(Adds analyst reaction beginning in seventh paragraph and updated stock
price.)
Eli Lilly & Co.
(LLY) expects to swing to a profit in
2009 from an anticipated loss in 2008 but sees sales growth slowing due to less
favorable currency exchange rates as well as generic competition for one of its
cancer drugs.
$6.5 billion
acquisition of ImClone Systems would result in a large charge for the fourth
quarter, causing the full-year net loss. The company also expects costs from the
deal to reduce 2009 earnings.
But excluding these financial impacts of ImClone in both years, and other
items, Lilly sees 2009 earnings growth of 8% to 15% from 2008.
. In addition, Lilly
highlighted what it considers to be a stronger pipeline of experimental drugs
partly as a result of the ImClone acquisition, which expanded Lilly’s presence
in cancer drugs.
Bristol-Myers Squibb Co.
(BMY) to win ImClone, which developed
the cancer drug Erbitux, and Lilly sees the deal as crucial to getting through a
challenging period of new generic competition for top drugs including
antipsychotic Zyprexa beginning around 2011.
, or 2.7%, to
$35.95
.
Some analysts said Lilly appeared to taking the right steps to get ready for
the wave of patent expirations it will hit in the next few years. But Lilly’s
ability to perform well in that period will depend upon whether drugs currently
in development will be approved and be successful – a somewhat risky proposition
given the cautious stance over drug safety taken by the U.S. Food and Drug
Administration.
“They have a good foundation right now for decent adjusted earnings growth in
2009,” said
, analyst with BMO Capital Markets, who rates Lilly
shares “outperform.” “The message here is let’s prepare for the next decade.”
Lilly’s leaders also indicated Thursday that they would consider entering the
so-called “follow-on biologics” market, in the wake of
Merck & Co.’s
(MRK)
disclosure this week that it was jumping into that field. Follow-on biologics
are loosely equivalent to generic versions of biotechnology-style drugs and are
seen as a future growth area for the drug industry. Lilly said it hadn’t firmed
its plans, but the recent ImClone buy has beefed up Lilly’s biotech
capabilities, and executives say it’s a possible strategic move.
“We’re very much considering that,” Chief Executive
told
analysts during a conference call. “We’ve not explicitly stated that as part of
our overall strategy in biotech.”
For 2008, Lilly expects to post a net loss of
$1.56 to $2.06
a share, revising
its earlier forecast of earnings of
$2.44 to $2.49
a share. The main factor is
an anticipated charge of
$4.05 to $4.50
a share related to the ImClone deal,
which closed in November. Excluding the charge and other items, Lilly sees 2008
earnings of
$3.97 to $4.02
a share, in line with its previous forecast excluding
items and up 12% to 14% from 2007.
The 2008 results are expected to reflect sales growth in the high single-
digits to low-double-digits on a percentage basis. But 2009 sales growth is seen
slowing to the low single digits because the U.S. dollar has strengthened
against foreign currencies. Also, cancer drug Gemzar is expected to face generic
competition outside the U.S. Gemzar had sales of
$1.6 billion
in 2007. (The
stronger dollar, however, also is expected to improve gross profit margins,
particularly in the first half of 2009).
On average, analysts surveyed by Thomson Reuters were anticipating 2009 sales
growth of 7% to
. CEO Lechleiter said an added uncertainty for 2009
is the possibility of health-care reform by the incoming Obama administration.
He expressed hope that reform measures wouldn’t be “carried out on the back of
the biopharma industry.”
Another challenge to sales growth may come from people trimming health-care
expenses due to the economic downturn. But Chief Financial Officer Derica Rice
told Dow Jones Newswires several drugs were continuing to post sales growth
because they treat diseases or conditions where symptoms would worsen
immediately if treatment stopped, such as insulin for diabetics. Even sales of
impotence drug Cialis were still growing, he noted.
$4 to $4.25
a share. This
reflects costs from the ImClone Systems purchase, which are seen reducing
earnings by
a share. Excluding these, earnings would be
$4.35 to
$4.55
a share, up 8% to 15% from expected 2008 results.
Although some analysts were expecting the earnings dilution from the ImClone
purchase to be lower, Rice said the impact was actually better than Lilly had
expected going into the acquisition. He said the dilution reflects the
amortization of intangible assets, cost of financing and ongoing support of
ImClone’s drug research. Rice added that some analysts didn’t include ongoing
research costs in their models.
Lilly’s 2009 forecast assumes the launch of prasugrel, the anti-clotting drug
codeveloped with
(4568.TO) that analysts think could be a big
seller. Lilly had hoped for regulatory approval by the end of this year, but the
Food and Drug Administration has missed its targeted decision date, and Lilly is
still in talks with the FDA on the application. A large study showed prasugrel
was more effective than market leader Plavix – co-marketed by
Bristol-Myers
Squibb Co.
(SNY) – at reducing risk of heart attacks
and related disease, but it increased the risk of major bleeding.
Lilly is studying several other experimental drugs in late-stage trials that
the company hopes will come to market in coming years, including treatments for
Alzheimer’s disease, diabetes and osteoporosis. Lilly said it planned to reduce
the cost of bringing a new drug to market to an average of
$1.2 billion
now.
Lilly’s forecast for both years assumes continued strong growth in sales of
the antidepressant Cymbalta, which has been approved for additional uses such as
the pain condition fibromyalgia. Sales could get a further boost because the
giant health insurer
WellPoint Inc.
(WLP) has moved the drug up on its
formulary, or list of preferred drugs, so that its members have better coverage
for the drug, Rice disclosed.
Lilly also expects continued sales growth for the impotence drug Cialis,
cancer drug Alimta and diabetes drug Humalog.
Separately, asked to address the prospect of industry consolidation,
Lechleiter said Lilly planned to remain independent and he said mega-mergers in
the drug industry haven’t been very successful.
, Dow Jones Newswires; 215-656-8289;
Kerry E. Grace
contributed to this report.)
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(END) Dow Jones Newswires
12-11-08 1433ET
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