Tags: Earns Eli Lilly

Eli Lilly Lowers 2011 Expectations After Profit Rises 28 Percent

Thursday, 27 Jan 2011 03:05 PM

Eli Lilly and Co.'s fourth-quarter net income jumped 28 percent on sales from established drugs, but it expects earnings to slide this year as it faces generic competition and health care overhaul costs.

The Indianapolis drugmaker, like many of its competitors, must endure a gauntlet of patent expirations for key products, and that challenge intensifies in October with top-seller Zyprexa. The antipsychotic brought in more than $5 billion last year, but Lilly said it expects "severe erosion" of the drug's global sales due to generic competition.

It said costs from a collaboration with German drugmaker Boehringer Ingelheim over diabetes treatments will affect next year's performance, as will the U.S. health care overhaul. Lilly anticipates a 2011 hit of between $400 million and $500 million from the overhaul, mainly due to rebates for patients in the Medicare prescription drug program.

The company expects its 2011 revenue to be flat or increase slightly from last year. However, it forecasts adjusted earnings of $4.15 to $4.30 per share this year, down from 2010's adjusted total of $4.74 per share.

Analysts expect about $4.29 per share, according to FactSet.

Aside from Zyprexa, Lilly also loses patent protection in 2013 for Cymbalta and the insulin Humalog. The company sees its pipeline of drugs under development as a key to filling these revenue gaps, along with opportunities in international and emerging markets, and executives stressed that message Thursday during a conference call with analysts.

Lilly has a potential Alzheimer's treatment in late-stage clinical testing and a version of the anti-depressant Cymbalta for the treatment of chronic pain that it intends to launch next week. Chief Financial Officer Derica Rice also told analysts that strong growth in Japan — which passed $1.5 billion in sales last year — and emerging markets will help counter the Zyprexa-induced revenue losses.

Some analysts doubt this strategy, especially after another Lilly Alzheimer's drug flunked late-stage testing last summer. The performance of the blood thinner Effient also has fallen short of expectations since its 2009 launch.

Edward Jones analyst Linda Bannister does favor Lilly's approach, although she said the company faces a few challenging years, and it may take a while to see positive results.

"If they can actually execute on the pipeline, this stock has, in our view, a lot of upside just because of (low) expectations," she said.

For the fourth quarter, Lilly earned $1.17 billion, or $1.05 per share. That was up from $915.4 million, or 83 cents per share, in the final quarter of 2009. Revenue rose 4 percent to $6.19 billion.

Excluding one-time charges, the company earned $1.11 per share. Analysts polled by FactSet expected, on average, earnings of $1.09 per share on $5.99 billion in revenue. Analysts normally exclude one-time items from their estimates.

Zyprexa sales fell 2 percent to $1.34 billion in the quarter due mainly to lower demand. Revenue from its second-best seller, Cymbalta, rose 19 percent to $984.6 million, boosted in part by launches in Japan and other international markets.

Sales for another top seller, the cancer treatment Gemzar, fell 22 percent to $243.6 million due to generic competition that started in November in the U.S.

For 2010, Lilly earned $5.07 billion, or $4.58 per share, on $23.08 billion in revenue. Like 2009, eight of its drugs surpassed $1 billion in sales.

Lilly shares climbed 29 cents to $35.24 in midday trading, while broader indexes also were up slightly.

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Eli Lilly and Co.'s fourth-quarter net income jumped 28 percent on sales from established drugs, but it expects earnings to slide this year as it faces generic competition and health care overhaul costs.The Indianapolis drugmaker, like many of its competitors, must endure a...
Earns Eli Lilly
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2011-05-27
Thursday, 27 Jan 2011 03:05 PM
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