Lilly and Incyte's oral arthritis drug aces its first Phase III test

Eli Lilly corporate headquarters in Indianapolis

A new rheumatoid arthritis pill from Eli Lilly ($LLY) and Incyte ($INCY) beat out placebo in a pivotal trial, the first late-stage success for a drug the companies hope can carve out a space in a crowded market.

In a Phase III trial on 527 RA patients who failed on TNF inhibitors like Enbrel and Humira, Lilly and Incyte's baricitinib met its main goal of significantly improving disease score compared to placebo. On the safety side, baricitinib's side effect profile was similar to placebo, the companies said, with common adverse events including headache, upper respiratory tract infection and nasopharyngitis. The partners are releasing only top-line results for now, planning to divulge full data at a scientific meeting next year.

The success allows Lilly and Incyte to check the first box in their 3,000-patient late-stage program, which includes four ongoing trials in the U.S. and one in China. The two expect to complete the first four studies by the end of 2015, mapping a path to regulators from there.

"People with rheumatoid arthritis who have had an inadequate response to TNF inhibitors are generally considered to be the least responsive to subsequent treatments," Lilly Senior Vice President David Ricks said in a statement. "These results give us further confidence in the potential for baricitinib to be a meaningful treatment option for those suffering from this debilitating condition."

And unlike the injected TNF blockers that have brought in billions for AbbVie ($ABBV) and Amgen ($AMGN), baricitinib is an oral JAK inhibitor designed to block inflammatory signaling and treat the underlying cause of immune diseases including RA, all without the need for needles.

Meanwhile, JAK inhibitors for inflammatory disease have lost some of their luster of late, as Pfizer's ($PFE) Xeljanz has failed to catch on as quickly as analysts expected when it won approval in 2012, and Johnson & Johnson ($JNJ) has walked away from a nearly $1 billion deal with Astellas covering a similar treatment called ASP015K.

- read the statement