WRAPUP 2-Bristol, Lilly top profit targets on strong sales

* Bristol EPS 46 cents vs 42-cent estimate

* Lilly EPS $1.04 vs $1.02 estimate

* Bristol shares up 2.7 pct; Lilly up less than 1 pct (Adds analyst, company comments, updates shares)

NEW YORK, Oct 23 (Reuters) - U.S. drugmakers Bristol-Myers Squibb Co BMY.N and Eli Lilly and Co LLY.N posted better-than-expected third-quarter results on Thursday on strong sales gains and gave improved outlooks for the rest of the year.

Drugmakers’ shares have been weakened by concerns about the lack of new products, but the companies largely surpassed expectations in the third quarter, proving their potential value as defensive investments in a time of economic turmoil.

“The whole drug group has broadly exceeded expectations in the quarter, to a large extent because of restructuring and cost-cutting each company has implemented,” Deutsche Bank analyst Barbara Ryan said.

Still, like most of their rivals, Bristol and Lilly face questions over their long-term profitability because of patent expirations to top products and uncertainty over their experimental drugs.

Bristol’s blood-clot preventer Plavix and Lilly’s schizophrenia drug Zyprexa, the companies’ respective top-selling products, will lose U.S. patent protection in the next few years, and there is skepticism about whether they will be able to make up for lost revenue.

Lilly said on Thursday the U.S. Food and Drug Administration (FDA) was “very far along” in reviewing its most important experimental drug, the blood-clot preventer prasugrel. Last month, the FDA let an action date for an approval decision pass, giving no indication of when it might render a verdict on prasugrel.

“People are much much more focused on when prasugrel will be approved,” than Lilly’s quarterly results, Edward Jones analyst Linda Bannister said.

Lilly has also sought to add to its revenue by acquiring ImClone Systems Inc IMCL.O and its widely used colon cancer drug Erbitux, which ImClone co-markets with Bristol-Myers.

Rights to a promising follow-up drug to Erbitux are in dispute, and Bristol’s chief executive James Cornelius told reporters on Thursday he hopes to discuss the situation with Lilly CEO John Lechleiter as soon as the $6.5 billion ImClone deal closes.

Bristol-Myers shares rose 47 cents, or 2.7 percent, to $18 in afternoon trading on the New York Stock Exchange. Lilly shares were up 10 cents to $32.21 on the NYSE, after rising as high as $34 earlier in the day.


For the quarter, Bristol said it earned $2.58 billion, or $1.29 per share, compared with $858 million, or 43 cents per share a year ago. The results reflect a $2 billion after-tax gain from the sale of the ConvaTec unit in August.

Excluding special charges, Bristol-Myers said its third-quarter profit from continuing operations was 46 cents per share. Analysts, on average, expected 42 cents per share, according to Reuters Estimates.

“It was a very strong quarter for Bristol,” Ryan said, citing strength in its core franchises, including Plavix, schizophrenia drug Abilify and its HIV drugs, as well as improved profit margins.

Bristol raised the lower end of its 2008 forecast to earnings per share of between $1.65 and $1.70, excluding items, from its prior range of $1.60 to $1.70.

The company affirmed that it expects compounded annual earnings growth from continuing operations of at least 15 percent from 2007 through 2010.

Bristol said its net earnings from continuing operations fell 21 percent, primarily due to a charge of $224 million in the quarter related to losses on auction rate securities.

Ryan said the company, which took its first charge for depressed auction rate securities in January, has shifted its investments into U.S. Treasury bonds. “They’re definitely playing safer,” she said.


Lilly said it lost $466 million, or 43 cents per share, as it booked $1.48 billion in charges for probes related to Zyprexa. That compared with a year-earlier profit of $926 million, or 85 cents per share.

Excluding special items, earnings rose 14 percent to $1.04 per share, 2 cents ahead of estimates.

Sales rose 14 percent to $5.21 billion, topping analysts’ forecast of $5.09 billion, as sales of its depression treatment Cymbalta soared 40 percent to $716.4 million.

“Overall, Lilly did as well as it possibly can with its current portfolio” of drugs, said Barclays analyst Tony Butler.

Butler said he was particularly impressed with the performance of cancer drug Alimta, sales of which rose 46 percent to $314 million.

Lilly raised its 2008 forecast, excluding items, to $3.97 to $4.02 per share, from its previous range of $3.85 to $4.00. (Editing by Dave Zimmerman)