merck Wins If It Loses

(Bloomberg Gadfly) -- While you were hopefully having a lovely summer weekend, Eli Lilly & Co. investors were sweating over the U.S. Patent Trial and Appeal Board (PTAB), which may invalidate a patent on the company's lung-cancer drug Alimta as soon as Monday. 

They have reason to be anxious. Alimta was Lilly's third-largest medicine last year, accounting for nearly $2.3 billion in sales. A patent loss could hasten generic competition, which would be bad news when coupled with the company's other patent losses, setbacks in its drug pipeline, and competition in the diabetes market. The patent at issue expires in 2022, so losing it now could mean a lot of lost revenue for Lilly. The company can appeal the decision, but there's a chance Alimta generics could hit the market this year. 

But Merck & Co. shareholders should be paying close attention, too. This decision may extend that firm's already formidable lead in the multi-billion-dollar market for immune-boosting cancer drugs. 

This group of so called immune-oncology (IO) drugs -- Merck's Keytruda and Bristol-Myers Squibb Co's Opdivo are the two most successful entrants to date -- are now FDA-approved to treat a wide variety of cancers. But though they can have dramatic effects in some patients, they don't work for most. The five firms that have medicines in this class on the market are now testing them in combination with other medicines in an effort to expand their reach.

Right now, Merck appears to be in the pole position in that race. Its combination of Keytruda with Lilly's drug Alimta -- a chemotherapy widely used in lung cancer -- was approved on May 10 for a broad swath of lung-cancer patients. The approval came substantially earlier than expected, and before AstraZeneca PLC and Bristol-Myers Squibb have even released late-stage data for their own combination approach, which uses two different IO drugs at the same time.  Merck is presenting positive data for Keytruda in breast cancer at the annual meeting of the American Society of Clinical Oncology in Chicago on Monday, and has released promising data on a different lung-cancer combination that pairs Keytruda with Incyte Corp.'s epacadostat.  

We won't know exactly how AstraZeneca and Bristol's results stack up to Merck's until they're released later this year. But they face a high bar to success: Merck's combination appears to be as effective as the double-IO combo, with substantially fewer side effects.

If Lilly's Alimta goes generic, then price becomes a factor in this race, too. Bristol-Myers's combination of two IO drugs, Opdivo and Yervoy, is already approved to treat melanoma at a cost of $256,000 per year. Merck's combination of Keytruda (about $155,000 per year) branded Alimta (about $100,000 a year) costs nearly the same. But Alimta going generic would make Merck's offering substantially cheaper.

Safety and effectiveness will be the biggest factors in deciding which combo ultimately wins the race for prescriptions. But a big price difference could amplify Merck's advantage, or at least dull any edge the Astra-Bristol combo approach has in effectiveness. A cheaper price could make oncologists more likely to choose Merck's combo as a first treatment option, further expanding Keytruda's reach and hurting rivals' lung-cancer sales.

And in a market this competitive, any advantage matters. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

To contact the author of this story: Max Nisen in New York at mnisen@bloomberg.net.

To contact the editor responsible for this story: Mark Gongloff at mgongloff1@bloomberg.net.