INDIANAPOLIS (AP) – Eli Lilly and Co.’s first-quarter profit fell 15 percent because of severance costs and a diabetes drug development agreement designed to help the drugmaker handle a wave of patent expirations for key products.
The Indianapolis company’s revenue rose 6 percent. Adjusted earnings topped Wall Street expectations.
Lilly said Monday that it earned $1.06 billion, or 95 cents per share, in the three months that ended March 31. That’s down from $1.25 billion, or $1.13 per share, in the same quarter last year. Revenue climbed to $5.84 billion from $5.49 billion.
Excluding one-time charges, Lilly’s profit was $1.24 per share. Analysts surveyed by FactSet expected, on average, earnings of $1.17 per share on $5.71 billion in revenue.
The drugmaker turned in a “decent, quiet quarter,” Bernstein analyst Tim Anderson said in a research note. He added that the company’s long-term outlook remains challenged due to the looming patent expirations, which will open the drugs to competition from cheaper generic versions.
Lilly faces one of the most daunting lists of impending patent expirations in the pharmaceutical industry. In October, it will lose U.S. patent protection for the top-selling anti-psychotic Zyprexa. In 2013, it loses protection for its second-best seller, the antidepressant Cymbalta, and the insulin Humalog.
Zyprexa sales climbed 6 percent to $1.28 billion in the first quarter, but Lilly said it expects “rapid and severe erosion” of sales after patent expirations hit.
It’s already seen that with the cancer treatment Gemzar. Lilly lost patent protection for Gemzar last November, and revenue from the drug fell 46 percent to $156.1 million in the first quarter.
Lilly has touted sales in emerging markets and Japan as well as its animal health business as keys to filling this revenue hole. The company also will depend on its pipeline of drugs in development, although some analysts doubt that those products – if they make it to market – can generate enough revenue to replace what Lilly loses.
The drugmaker showed some signs of its strategy for dealing with patent losses in its first-quarter performance. Lilly said revenue outside the U.S. rose 13 percent to $2.76 billion in the first quarter. Research and development costs also climbed 8 percent in the quarter to $1.12 billion due to a rise in late-stage clinical trial costs.
Lilly aims to have at least 10 potential drugs in late-stage clinical development by the end of this year.
In January, Lilly announced an agreement with German drugmaker Boehringer Ingelheim to develop diabetes treatments. The drugmaker recorded a $388 million first-quarter research and development charge tied to that deal.
Lilly also recorded a $76.3 million charge tied to severance costs from a previously announced restructuring plan. The company said in 2009 it would eliminate 5,500 jobs over two years and reorganize into five business units as part of a plan to cut $1 billion in annual costs.
Lilly said the health care overhaul reduced first-quarter earnings by about 10 cents per share and revenue by about $90 million. Lilly and other drugmakers began paying a fee this year to help fund for the overhaul and will also cover rebates to patients in the Medicare prescription drug program.
The overhaul started to take effect last year and aims to eventually cover millions of people. Lilly said the overhaul trimmed earnings by 12 cents per share in last year’s first quarter.
Lilly is the first major U.S. drugmaker to report first-quarter earnings.
Date: April 18, 2011
Source: Associated Press