Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=199436
Story Retrieval Date: 5/28/2012 10:27:18 AM CST
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Drew Woolley/Medill News Service
Zyprexa has been a consistent performer for Lilly, before its patent expired in October.
Patent expirations dent Eli Lilly earnings
by Drew Woolley
Jan 31, 2012
For the Dec. 31 quarter, net earnings for the pharmaceutical company declined to $858.2 million, or 77 cents per diluted share, from $1.17 billion, or $1.05 per share in the year-ago period. Revenue weakened to $6.01 billion from $6.19 billion a year ago.
Lilly, like a number of other major pharmaceutical makers, has seen profits squeezed as lucrative blockbuster drugs come off patent and face low-cost generic competition. Experts say Lilly has a number of potentially big drugs in the development pipeline that the company will lean on in coming years as even more products lose their patents.
The company’s net in the latest quarter was crimped by the impact of a few one-time items, including the acquisition of ChemGen Corp. and the withdrawal of its Xigris drug, as well as hefty charges for asset impairments and restructuring.
Excluding these factors, the company’s earnings in the fourth quarter were 87 cents per share – better than the 81 cents that analysts polled by Yahoo! Finance had predicted, but down from the $1.11 a share in the year-ago quarter.
"Lilly's fourth quarter results not only reflect the impact of recent patent expirations,” said John C. Lechleiter Ph.D., Lilly's chairman, president and CEO, “but also highlight the growth opportunities that will enable us to remain a strong and successful company in the years ahead."
Although the company had ”anticipated the sales erosion in the fourth quarter resulting from the loss of U.S. patent exclusivity for Zyprexa in late October,” he added, “I am encouraged by the strong performance of many other areas of our business.”
Zyprexa, an antipsychotic for the treatment of schizophrenia and bipolar disorder, generated more than 20 percent of the company’s total revenue in the year-ago quarter. With new generics now competing in the market, revenue from the drug slid 44 percent to $749.6 million from $1.34 billion.
Those losses were partially offset by the growth of Lilly’s Cymbalta drug, which is used to treat major depressive disorder; revenue from that product climbed 20 percent to $1.18 billion from $984.6 million.
Lilly expects the repercussions of Zyprexa’s patent expiration to continue throughout 2012: Officials said the company's sales, damaged by an expected $3 billion fall in Zyprexa sales, will drop to between $21.8 bilion and $22.8 billion -- an indicated 6 percent to 10 percent. The company is also projecting earnings per share of $3.10 to $3.20 for the coming year, an indicated 18 to 20 percent dropoff from 2011.
Still, the company is optimistic about the potential growth of newer products, as well as the dozen pipeline drugs currently in Phase III clinical testing.
Linda Bannister, an analyst for Edward Jones and Co., says the payoff could be big.
“The market is always forward looking, and now everything is focused on the pipeline,” she said. “Most of those drugs are high-risk, high-reward products.”
Bannister highlighted a potential treatment for Alzheimer’s as one of the most prominent drugs in Lilly’s pipeline.
“It is a disease that is growing but there is no approved treatment,” she said. “If Lilly is successful with this project it could have a huge impact on patient care and would obviously impact the company’s bottom line as well.”
Lilly also reported net earnings for the full year of $4.35 billion, or $3.90 per diluted share, a 14 percent slump from 2010 earnings of $5.01 billion, or $4.58 a share. Revenues for the year rose to $24.29 billion from $23.08 billion.
In New York Stock Exchange trading Tuesday, Lilly’s shares rose 49 cents or 1.25 percent to close at $39.74.
