Updated from 8:23 a.m. EST
reaffirmed earnings guidance for 2004 that matches Wall Street expectations. It also offered financial guidance for 2005, providing a range that comfortably fit around the consensus Wall Street opinion.
The Indianapolis-based company still expects EPS of 73 cents to 75 cents and $2.80 to $2.82, respectively, in line with the Thomson First Call consensus estimates of 74 cents and $2.81. These calculations exclude fourth-quarter charges for restructuring and for asset impairments. Using the GAAP standard, the company predicts fourth-quarter EPS would be in the range of 47 cents to 54 cents and full-year EPS in the range of $2.13 to $2.20.
For 2005, Lilly predicted earnings per share of $3.05 to $3.15. The Thomson First Call consensus estimate is $3.11.
However, the company said these projections exclude expenses related to a new accounting for options, which is being proposed by the Financial Accounting Standards Board. Lilly said it will adopt a stock-option expensing plan on Jan. 1 rather than on July 1 as proposed by the FASB. The company said it will be easier to adopt this change for the full fiscal year rather than for half of the fiscal year.
Lilly said the new accounting policy plus a change in its compensation structure will cost approximately 25 cents a share for 2005. Lilly said these changes would have trimmed 24 cents if they had been in effect for all of 2004.
Using the GAAP standard and factoring in option and compensation-change charges, Lilly predicts 2005 EPS of $2.80 to $2.90.
The company said it expects three product approvals in key markets, including European approval for its Cymbalta depression treatment. In the U.S, look for duloxetine for stress urinary incontinence and exenatide for type 2 diabetes to get the regulatory nod. In addition, the company said it remains on track for a 2005 U.S. submission of ruboxistaurin for symptoms related to nerve damage caused by diabetes.
"In the past three years, we have doubled our product line with the launch of eight innovative new medicines that address significant unmet medical needs," said Sidney Taurel, the company's chairman and CEO. "Also, within the past 18 months, we've added seven new indications or formulations for our existing and new products. And our pipeline remains robust even after this recent surge of launches."
Lilly is widely viewed to have one of the strongest R&D pipelines in the industry. The company said it has nine experimental drugs that are expected to be in mid- to late-stage development by next year, covering such problems as brain cancer, heart disease, urological disorders, Alzheimer's disease and central nervous system disorders.
Taurel added that the company's sales growth next year should accelerate in the second half. This growth is "virtually all tied to new products, thereby minimizing our dependence on any single product," he said.
Taurel said that the company expects its best-selling drug, the antipsychotic Zyprexa, to suffer a "slight decline" in worldwide sales in 2005, despite a predicted "double-digit growth" in sales outside the United States. He didn't provide a specific figure.
The big hit to Zyprexa is coming from the United States, thanks to competition from several brand name products as well as from generic versions of other drugs. Lilly also is awaiting a court ruling on a patent challenge to Zyprexa. Although analysts believe Lilly will prevail, the lack of a decision heightens the uncertainty about its financial performance.
The company is "committed to ensuring physicians understand which patients would benefit from Zyprexa's profile," Taurel said. "While we expect U.S. Zyprexa sales to decline for full-year 2005, we believe our interventions will enable us to slow the erosion sometime next year."
In premarket action, shares were trading at $53.97, off 37 cents, or 0.7%. That's about $3.60 above their 52-week low.