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VOL. 35 | NO. 28 | Friday, July 15, 2011




Eli Lilly 2Q profit falls 11 percent

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INDIANAPOLIS (AP) — Eli Lilly and Co. said Thursday its second-quarter net income fell 11 percent, as increases in marketing and other expenses blunted the drugmaker's revenue growth.

The Indianapolis company earned $1.2 billion, or $1.07 per share, in the three months that ended June 30. That's down from the $1.35 billion, or $1.22 per share, Lilly earned in the same quarter last year. Revenue rose 9 percent to $6.25 billion.

Excluding charges for a restructuring that aims to cut costs, the company's profit was $1.18 per share.

Analyst surveyed by FactSet expected, on average, earnings of $1.19 per share on $6.01 billion in revenue.

Sales for Lilly's best-selling drug, the antipsychotic Zyprexa, climbed 12 percent to $1.41 billion. Sales for the antidepressant Cymbalta, Lilly's second-best seller, climbed 16 percent to $1 billion in the quarter, and the drugmaker saw strong sales growth from several other products as well.

But marketing, selling and administrative expenses climbed 16 percent to $2.04 billion as the company supported new drug launches. Research and development costs rose 6 percent to $1.26 billion, and Lilly took a pretax $132 million restructuring charge.

The drugmaker also said the health care overhaul reduced earnings by about 12 cents per share in the quarter. Lilly and other drugmakers are paying a fee this year for the health care overhaul, the massive law that went into effect last year and aims to eventually cover millions of uninsured people. Drugmakers also are funding rebates to patients in the Medicare prescription drug program.

Lilly is investing heavily in developing and selling new drugs because it will lose U.S. patent protection for Zyprexa in October.

Patent expirations will sweep over the pharmaceutical industry in the next few years, and they will hit Lilly especially hard. The looming Zyprexa patent loss follows last fall's loss of patent protection for the cancer treatment Gemzar. The U.S. patent protecting Cymbalta from generic competition expires in 2013.

By 2014, Lilly will have lost patents protecting drugs that generated 64 percent of its U.S. product sales last year.

The company has staked future growth on its labs, which it expects to generate new drugs to fill that revenue hole. It also will rely on sales growth from other countries like Japan, its animal health business and emerging markets like China and India.

Lilly also raised its 2011 earnings guidance. The drugmaker now expects adjusted earnings of $4.25 to $4.35 per share, up from $4.15 to $4.30 per share. Analysts expect $4.29 per share.

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