Lilly to look at biotech: CEO

KIAWAH ISLAND, South Carolina (Reuters) - Eli Lilly and Co (LLY.N) Chief Executive John Lechleiter said his company would look at expanding its presence in biotechnology, even as it deals with its acquisition of ImClone Systems Inc IMCL.O and the credit crisis.

"Right now the biotech companies are probably going to struggle the most in this environment," Lechleiter said in an interview on Thursday.

"Certainly traditional sources of funding and the traditional capital markets that biotech companies have accessed are withering right now," he said. "I think there is a sense that Big Pharma could provide that capital that many biotechs are looking for."

Lechleiter said there would probably be opportunities for his company to pursue partnerships, acquisitions, licensing or other types of deals in the next year or two.

"I think you can expect to see us be opportunistic," he said.

Besides biotech, he said the company was also interested in expanding key growth opportunity areas like oncology, as well as opportunities that that would allow it to be more selective and more targeted in how it presents drugs to patients.

Lechleiter said Lilly could expand in these areas, even while working to complete the biggest deal in his company's history and with capital markets virtually frozen.

"For the kinds of the things we'll need to do and for the kinds of acquisition we'll need to make, we believe between our cash position and our debt position we'll be able to execute on those," he said. "We're in a business that generates cash and we're trying to put that cash to work in the best way to benefit shareholders."

Despite the financial crisis, he said many of the fundamentals of the economy remain intact, especially for the health-care industry because health care is not dependent on consumer discretion and there are payment systems in place for the companies.

Still, he said the downturn could have an effect on the industry in the future if government payments start to dwindle.

"Because government payments through Medicaid and Medicare amount for a significant fraction of total health-care spending in this country, the impact of declining government revenues and greater pressure on state and federal budgets, the after-effects of that are going to have to be understood and monitored carefully," Lechleiter said.

The downturn is "bound to have an effect on the timing and shape of health-care reform proposals," he said.

"There probably will be questions raised about how much more we can afford to spend beyond plans that are already in place."

Lechleiter was in South Carolina for a meeting of the Business Council, a group made up of CEOs of some of the United States' largest companies.

(Reporting by Michael Erman; Editing by Lisa Von Ahn, Gary Hill)