(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.)
Click here to go to Dow Jones NewsPlus, a web front page of today’s most
important business and market news, analysis and commentary: http://
. You can use this link on
the day this article is published and the following day.
(END) Dow Jones Newswires
12-11-08 1433ET
Copyright (c) 2008 Dow Jones & Company, Inc.

Glaxo CEO Sees ‘Sustainable Growth’ From Deals, Drugs (Update1)
Jan. 9 (Bloomberg) –
, Europe’s largest
drugmaker, will boost its reliance on acquisitions and licensing
deals to bring new medicines to the market, Chief Executive
Officer Andrew Witty said in an interview.
The London-based company has 30 drugs in the final stage of
testing needed before approval and plans to release about five
new products a year, Witty, 44, said yesterday. Glaxo will
sustain drug development by seeking smaller, “bolt-on”
alliances and takeovers, or deals valued from about $50 million
to the “low billions,” he said.
“I would feel very comfortable if five or six years down
the road half of our drug approvals came from products which
weren’t originally discovered in a GSK laboratory,” Witty said
in the interview in New York. “Now, that number is more like 25
to 30 percent.”
Witty, who took over as CEO last May, said Glaxo will expand
into emerging markets and over-the-counter products, mostly
through acquisitions and licensing agreements. The drugmaker will
also focus on developing vaccines. Revenue from these areas will
ease the company’s reliance on the “one or two products” that
currently make up about
, Witty said.
“This is no longer a sector that is perceived by the market
to be without risk,” he said. “We need to make sure we’re
delivering sustainable growth with a low-risk profile. We need to
make sure we are finding multiple sources of drugs.”
Even though patent protection expired for four of the
company’s 15 bestsellers last year — allowing $3 billion in
annual peak sales to be lost to generic competition — Witty said
Glaxo is in a stronger position than other drugmakers.
The company’s pipeline of experimental drugs, along with the
fact that Glaxo has already withstood most of its “patent
cliff,” means Glaxo isn’t desperate to make costly merger deals,
he said.
“We can see a way forward without having to go through big
transactions,” Witty said. “We certainly don’t need a survival-
driven transaction.”
Glaxo has made “dozens” of small acquisitions in 2008,
according to
, a company spokeswoman. In December,
Glaxo bought rights to
’s technology for developing
arthritis medicines, acquired Bristol-Myers Squibb Pakistan
(Private) Ltd. and extended an alliance to develop arthritis
drugs with Belgium’s
.
Glaxo shares gained 0.4 percent last year, the second-best
performing stock among the top-five European drugmakers behind
U.K. rival
. The stock gained 13.5 pence, or 1.1
percent, to 1,298.5 pence at 8:51 a.m. in London trading.
Witty said Glaxo won’t vie to sell generic versions of
biologic drugs, saying the possible market glut of so-called
biosimilars will force prices down.
The company last year said it will eliminate at least 2,000
jobs as part of a plan to save 700 million pounds ($1.06 billion)
by 2010. Witty said he would give a clearer picture to investors
about the company’s financial goals during fourth-quarter results
presented in February.
“It’s very important we have milestones associated with the
strategy we’re following and we’re not simply fixed on one
quarter to the next,” he said.
Witty said he has engaged in talks with policy makers and
legislators in Washington about health-care policy under a Barack
Obama administration and is “quietly optimistic” about
drugmakers’ prospects under the new president.
“The industry needs to play a constructive role” in
health-care reform, he said. “I’ve been pleasantly surprised at
the way in which the administration and those around the
administration are engaging in this.”
Last Updated: January 9, 2009 04:03 EST

