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UPDATED: FDA rejects Eli Lilly's SGLT2 diabetes drug empagliflozin

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Eli Lilly CEO John Lechleiter

The FDA has rejected one of Eli Lilly's top drug prospects, saying that its SGLT2 drug empagliflozin could not be approved for marketing before its partner Boehringer Ingelheim fixed "deficiencies" at one of its manufacturing facilities.

The latest setback creates a problem for Lilly ($LLY), which has vowed to gain "several" new drug approvals this year to make up for a long drought in approvals. If its Type 2 diabetes drug empagliflozin is put on indefinite hold pending regulatory clearance, Lilly's best shot at approvals this year may well rest on its GLP-1 diabetes drug dulaglutide and the cancer therapy ramucirumab, both of which have racked up positive Phase III data. And after blowing an earlier promise to investors that it would have two approvals last year--as generic competition to franchise blockbusters ate away at its revenue--the jury is out on just how long investors will wait for CEO John Lechleiter to deliver a new portfolio to fill the widening hole in its product lineup.

This latest blow came just weeks after Lilly's copycat version of Lantus was put on hold after Sanofi filed a lawsuit against Lilly claiming that the pharma rival infringed four of its patents. The legal squabble is likely to delay any launch of Lilly's product until the middle of 2016. 

Lilly's shares, though, were down less than one percent this morning. But its margin for error has just been shaved down again.

Empagliflozin still represents Lilly's best shot at competing with SGLT2 pioneers like Johnson & Johnson's ($JNJ) Invokana and Farxiga (dapagliflozin) from AstraZeneca ($AZN) and Bristol-Myers Squibb ($BMY), which was finally approved by the FDA in January after a long delay. Lilly presented the FDA with data from 10 multinational clinical trials and more than 13,000 people with Type 2 diabetes for its drug.

The source of their woes evidently centers on Boehringer's plant at Ingelheim am Rhein. Last spring the FDA issued Boehringer a warning letter chiding the company for not properly investigating the appearance of large particles contaminating batches of an active pharmaceutical ingredient it manufactured there. At the time the pharma company said that it was taking the warning seriously, adding that the plant had passed 22 inspections over 5 years.

Over the past two years Lilly has been hit with a series of setbacks in the clinic, losing top drug prospects and failing to gain critically needed product approvals as Zyprexa and Cymbalta lost patent protection. But while the rest of the Big Pharma companies retooled their R&D strategy, externalizing much of their work through partnerships and fast-paced dealmaking, Lilly's Lechleiter has stubbornly insisted that the company already had what it needed to come up with a new set of products to sell.

Lilly has another drug, the enzyme replacement therapy liprotamase, under regulatory review. Liprotamase was originally rejected back in 2011 and Lilly was forced to begin a new trial.

Analysts have been growing increasingly skeptical about the potential of SGLT2 drugs, which flush glucose through urine. And without any clear differentiating factors in its favor, Lilly and Boehringer faced a tough challenge in building sales. That challenge, though, will have to wait now.

- here's the release

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