Eli Lilly predicts earnings growth, touts pipeline

AP News
Posted: Dec 10, 2009 4:39 PM

Eli Lilly & Co. said Thursday earnings per share could grow more than 10 percent next year, but the drugmaker's stock dropped as its 2009 forecast fell short of Wall Street expectations.

Indianapolis-based Lilly also touted its pipeline of drugs under development during a Webcast of its annual meeting with investors in New York. Company leaders said they expect to launch two new medicines per year starting in 2013.

But analysts remain unconvinced the company will be able to generate enough revenue to make up for a huge wave of patent expirations looming in a couple years.

"Products in the pipeline do not translate into products to be sold into the future," said WBB Securities President Steve Brozak. "They merely improve your odds of having products sold into the future."

Lilly will lose patent protection for its best-selling drug, the antipsychotic Zyprexa, in 2011. Zyprexa generated $4.7 billion in sales last year. In 2013 and 2014, Lilly will lose protection for four drugs that each generated more than $1 billion in annual sales last year. They include the antidepressant Cymbalta, its second-best seller, and the cancer drug Gemzar.

Losing patent protection exposes the drugs to generic competition.

Lilly executives touted potential new drugs in oncology and for Alzheimer's disease during Thursday's meeting. They said their pipeline includes 25 compounds in mid- or late-stage testing. But the drugmaker also went through a product-launch drought of about four years before it launched the blood thinner Effient earlier this year.

These potential drugs must receive regulatory approval before they can be sold, and Brozak said drug companies are "notorious" for not delivering the products they expect. He noted that bigger drug companies like Pfizer and Merck have grown through huge acquisitions, a path Lilly shuns.

This leaves analysts in uncharted territory, he said.

"They don't know how to really handicap what the chances are of a company being able to deliver the growth or the new products," he said.

Bernstein analyst Dr. Tim Anderson said in a research note he expects good earnings-per-share growth from Lilly into 2011.

"We have at least some concerns _ either from a regulatory or a commercial perspective _ about several pipeline drugs in the latest states of development," he wrote.

In September, Lilly said it would reorganize into five business units and trim 5,500 jobs over two years in a push to cut costs and pick up the pace of drug development.

"All of these actions are part of our strategy to speed valuable medicines to patients," Lilly Chairman and CEO John Lechleiter told analysts Thursday.

The company also said it has trimmed its sales force by 25 percent over the past year. Spokesman Mark Taylor said that was separate from the job cuts announced in September. He declined to say how many sales people were cut.

For 2009, Lilly said it expects earnings per share of between $4.30 to $4.40. Analysts polled by Thomson Reuters expect $4.42 per share.

Lilly expects to earn $4.65 to $4.85 per share next year, which would represent growth of 6 percent to 13 percent compared to its 2009 expectation. Analysts expect earnings of $4.74 per share for 2010.

Lilly shares fell $1.54, or 4.2 percent, to close at $35.02 Thursday. Meanwhile, the Standard & Poor's 500 index rose less than 1 percent.

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