April 25, 2012 / 12:00 PM / 8 years ago

UPDATE 2-Lilly profit beats forecast; focus on new drug data

* Q1 EPS, excluding items, $0.92/shr vs. $0.78 forecast

* Q1 sales top forecast by $240 mln, drive earnings beat

* Raises full-year 2012 profit view

* Data on new drug for Alzheimer’s in view

* Shares rise nearly 1 pct

By Ransdell Pierson

April 25 (Reuters) - Eli Lilly and Co reported a higher-than-expected quarterly profit as its Zyprexa schizophrenia drug took a milder drubbing from generics than Wall Street feared, and other products, including its Cymbalta anti-depressant, showed double-digit sales growth.

The company’s shares rose nearly 1 percent on the first-quarter results, which also benefited from surging demand in China, as well as cost controls.

Analysts said Lilly would face a greater test of its ability to revive sales in the coming months, as data becomes available on its experimental treatment for Alzheimer’s disease and other medicines in late-stage trials.

The Indianapolis-based drugmaker earned $1.01 billion, or 91 cents per share, compared with $1.06 billion, or 95 cents per share, a year earlier, when it took a number of restructuring and research-related charges.

Excluding special items, Lilly earned 92 cents per share. Analysts on average had expected 78 cents, according to Thomson Reuters I/B/E/S.

Data on Lilly’s solanezumab for Alzheimer’s is expected later this year. Although it is considered a long shot, investors say solanezumab would have huge sales potential if it even slows the progress of the memory-robbing disease, speeding Lilly’s return to profit growth and giving a quick boost to its share price.

On a conference call with industry analysts, Lilly Chief Financial Officer Derica Rice said investors should not put all their hopes into that one drug, but consider the entire slate of one dozen products in Phase III studies.

“We’ve said all along that solanezumab is not the home run bet for Lilly,” Rice said.

Rice said solanezumab represented “the upside” for Lilly, on top of potential for its other late-stage medicines, including for lupus, diabetes, depression, cancer and schizophrenia.


Revenue fell 4 percent to $5.6 billion in the quarter, above Wall Street expectations of $5.36 billion.

Sales of Zyprexa, which lost U.S. patent protection in October, tumbled 56 percent to $563 million. But sales came in $63 million higher than expected, Leerink Swann analyst Seamus Fernandez said in a research note.

Sales of animal health brands jumped 33 percent to $491 million, helped by the recent acquisition of new products in Europe, and topped the analyst’s forecast by $81 million.

Cymbalta sales jumped 23 percent to $1.11 billion. Although that helped offset declines for Zyprexa in the quarter, the depression drug’s own U.S. patent will lapse in mid-2013. Its sales will then shrink dramatically, worsening Lilly’s long-feared patent cliff.

Lilly has vowed it will not pursue a large-scale acquisition to prop up earnings during its three-year patent cliff, but will instead cut costs and rely on its drug pipeline to eventually restore profit growth. In the meantime, it has sought to mollify investors with pledges to preserve its hefty dividend.

“Lilly has the highest dividend among U.S. drugmakers, with a yield of 4.9 percent, so that will prop up Lilly if the stock market sees a shift to lower-risk assets,” said MKM Partners analyst Jon LeCroy.

In the meantime, he said Lilly would have a tough time replacing lost sales of Zyprexa, Cymbalta and osteoporosis drug Evista as the patent expirations pile up. “It’s entering a trough period, before its pipeline kicks in.”

Sales of lung cancer drug Alimta rose 5 percent to $607 million. Its Humalog insulin rose 12 percent to $590 million, while its Humulin insulin brand grew 6 percent to $308 million.

The company raised its 2012 profit forecast to between $3.15 and $3.30 per share, excluding special items. In January, Lilly had forecast $3.10 to $3.20, far below analysts’ estimates, and its shares fell sharply.

The stock was up 0.9 percent at $40.32 in morning trading on Wednesday.

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