Bloomberg News

Lilly Profit Beats Analyst Estimates as Cymbalta Sales Rise

July 25, 2012

Lilly Second-Quarter Profit Falls on Zyprexa Generic Competition

Eli Lilly & Co. corporate headquarters stand in Indianapolis, Indiana. Photographer: Victor J. Blue/Bloomberg

Eli Lilly & Co. (LLY:US), maker of the schizophrenia medicine Zyprexa, reported second-quarter profit that fell less than analysts estimated after higher sales for the antidepressant Cymbalta helped trim losses from generic competition to its former top-seller.

Net income (LLY:US) declined 23 percent to $924 million, or 83 cents a share, from $1.2 billion, or $1.07, a year earlier, Indianapolis-based Lilly said today in a statement. The per- share earnings beat the 77-cent average of 15 analysts’ estimates compiled by Bloomberg.

Revenue from Cymbalta rose 22 percent to $1.22 billion, while Zyprexa, Lilly’s former biggest-selling medicine that lost patent protection last year, saw sales fall 73 percent to $380 million. With Cymbalta also facing generic competition in 2013, investors have turned their focus to the company’s pipeline of experimental medicines.

“Overall, a good bottom line beat for the quarter,” Tim Anderson, an analyst with Sanford C. Bernstein & Co., wrote in a research note today. “Yet for many investors it is the longer- term financial outlook that matters more and here, Lilly still looks challenged.”

Revenue dropped 10 percent to $5.6 billion, Lilly said. Profit, excluding one-time items, for the full year will be $3.30 to $3.40 a share, compared with a previous forecast (LLY:US) of $3.15 to $3.30.

Lilly rose 2.9 percent to $43.21 at 3:05 p.m. New York time, after gaining to $43.58 in the biggest intraday increase since December. The shares had gained 1 percent this year through yesterday.

Exchange Rate

The dollar’s strength against other currencies reduced sales by about 2 percentage points for the company, which gets at least half of its revenue from outside the U.S. The U.S. dollar index, which reflects the value of the dollar against major world currencies, was on average 8.1 percent higher in the second quarter than a year earlier.

“If you take Zyprexa out of the equation, our underlying sales grew 8 percent,” Chief Executive Officer John Lechleiter said in a telephone interview today.

Lechleiter pointed to Forteo, Effient and cancer therapy Alimta as other sources of growth. He also cited the animal health business and sales opportunities in Japan and China (LLY:US).

“These were areas we invested in in advance of our YZ period,” he said, referring to the years of patent expirations. “Knowing they could be sources of growth that could cushion the blow we took when we faced generic competition for Zyprexa.”

Revenue for Lilly’s animal health business rose 32 percent to $512 million.

Pipeline Focus

Investors are focusing on Lilly’s experimental Alzheimer’s treatment, about which the company is expected to report initial data by the end of September, said Jami Rubin, an analyst with Goldman Sachs Group Inc. in New York.

“We expect the key focus to remain on Lilly’s high risk, high reward Alzheimer’s drug solanezumab and potential mitigating factors if unsuccessful, such as a program to cut costs,” Rubin said in a report before the earnings release.

Lilly shares fell 4.2 percent yesterday, after Pfizer Inc. (PFE:US), Johnson & Johnson (JNJ:US) and Elan Corp. (ELN:US) reported data July 23 showing a similar experimental Alzheimer’s treatment failed in the first of four late-stage clinical trials.

Lechleiter said conclusions on Lilly’s Alzheimer’s medicine shouldn’t be drawn from those results.

“They’re different from one another,” he said. “We just need to wait and see our own data.”

To contact the reporters on this story: Meg Tirrell in New York at mtirrell@bloomberg.net; Shannon Pettypiece in New York at spettypiece@bloomberg.net

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


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Companies Mentioned

  • LLY
    (Eli Lilly & Co)
    • $66.05 USD
    • 1.70
    • 2.57%
  • PFE
    (Pfizer Inc)
    • $29.11 USD
    • 0.51
    • 1.75%
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