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Eli Lilly and the Depression-Diabetes Circle

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New warnings on blockbuster Zyprexa won't hurt much.

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Sometimes fixing one problem creates another. In the pharmaceutical industry this is called an opportunity.

The most recent company to be called out by the FDA for adding to one problem while fixing another is Eli Lilly (LLY) -- the drug giant recently had to issue a letter of warning to doctors concerning the prescription of its blockbuster antipsychotic Zyprexa to children ages 13 to 17. While effective for treating schizophrenia and depression, Zyprexa has been shown to cause weight gain and even lead to diabetes from said weight gain, and this is even more likely in children taking the drug.

The warning letter to doctors says: "Compared to patients from adult clinical trials, adolescents were likely to gain more weight, experience increased sedation, and have greater increases in total cholesterol, triglycerides, LDL cholesterol, prolactin, and hepatic transaminase levels."

This actually bodes rather well for Lilly, which has a 50% stake in the Byetta diabetes drug franchise along with Amylin Pharmaceuticals (AMLN). When children who have gained weight on Zyprexa reach adulthood and potentially develop diabetes, Lilly will be able to treat them for that too.

According to a survey released in December 2009 by the National Institute of Mental Health, about 13% of the more than 3,000 participants had at least one of six mental disorders, including depression. "Data on the prevalence of mental disorders among US youth have been varied, making it difficult to truly understand how many children and teens are affected," said NIMH Director Thomas R. Insel, M.D. Yet, it's reasonable to conclude that quite a lot of children and young adults are taking these sorts of medications and that the number is higher than in previous generations.

Yet, the warning to doctors probably won't cause Lilly too much of a headache. The company's latest earnings announcement showed that Zyprexa sales were $4.9 billion in 2009; with the company spending only $692.7 million on costs related to Zyprexa litigation -- most of the suits accuse Lilly of failing to warn patients of the drug's weight gain and diabetes side effects. This is less than the $1.4 billion the company spends annually to market the antipsychotic. The cost of Zyprexa litigation is way down from the year prior, when the company spent $1.9 billion. But the company will squeeze what it can out of Zyprexa -- the drug's patent expires in 2011. (Check out BNet Pharma for a breakdown of the litigation costs per quarter).

The latest warnings to doctors come on the tail end of a study done in October 2009 that was published in the Journal of the American Medical Association and showed that teenagers taking Zyprexa gained, on average, 17 pounds over the course of 12 weeks. This was greater than the risk of weight gain associated with several other antidepressants. Yet, all of the drugs considered "new-generation antipsychotics", like Zyprexa, showed significant weight gain and changes in body composition that could lead to diabetes if used for a prolonged time.
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