WSJ
Lilly Expects to Post Full-Year Loss
By KERRY E. GRACE and PETER LOFTUS
Eli Lilly & Co. said it will post a net loss for the year on more than $4 billion in fourth-quarter charges for its acquisition of ImClone Systems.
The pharmaceutical company also said it sees little 2009 sales growth, but noted progress in cutting drug-development costs and said it may follow Merck & Co. into the field of so-called follow-on biologics.
Lilly, which reiterated its 2008 profit view excluding the charges, expects "robust sales volume growth" again in 2009 from drugs including Cymbalta and Cialis and the expected launch of prasugrel. The company is still in talks with the Food and Drug Administration on getting approval for the anti-clotting drug, co-developed with Daiichi Sankyo. It had hoped for approval by year's end.
But overall, Lilly said 2009 sales growth will likely only be in the low single digits on a percentage basis as the dollar strengthens. Analysts surveyed by Thomson Reuters were anticipating 2009 sales growth of 7% to $22 billion.
Another potential revenue hit may come from people trimming health-care expenses. But Chief Financial Officer Derica Rice said several drugs were continuing to post sales growth because they treat diseases or conditions where symptoms would immediately worsen if treatment stopped, such as insulin for diabetics. Even sales of impotence drug Cialis were still growing despite requiring out-of-pocket costs for users, he said in an interview.
Margins are expected to increase "substantially" next year, driven by the strengthening dollar, particularly in the first half, the company said, in an annual presentation to analysts..
The company projected 2009 earnings, excluding dilution from the shares issued for purchasing ImClone, of $4.35 to $4.55 a share. The dilution is expected to impact profits by 30 cents to 35 cents a share. Analysts were projecting $4.26 a share.
Although some analysts were expecting the earnings dilution from the $6.5 billion acquisition of ImClone to be lower, Mr. Rice said the impact was actually better than Lilly had expected going into the deal. The company still expects the deal, which closed in November, to begin adding to earnings around 2012.
For this year, the company said it now expects to record a loss of $1.56 to $2.06 a share, reflecting Imclone-related charges of $4.05 to $4.50 a share.
Lilly also said it is halfway to meeting its goal of cutting the cost of bringing a new drug to market to $800 million by 2010 from $1.2 billion in 2007.
Drug makers, which will be subject to continued patent expiration of blockbusters in the next several years, have been looking to cut costs as their pipelines generally aren't seen as being able to recoup the revenue losses caused by generic competition.
Biopharmaceuticals has been seen as a way to offset waning growth, highlighted by the ImClone acquisition.
Lilly research chief Steven Paul said the company would consider getting into follow-on biologics, essentially generic versions of leading branded biotechnology drugs. He noted Lilly had significant biologics capabilities, saying, "If anyone could move down the path pretty quickly and efficiently, it could be Lilly." But the company isn't prepared to be more specific about its plans now.
Write to Kerry E. Grace at kerry.grace@dowjones.com and Peter Loftus at peter.loftus@dowjones.com |
