Eli Lilly Working to Cut Costs
April 25 2017 - 8:28AM
Dow Jones News
By Austen Hufford
Eli Lilly & Co. on Tuesday reported higher revenue but swung
to a loss and cut its profit forecast due to charges related to
cost-cutting efforts.
The company said it was working reduce its cost structure but
that severance expenses would eat into unadjusted profit in the
year. In the first quarter, Lilly took a $213.9 million charge for
severance-related items as well as for Novartis integration
costs.
It now expects to earn $2.60 to $2.70 per share in 2017,
compared with the $2.69 to $2.79 it expected previously. Still, the
company reaffirmed its revenue and adjusted earnings per share
guidance.
Manufacturing efficiencies helped lift Lilly's gross margin to
74.6% from 72.8% in the first quarter last year.
Volume growth was helped by diabetes treatment Trulicity,
skin-drug Taltz and other new drugs. Cancer treatment drug Alimta
and antipsychotic medication Zyprexa hurt volumes in the quarter.
Sales of blockbuster erectile-dysfunction drug Cialis fell 7% to
$533.6 million, hurt by decreased demand.
In all, global volumes rose 8% in the quarter, which were
partially offset by a 1% hit on unfavorable exchange rates.
Sales of Humalog, one of Lilly's biggest products by revenue,
grew 17% to $708.4 million driven by a prior U.S. quarter having
higher discounts and by increased demand in the most recent
quarter. Sales in its animal-health division, which Lilly bought
from Novartis AG for about $5.4 billion in 2014, grew 2% to $769.4
million. In January, Eli Lilly closed on its acquisition of
Boehringer Ingelheim Vetmedica Inc.'s U.S. pet vaccines portfolio
for $885 million in a move to grow its animal unit.
During the quarter, the company also bought CoLucid
Pharmaceuticals Inc., adding a potential near-term launch to its
late-stage drug pipeline with lasmiditan for acute migraines, but
also taking a $857.6 million charge. The deal helped swing the
company to a loss.
In all for the first quarter, Lilly reported a loss of $110.8
million, or 10 cents a share, compared with a profit of $440.1
million, or 41 cents a share, a year prior. Excluding certain
items, earnings per share was 98 cents.
Revenue rose 7.5% to $5.23 billion.
Analysts projected 96 cents in adjusted per-share profit on
$5.22 billion in sales.
This month, the U.S. Food and Drug Administration didn't approve
Eli Lilly and Incyte Corp.'s new drug application for a rheumatoid
arthritis treatment that some analysts estimate could generate more
than $2 billion in annual sales. The FDA asked for more clinical
data to determine the most appropriate doses and clarify safety
concerns for baricitinib, a once-daily oral medication for the
treatment of moderate-to-severe rheumatoid arthritis.
On Monday, Lilly also reported positive news from a clinical
trial of an experimental breast cancer, saying abemaciclib, when
added to an older type of breast-cancer treatment, improved
measures of survival and tumor shrinkage in trial patients.
Shares of Lilly, up 11% over the past three months, were
inactive in premarket trading.
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
April 25, 2017 08:13 ET (12:13 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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