Bloomberg News

Lilly’s 2012 Earnings Forecast Misses Analysts’ Estimates

January 09, 2012

(Adds analyst’s comment in the fourth paragraph)

Jan. 5 (Bloomberg) -- Eli Lilly & Co., maker of the antipsychotic Zyprexa, provided a 2012 earnings forecast that missed analyst estimates, sending shares down.

Full-year profit will be $3.10 to $3.20 a share, less than the average estimate of $3.67 by 19 analysts surveyed by Bloomberg. Annual revenue may be between $21.8 billion and $22.8 billion, Lilly said in a statement. The stock declined 3.2 percent to $39.41 at 9:42 a.m. in New York trading.

Lilly also said 2011 earnings excluding some items met or exceeded its forecast of $4.30 to $4.35 a share. The Indianapolis-based drugmaker is investing in research, seeking to overcome the loss of patents on its best-selling medication Zyprexa, with revenue of $5 billion in 2010, and other medicines, without a major merger. Zyprexa sales are expected to decline by more than $3 billion this year, Lilly said.

“The guidance came in well below expectations,” said Seamus Fernandez, an analyst for Leerink Swann & Co., in a telephone interview. “The patent loss of Zyprexa means revenue is coming down faster than people expected.”

Unlike other drug companies, Lilly is continuing to spend heavily on research and development, Fernandez said. That strategy will reveal itself over the next few years as results from drugs in development come in, he said. The only way to know if the strategy works is to wait for data, Fernandez said.

R&D Costs

Research and development expenses this year will be $5 billion to $5.3 billion, Lilly said today.

“2012 is an important year for Lilly, having entered the period when we face patent expirations on some of our largest products, most notably Zyprexa late last year and Cymbalta in the U.S. at the end of 2013,” said Chief Executive Officer John Lechleiter in the statement. “We’ve been preparing to meet these challenges for many years, and have the plans in place to enable us to bridge this period and return to sustainable growth after 2014.”

Cymbalta, approved for the treatment of depression, anxiety disorder and fibromyalgia, generated sales of $3.5 billion in 2010, according to data compiled by Bloomberg.

The drugmaker has treatments for Alzheimer’s, diabetes and cancer in final-stage trials. As Lilly awaits these results, the company is focusing effort on growth areas such as emerging markets and animal health, Lechleiter said.

“This may be Lilly saying, ‘We’ve cut as much as we’re going to cut, and we’re going to maintain research and development at a fairly healthy level,” said Anthony Butler, an analyst for Barclays Capital in New York, in a telephone interview.

--Editors: Reg Gale, Bruce Rule

To contact the reporter on this story: Elizabeth Lopatto in New York at elopatto@bloomberg.net.

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net.


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