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Eli Lilly Faces Revenue Slowdown

By Mike Seemuth   |   Tuesday, 28 Jun 2011 01:39 PM

Eli Lilly (LLY) is one of the biggest drug manufacturers in the world, with sales in more than 120 countries. But like its rivals in the pharmaceuticals industry, Lilly is under pressure to ensure that its creativity in product development matches its impressive capacity in manufacturing and distribution. The Indianapolis company needs new products to offset the pending loss of product patent protection, so "we continue to advance the next wave of potential new medicines in our pipeline," John C. Lechleiter, chairman, president and chief executive of Lilly, said in a statement with the company's first-quarter earnings report.

In early June, most analysts following Lilly had neutral ratings on its stock, but opinions stretched over a wide range, from a few strong buy ratings to a few sell recommendations.

Lilly reported in its annual 10K report filed in February 2011 with the Securities and Exchange Commission that eight drugs accounting for 74 percent of its 2010 revenue "will lose effective intellectual property protection ... in the next several years," including Zyprexa in October 2011, Cymbalta in 2013, and Alimta in 2017.

Zyprexa was Lilly's top-selling drug at the start of 2011. A treatment for schizophrenia and bipolar disorder, Zyprexa generated $1.28 billion in sales in the first quarter, followed by second-ranked antidepressant and painkiller Cymbalta at $908 million, and No. 3 drug Alimta, a lung cancer treatment, at $597 million. Other drugs among the top 10 selling brands made by Lilly include the erectile dysfunction drug Cialis and antidepressant Prozac. Lilly's total net revenue topped $23 billion in 2010.

Lilly reported $5.83 billion in revenue in the first quarter of 2011, up 6 percent from the same period last year. But first-quarter net income dropped to $1.05 billion, down 15 percent from last year.

Declining EPS

In its April announcement of first-quarter results, Lilly predicted that its 2011 earnings per share will range from $3.86 to $4.01.That would compare with $4.58 in 2010 and $3.94 in 2009.

The company said its guidance for the year assumed 2011 sales growth for such products as Alimta, Cymbalta, and Cialis as well as "rapid and severe erosion of global Zyprexa sales after patent expirations in major markets, including the U.S., starting in October 2011, and the continued severe erosion of U.S. Gemzar (cancer drug) sales," which have been hurt by generic competition.

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Eli Lilly (LLY) is one of the biggest drug manufacturers in the world, with sales in more than 120 countries. But like its rivals in the pharmaceuticals industry, Lilly is under pressure to ensure that its creativity in product development matches its impressive capacity in...
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