Eli Lilly Wilts on Light Profit, Outlook

Eli Lilly(LLY - Cramer's Take - Stockpickr) fell shy of first-quarter expectations on Monday, giving up nearly 5% in morning trading.

The Indianapolis, Ind.-based pharmaceutical company benefitted from foreign exchange rates, a tax-audit resolution and strong sales in some of its drug arsenal, but also suffered charges in the first three months of 2008.

Lilly reported profit of $1.06 billion, or 97 cents a share, vs. $508 million, and 47 cents a share in the year-ago quarter. Sales rose to $4.8 billion, from $4.22 billion in 2007.

The recent quarter included a 19-cents-a-share benefit from resolution of a federal tax audit, and a 14-cents-a-share charge for restructuring and acquisitions. The company recognized $145.7 million in asset impairment, restructuring and other special charges, primarily related to the termination of AIR Insulin.

Year-ago results include a 29-cents-a-share charge for the acquisition of Cialis maker Icos.

On an adjusted basis, Lilly earned 92 cents a share, vs. 83 cents a share in the 2007 quarter. Analysts surveyed by Thomson Financial were looking for 96 cents a share on revenue of $4.82 billion.

Despite the miss, some of Lilly's drugs saw strong sales growth. "Double-digit sales growth was once again primarily driven by volume. The sales growth of Cymbalta, Cialis, Alimta, Forteo and Humalog was especially encouraging," said Lilly's new CEO John Lechleiter in a release.

Worldwide sales volume increased 8%, and exchange rates and selling prices contributed 5% and 1% of sales growth, respectively.

Sales of depression and anxiety drug Cymbalta increased 37% to $605 million, driven by an increase in demand. Sales of erectile dysfunction drug Cialis increased 74% to $336 million, due to increased prices and higher demand. And sales of Humalog for diabetes increased 20% to $407 million.

Also sales of cancer drug Gemzar climbed 13% to $462 million, and sales of non-small-cell lung cancer drug Alitma increased 32% to $272 million.

Meanwhile, sales of antipsychotic Zyprexa grew just 1% to $1.12 billion. Zyprexa sales in the U.S. decreased 5% due to a decrease in demand. Demand outside the U.S. also decreased slightly, but international sales still increased 6% in light of favorable foreign exchange rates.

In the first quarter, Lilly received a not-approvable letter from the Food and Drug Administration for Zyprexa long-acting injection for schizophrenia in adults. The agency said it needs more information on the risk and cause of excessive sedation events observed in roughly 1% of patients in clinical trials.

Total revenue of Byetta, which Lilly co-markets with Amylin(AMLN - Cramer's Take - Stockpickr), totaled $169 million, 15% higher than the first quarter. Amylin said Monday morning that these sales were lower than expected. Lilly records 50% of Byetta's revenue.

Looking ahead, the company expects a profit of between $3.90 and $4.05 a share in 2008. Analysts surveyed by Thomson Financial are looking for an average of $3.95 a share on revenue of $20.3 billion.

Lilly's shares were down $2.19, or 4.2%, at $49.88 in recent trading.

Merck(MRK - Cramer's Take - Stockpickr) exceeded analysts' earnings estimates for the first quarter and affirmed its forecast for 2008, sending its shares higher Monday morning.

Also, shares of Novartis(NVS - Cramer's Take - Stockpickr) gained nearly 3% after the Swiss drugmaker reported an increase in its quarterly profits.

Shares of Pfizer(PFE - Cramer's Take - Stockpickr) and Bristol-Myers Squibb(BMY - Cramer's Take - Stockpickr) also were falling, while Schering-Plough(SGP - Cramer's Take - Stockpickr) stock was edging higher.