NEW DELHI: The Union health ministry
has come to the defence of Ranbaxy, alleging that vested interests were behind
the US ban on 30 drugs of the Indian pharma major. The US Food and Drug
Administration (FDA) was being pressurised by political and pharma lobbies to
act against Ranbaxy, a top official of the ministry said.
“The
FDA never had problems with the same drugs earlier. The moment the House (US
Congress) committee on trade, commerce and energy created a ruckus, FDA started
having problems. All these are non-tariff barriers. There is a huge and growing
market for Indian generic drugs in the US and drug lobbies there never want this
to happen. Clearly, they are putting pressure on FDA. You have to understand
there is a vested commercial interest in this,” health secretary Naresh
Dayal told ET.
This is the first time that the Indian health ministry
has come out in support of the pharma major. FDA started investigation of
Ranbaxy’s plant in February 2006. After the US department of justice (DoJ)
moved the court on July 3, the US Congress committee initiated a probe against
FDA for allegedly being lax in its investigation of Ranbaxy.
In the
following weeks, FDA banned entry of Ranbaxy’s 30 drugs manufactured at
its two plants in India. The US government also stopped sourcing Ranbaxy’s
three anti-HIV drugs.
The drug controller general of India (DCGI) has
also supported Ranbaxy’s case, saying FDA has itself admitted that there
is no problem with Ranbaxy’s drug. “The drug regulators of the UK,
Australia and other developed countries do not have a problem with
Ranbaxy’s drugs. About 90% of the regulations are the same. Even the
deficiencies FDA has pointed out are small process violations,” DCGI Dr
Surinder Singh said. The FDA move is a major setback for Ranbaxy as the US is
the company’s single largest market, accounting for about a quarter of its
$1.6 billion annual sales. Industry analysts peg the company’s revenue
loss due to the ban at around 10-15% of its annual sales. Earlier, former
promoter and Ranbaxy chief executive & MD Malvinder Singh had alleged that a
“rival global MNC” was behind the FDA move.
The commerce
department and the chemicals ministry have written to the US authorities, saying
that the curbs were not justified. The commerce department plans to take up the
matter during bilateral discussions if FDA does not revoke the ban after Ranbaxy
takes corrective measures to comply with US manufacturing standards. Indian
pharma companies who make low-cost off-patent drugs have been alleging that
global drugmakers are resorting to non-tariff barriers to curb competition.
vikas.bhardwaj@timesgroup.com

Glaxo CEO Sees ‘Sustainable Growth’ From Deals, Drugs (Update2)
Jan. 9 (Bloomberg) –
, Europe’s largest
drugmaker, will boost its reliance on acquisitions and licensing
deals to bring new medicines to the market, Chief Executive
Officer Andrew Witty said in an interview.
The London-based company has 30 drugs in the final stage of
testing needed before approval and plans to release about five
new products a year, Witty, 44, said yesterday. Glaxo will
sustain drug development by seeking smaller, “bolt-on”
alliances and takeovers, or deals valued from about $50 million
to the “low billions,” he said.
“I would feel very comfortable if five or six years down
the road half of our drug approvals came from products which
weren’t originally discovered in a GSK laboratory,” Witty said
in the interview in New York. “Now, that number is more like 25
to 30 percent.”
Witty, who took over as CEO last May, said Glaxo will expand
into emerging markets and over-the-counter products, mostly
through acquisitions and licensing agreements. The drugmaker will
also focus on developing vaccines. Revenue from these areas will
ease the company’s reliance on the “one or two products” that
currently make up about
, Witty said.
“This is no longer a sector that is perceived by the market
to be without risk,” he said. “We need to make sure we’re
delivering sustainable growth with a low-risk profile. We need to
make sure we are finding multiple sources of drugs.”
Even though patent protection expired for four of the
company’s 15 bestsellers last year — allowing $3 billion in
annual peak sales to be lost to generic competition — Witty said
Glaxo is in a stronger position than other drugmakers.
The company’s pipeline of experimental drugs, along with the
fact that Glaxo has already withstood most of its “patent
cliff,” means Glaxo isn’t desperate to make costly merger deals,
he said.
“We can see a way forward without having to go through big
transactions,” Witty said. “We certainly don’t need a survival-
driven transaction.”
Glaxo has made “dozens” of small acquisitions in 2008,
according to
, a company spokeswoman. In December,
Glaxo bought rights to
’s technology for developing
arthritis medicines, acquired Bristol-Myers Squibb Pakistan
(Private) Ltd. and extended an alliance to develop arthritis
drugs with Belgium’s
.
Glaxo shares gained 0.4 percent last year, the second-best
performing stock among the top-five European drugmakers behind
U.K. rival
. The stock gained 4 pence, or 0.3
percent, to 1,289 pence in London trading.
Witty said Glaxo won’t vie to sell generic versions of
biologic drugs, saying the possible market glut of so-called
biosimilars will force prices down.
The company last year said it will eliminate at least 2,000
jobs as part of a plan to save 700 million pounds ($1.06 billion)
by 2010. Witty said he would give a clearer picture to investors
about the company’s financial goals during fourth-quarter results
presented in February.
“It’s very important we have milestones associated with the
strategy we’re following and we’re not simply fixed on one
quarter to the next,” he said.
Witty said he has engaged in talks with policy makers and
legislators in Washington about health-care policy under a Barack
Obama administration and is “quietly optimistic” about
drugmakers’ prospects under the new president.
“The industry needs to play a constructive role” in
health-care reform, he said. “I’ve been pleasantly surprised at
the way in which the administration and those around the
administration are engaging in this.”
Last Updated: January 9, 2009 11:50 EST