Due to noteworthy strategic measures taken by the company, Eli Lilly & Co. (LLY) swung to a higher-than-expected third-quarter profit from the same period last year. While sales of its major drugs including Zyprexa, Cymbalta, Humalog, Cialis, Evista, Humulin, Forteo and Strattera continue to improve, other income is still expected to show a net loss of between $200 million and $250 million.
The Indianapolis pharmaceutical giant had significantly enhanced financial gains, but it there are some harsh times ahead. Over the coming years, the patency of its several best selling drugs is going to expire and it does not appear as if the company has many new blockbuster drugs in the near future.
To improve its position on the pharmaceutical market, Lilly has recently announced a major restructuring by reducing its workforce by 14% that will hopefully save at least $1 billion by the end of 2011. The company has also announced an agreement to sell its Tippecanoe laboratories manufacturing site to an affiliate of Evonik Industries AS, one of the world’s largest chemical companies.
The above moves are intended to help process Lilly’s 2008 purchase of ImClone Systems Inc. and offset a number of losses it expects starting in 2011 from generic competition to Zyprexa. With sales of close to $ 4.7 billion in 2008, Zyprexa remains Lilly’s top selling pharmaceutical product.
Lilly bought ImClone last year (November 08), and also added the anti cancer drug, Erbitux and the blood thinner Effient to its product line to help generate more revenue. Zyprexa now faces intense competition after release of the much cheaper generic form of Johnson & Johnson’s Risperdal, a rival anti psychotic drug which went on the market last July. Sales of Zyprexa peaked to 2.8 percent to $1.22 billion in the quarter.
Lilly Chief Executive John Lechleiter credited the superior third-quarter results to high gross profit margins and a much tighter control of operating expenditure.
“Lilly continues to deliver very solid financial results,” said John C. Lechleiter Ph.D., Lilly’s chairman and chief executive officer. “Our performance in the third quarter once again was driven by volume-based sales growth, improving gross margins and tight control of operating expenses, allowing us to deliver very attractive earnings growth. These results are evidence of the strength of our current operations as we implement our new operating model, streamline our organization and take measures to accelerate the flow of new medicines through our pipeline.”
Marketing, promotion, and managerial expenses are still anticipated to show flat to low-single digit growth. Research and development operating expense are still expected to grow in the high-single digits on a pro forma non-GAAP basis and in the low-double digits on a reported basis.
Lilly shares fell 61 cents to $34.63 in New York Stock Exchange composite trading.
For the third quarter, Lilly accounted a net income of $941.8 million, or 86 cents a share, in contrast to a loss of $465.6 million, or 43 cents a share, the previous year.