--Higher sales of antidepressant Cymbalta fuels rise in 2Q
revenue, profit
--Lilly boosts 2013 earnings outlook
--Company faces challenging 2014 due to drug patent
expirations
(Adds comments from Lilly CEO throughout; additional details and
background.)
By Peter Loftus
Eli Lilly & Co. (LLY) returned to quarterly sales growth for
the first time since a big drug patent expired in 2011, but it's
likely to be short-lived because the company faces a new round of
patent losses.
Lilly on Wednesday reported a 31% increase in second-quarter
profit, as higher sales of blockbuster antidepressant Cymbalta and
cost controls more than offset declining sales of antipsychotic
Zyprexa, which has faced generic competition since losing patent
protection in October 2011.
The Indianapolis drug maker also boosted its forecast of
full-year 2013 earnings. Lilly shares, a laggard among drug stocks
this year, rose 1.8% Wednesday to $51.90.
Despite Lilly's strong quarter and improved outlook for 2013, it
faces a challenging 2014. Its best-selling drug, Cymbalta, is
expected to lose patent protection in December, followed by
osteoporosis treatment Evista in March 2014, triggering competition
from generic copies.
Lilly expects to lose about 20% of its global revenue in 2014
because of the patent expirations. To bolster profits ahead of the
expected downturn, the company is cutting costs, including recent
sales force layoffs and a planned employee pay freeze for 2014.
Lilly has been developing new drugs that could replace revenue
lost to patent expirations and support sustained sales and earnings
growth after 2014. Some promising drugs continue to advance in
clinical testing, such as potential cancer treatment ramucirumab.
But Lilly also has had research setbacks, including discontinuing
development of drugs for Alzheimer's disease and schizophrenia.
Still, "we remain very bullish on our pipeline," Chief Executive
John C. Lechleiter said in an interview. He expects Lilly will have
submitted applications for regulatory approval of four new drugs by
the end of 2014, including treatments for diabetes.
For the three months ended June 30, Lilly earned $1.2 billion,
or $1.11 a share, up from $923.6 million, or 83 cents a share, a
year earlier. The latest quarter included a charge of 4 cents a
share related to the expected closure of a packaging and
distribution facility in Germany.
Excluding the plant-closing charge and other items, Lilly earned
$1.16 a share for the latest quarter. Revenue rose 6% to $5.93
billion.
The numbers were solidly ahead of Wall Street expectations.
Lilly was expected to earn $1 per share, excluding certain items,
on $5.82 billion in sales, according to the mean estimates of
analysts surveyed by Thomson Reuters.
Operating expenses declined 2% from a year earlier. Dr.
Lechleiter said the company has been cutting costs to prepare for
2014, recognizing that expected new products will not be able to
offset the effect of patent losses in the short-term.
Spearheading the sales growth was a 22% gain for Cymbalta, to
$1.5 billion. U.S. sales of the drug rose 27% on higher prices,
increased demand and favorable wholesale buying patterns. Cymbalta
revenue outside the U.S. rose 4%.
Price increases for Cymbalta illustrate the continued ability of
drug makers to raise prices for key drugs in the U.S., even as they
grapple with price cuts in other countries, including those imposed
by European national health systems.
Lilly also posted sales gains for cancer drug Alimta, diabetes
treatment Humalog and erectile dysfunction pill Cialis.
Lilly's Elanco animal-health unit posted sales of $543.5
million, up 6%, better growth than in the first quarter but still
lower than 2012's double-digit rate.
Dr. Lechleiter said Lilly plans to keep Elanco--and make further
acquisitions to expand it--because it's an important contributor to
Lilly's growth. In contrast, rival Pfizer Inc. (PFE) recently
separated its animal-health business into an independent company,
Zoetis Inc. (ZTS).
Lilly boosted its forecast of 2013 earnings to a range of $4.28
to $4.38 a share, compared with a prior forecast of $4.10 to $4.25
per share. Excluding items, the new forecast is $4.05 to $4.15 a
share, versus a prior range of $3.82 to $3.97 a share.
The company reiterated its revenue forecast of $22.6 billion to
$23.4 billion.
For full-year 2013, analysts expected earnings of $3.92 a share
on revenue of $22.8 billion.
Separately, Dr. Lechleiter said the company hasn't been
contacted by the Chinese government authorities investigating
bribery allegations against drug maker GlaxoSmithKline PLC (GSK).
Lilly is closely watching the situation but continues to plan to
expand its business in China, he said.
Write to Peter Loftus at peter.loftus@dowjones.com
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