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Eli Lilly'sProfit Jumps 38 Percent as Charges Fall

Thursday, 21 Oct 2010 10:09 AM

Eli Lilly and Co.'s third-quarter earnings jumped 38 percent as the drugmaker cut costs while international sales climbed, but total revenue lagged and looming patent expirations remain a concern.

The Indianapolis company raised its 2010 net income guidance and said Thursday it earned $1.3 billion, or $1.18 per share, in the three months that ended Sept. 30.

That's up from the $941.8 million, or 86 cents per share, in the same period last year, when Lilly recorded nearly $550 million in one-time charges tied to litigation and the sale of a manufacturing site.

Revenue for the past three months rose 2 percent to $5.65 billion, mainly due to higher prices.

Excluding charges, Lilly reported an adjusted profit of $1.21 per share for the third quarter. That topped analyst expectations.

Analysts polled by Thomson Reuters forecast, on average, a profit of $1.15 per share on greater revenue of $5.8 billion.

Lilly had a "reasonable quarter" financially, Bernstein analyst Tim Anderson said in a research note. But he added that the longer-term financial outlook matters more for many investors, and the company "still looks challenged."

The drugmaker faces expirations for patents protecting several key products over the next few years. Its top seller, the antipsychotic Zyprexa, loses patent protection next year, which will expose it to generic competition. Protection for its second-best seller, the antidepressant Cymbalta, ends in 2013.

Company leaders have touted Lilly's pipeline of drugs under development as the key to filling this revenue hole, and they've emphasized this approach instead of buying another big drug company to replenish the product portfolio.

But analysts doubt that Lilly can produce drugs at a quick enough pace to replace the revenue.

Some drug development and patent court setbacks marred Lilly's third quarter. Most notably, the company said in August it would end the development of an experimental Alzheimer's disease drug that was in late-stage testing.

Zyprexa sales slipped 1 percent to $1.21 billion in the third quarter, while Cymbalta revenue grew 4 percent to $825.3 million.

Revenue from the cancer drug Alimta rose 21 percent to $560.3 million as sales in Japan climbed.

Sales of the blood thinner Effient, which launched last year, rose 59 percent to $36.3 million. Revenue from the cancer drug Erbitux fell 6 percent to $95.4 million.

Lilly said its cost of sales fell 6 percent to $987.6 million, due in part to cost containment efforts.

Lilly now expects adjusted earnings of $4.65 to $4.75 per share in 2010. That excludes about 10 cents per share in one-time items and represents an increase from previous guidance of $4.50 to $4.65 per share.

Analysts forecast a profit of $4.61 per share.

Lilly said the U.S. health care reform law will reduce its revenue by $225 million to $275 million this year due to drug rebates provided to some hospitals under the law.

In morning trading, its shares fell 30 cents to $35.71.

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Eli Lilly and Co.'s third-quarter earnings jumped 38 percent as the drugmaker cut costs while international sales climbed, but total revenue lagged and looming patent expirations remain a concern.The Indianapolis company raised its 2010 net income guidance and said Thursday...
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Thursday, 21 Oct 2010 10:09 AM
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