Lilly Edges Past Profit Targets

Fourth-quarter earnings beat by a penny.
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Eli Lilly

(LLY) - Get Report

Tuesday delivered a penny per-share earnings beat for its fourth quarter, benefiting from the foreign exchange rate and sales growth in drugs like antidepressant Cymbalta and erectile-dysfunction drug Cialis. Those sales helped to offset a flat quarter for its leading earner, schizophrenia drug Zyprexa.

Shares rose $1.22, or 2.4%, to $52.59 Tuesday morning.

The company said Tuesday that net income came in at $854.4 million, or 78 cents a share, vs. $132 million and 12 cents a share in the year-ago quarter when Lilly recognized asset impairment, restructuring and Zyprexa product liability charges of 73 cents a share.

On an adjusted basis, the company reported net income of $986.4 million, or 90 cents a share. Lilly said quarterly sales increased 22% to $5.19 billion. Analysts surveyed by Thomson Financial were looking for 89 cents a share on revenue of $4.81 billion.

For the year, the company reported adjusted earnings of $3.96 billion, or $3.54 a share, on sales of $18.7 billion. Analysts were looking for $3.54 a share on roughly $18.26 billion.

Back to the quarter, sales of the Zyprexa, a treatment for schizophrenia and bipolar disorder, increased 10% to $1.27 billion. However, the company said sales were essentially flat in the U.S. and an increase of 10% in foreign markets was driven by the favorable impact of foreign exchange rates. Demand outside the U.S. was also essentially flat, according to the company, because growth in Japan and several European markets was offset by the impact of generic-drug competition in Canada and Germany.

Sales of Cymbalta -- a drug approved for management of diabetic nerve pain and also, as of November, for major depressive disorder -- came in at $628 million for the quarter, a 48% rise from the same quarter in 2006. U.S. sales increased 45%, driven by strong demand and to a lesser extent increased prices, according to the company. And sales outside of the U.S. increased 70% to $81 million, on higher demand and a positive impact of foreign exchange rates.

Total worldwide sales of the company's erectile-dysfunction drug Cialis were $346.2 million, a 29% increase over the fourth quarter of 2006, on higher prices and increased demand. The drug was approved this January for once-daily use. All sales of Cialis after the company's acquisition of ICOS on Jan. 29 of 2007 are reported in Lilly's revenue (vs. a 50% share in joint-venture territories prior).

As reported Monday post-close by partner

Amylin Pharmaceuticals

(AMLN)

, worldwide sales of Byetta were $183.6 million in the fourth quarter, a 34% increase vs. the year-ago period. Lilly reports its 50% share of Byetta's gross margin in the U.S., all of Byetta sales outside the U.S., and its sales of Byetta pen delivery devices to Amylin, as revenue. Lilly recognized total revenue of $92.1 million related to Byetta for the quarter, a 34% increase year over year.

Looking ahead, Lilly confirmed 2008 guidance of pro forma sales in the mid-to-high single digits, with operating expenses growing more slowly than sales with growth in the mid single digits and R&D growing in the high-single to low-double digits.

Lilly is looking for adjusted earnings of $3.85 to $4 a share for 2008, which excludes a 5-cent per-share charge related to the in-licensing transaction with

BioMS

. Analysts surveyed by Thomson Financial were looking for $3.88 a share for 2008.