Lilly earnings down, but better than expected
This article was originally published in Scrip
Having put the bad news out of the way three weeks ago, Lilly presented an unexpectedly rosy picture to investors on January 31 when it released its 2011 results. Fourth quarter adjusted earnings of $969 million were down 22% from the same period in 2010, but that worked out to per share earnings of 87 cents, while various polls of analysts taken before the announcement had expected a figure in the 80 to 81 cent range.
The big depressant on earnings came from the nose dive in sales of the antipsychotic Zyprexa (olanzapine) after a generic version entered the market in October. Sales of that product came to $750 million in the October-December period, down 56% in the US and 32% in other markets. Sales of the oncology drug Gemzar (gemcitabine), also hit by generic competition, were down 62%, to $93 million.
But Lilly had prepared the market for those gloomy results in early January by setting earnings guidance for 2012 in the $3.10-$3.20 per share range, below analysts' expectations (scripintelligence.com, 6 January 2012). That forecast for the year was repeated in the company's January 31 presentation, based on projected of total revenue of between $21.8 billion and $22.8 billion.
"Lilly's fourth quarter results not only reflect the impact of recent patent expirations, but also highlight the growth opportunities that will enable us to remain a strong successful company in the years ahead," said Lilly CEO John C. Lechleiter. Sales of two drugs that go off-patent in 2013 were especially strong, with totals for the antidepressant Cymbalta (duloxetine) up 20% from the 2010 fourth quarter figure, to $1.2 billion, and sales of the insulin lispro injection Humalog up 21%, to $662 million. The Cymbalta and Humalog increases were due to a combination of moving more of the drugs and getting higher prices for each, Lilly explained.
2012 outlook
With the meeting coming the day after Lilly got USFDA approval to sell the diabetes treatment Jentadueto (linagliptin/metaformin hydrochloride) (scripintelligence.com, 1 February 2012), the company said it had high hopes for the agency to approve three more indications for marketed drugs this year: Alimta (pemetrexed) for continuation maintenance in nonsquamous non-small cell lung cancer, and Erbitux (cetuximab) for both first-line treatment for non-small cell lung cancer and first-line treatment of metastatic colorectal cancer. It is also banking on getting a green light to sell Amyvid (florbetapir) for detection of beta amyloid plaque. FDA last March turned down an earlier application for the Alzheimer's detection agent, but the concerns then were that no standards had been developed to provide consistent readings of the images.
But the most important driver of Lilly's future may be the expected completion this year of the Phase III trial of its new Alzheimer's drug solanezumab; more than 2,000 patients have been enrolled. That data "is going to be the biggest thing they are going to report this year," predicts Morningstar analyst Damien Conover. Bernstein Research estimated that if the drug is effective it could produce $23 billion in sales by 2020.
For 2011 as a whole, Lilly reported total revenue of $24.3 billion, 5% above the 2010 figure, although the adjusted net -- $4.9 billion -- was down 6% from the year before. The revenue growth came from a 6% gain in the volume of product sold and a 2% increased attributed to foreign exchange rates, but those plusses were offset by a 3% decrease due to lower prices. That overall revenue increase was attributable to a hefty 11% increase in overseas sales, with US growth only 1%.
The company said it spent 21% of total revenue on R&D; the $5.02 billion expenditure was a 3% increase over 2010. Marketing and administrative expenses increased 12%.