Lilly's losses put pressure on key Alzheimer's program

Eli Lilly ($LLY) saw its fourth-quarter profit slide 27% after the loss of its patent on Zyprexa last year hit sales of the schizophrenia drug harder than expected, Bloomberg reported. And the fresh setback could raise the stakes on CEO John Lechleiter's big bet on Lilly's internal R&D programs.

Swearing off megamergers like the Pfizer/Wyeth and Merck/Schering-Plough deals, Lechleiter needs some major successes in the drugmaker's late-stage pipeline to stay out of hot water with investors. Analysts have panned Lechleiter's gamble on the company's internal pipeline as too risky, and we'll see whether the criticisms are justified as Lilly reveals data on its most highly prized programs in cancer, diabetes and Alzheimer's disease.

Solanezumab, for instance, is perhaps the crown jewel of Lilly's pipeline. Phase III data for the Alzheimer's drug are expected in the third quarter, providing some indication of whether the antibody can slow the progression of the memory-stealing disease and live up to its blockbuster potential. Analysts at Cowen have estimated that sales of the drug could hit $1.5 billion in four years if the program succeeds.

Lilly had a modest victory this week with the FDA approval of its linagliptin-metformin combo pill for diabetes, a program partnered with Boehringer Ingelheim.

Lechleiter has been upbeat on the use of external collaborators to complement the work of his internal R&D group. Yet any major meltdown in the company's internal pipeline--such as if solanezumab bombs--could force Lilly to cave in and do a merger deal that is larger than Lechleiter would like.

- here's the Bloomberg report

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