Bloomberg News

Lilly to Buy Back $5 Billion as Sales Goal Harder to Reach (2)

October 03, 2013

Eli Lilly & Co. (LLY:US), saying that meeting its sale target will be a challenge, plans to repurchase $5 billion in shares and introduce new diabetes drugs to help navigate past four years of patent losses.

Less-than-expected profit in emerging markets and a decline in the yen have slowed growth across the pharmaceutical industry. That may make it more difficult for Lilly to meet a reaffirmed goal of at least $20 billion in revenue through 2014, the Indianapolis-based company said in a statement today.

The new products and buybacks are part of Lilly’s strategy to return to growth after next year. Pfizer Inc. (PFE:US), the biggest U.S. drugmaker, is splitting its businesses to offset its patent losses, while Merck & Co. earlier this week increased job cuts and refocused its research program.

“I am confident in our outlook to return to a period of growth and expanding margins,” Lilly Chief Financial Officer Derica Rice said in the statement.

Lilly reiterated goals of at least $3 billion in net income and $4 billion in operating cash flow through next year.

The company filed U.S. and European regulatory submissions for two diabetes treatments -- empagliflozin and dulaglutide -- and a European submission for a new insulin glargine product.

Cancer Drugs

Lilly also is seeking approval for ramucirumab to treat advanced gastric cancer. Necitumumab, a lung-cancer medicine, performed well in a trial and the company may file for regulatory approval as early as next year, according to the statement.

Investors will keep a close eye on the pipeline, said Mark Schoenebaum, an analyst with International Strategy & Investment Group LLC in New York, in a note today.

“Will Lilly hit this guidance even if the pipeline fails?” Schoenebaum said was the question on investors’ minds. “We would like to understand if there if a ’Plan B’ exists.”

Lilly met with investors today in Indianapolis. The company’s shares (LLY:US) fell 3.4 percent to $48.80 at the close in New York, the biggest single-day decline since June 20.

“Market factors, including the devaluation of the yen and slower market growth in key emerging market countries, have moderated the company’s near-term revenue growth expectations,” Lilly said in the statement. “These headwinds will make it challenging for the company to meet the minimum revenue goal of $20 billion in 2014.”

To contact the reporters on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net; Drew Armstrong in Washington at darmstrong17@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)
    • $62.62 USD
    • 0.16
    • 0.26%
  • PFE
    (Pfizer Inc)
    • $30.05 USD
    • -0.10
    • -0.33%
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