Updated from 7:18 a.m. EDT
first-quarter earnings shot up a better-than-expected 84% from a year ago, reflecting brisk sales of a handful of big drugs and a charge in the year-ago quarter. The drug giant issued mixed guidance, saying its second-quarter profit will trail estimates while affirming its full-year results.
Lilly, which last week
won key patent litigation with generic challengers involving the antipsychotic drug Zyprexa, earned $736.6 million, or 68 cents a share, on sales of $3.50 billion, for the first quarter.
The consensus prediction among analysts polled by Thomson First Call was a profit of 66 cents a share on sales of $3.56 billion.
For the same period last year, Lilly earned $400.4 million, or 37 cents a share, on a reported basis. These results include a one-time charge related to an acquisition.
Lilly noted that its first-quarter 2005 was affected by changes in accounting for stock options which it initiated on Jan. 1.
Lilly said the first quarter results were affected by new arrangements with wholesalers, which the company says will enable it to keep better track of inventory and to prevent "speculative wholesaler buying."
These arrangements reduced first quarter revenue by $130 million, and the company expects the second quarter will be affected by further inventory reductions. The sales impact will be less than in the first quarter. It won't affect the company as a whole, but it will have an impact on a few drugs, including the anti-depressant Prozac and Strattera, for attention deficit hyperactivity disorder, or ADHD.
For the current quarter, Lilly expects to earn 65 cents to 68 cents a share, compared with the Thomson First Call consensus estimate of 69 cents a share. The guidance "takes into account additional U.S. wholesaler inventory reductions anticipated in the second quarter," Lilly said.
For all of 2005, Lilly expects to earn $2.80 to $2.90 a share, compared with the Thomson First Call consensus estimate of $2.83 a share.
"We expect acceleration of sales and earnings growth in the second half of the year driven by our newer products," said Sidney Taurel, the chairman and CEO, in a prepared statement. For the full year, the company expects sales growth in the 8% to 10% range.
Zyprexa remained Lilly's biggest seller in the first quarter, even though revenue fell 5% from a year ago to $1.04 billion. Zyprexa accounted for 40% of first-quarter revenue.
Lilly's patent victory last week in federal district court in Indianapolis "removes a cloud" over the drug, said Jim Ward, executive director of investor relations, in a telephone conference call with analysts. A federal judge rejected challenges by three companies to the key Zyprexa patent in the U.S. which remains in force until 2011. One challenger,
says it will appeal. Last year, Zyprexa produced $4.4 billion in sales, including $2.4 billion in the U.S.
Zyprexa's sales continue to grow overseas, but competition from other antipsychotic drugs in the U.S. caused domestic revenue for Zyprexa to drop 17% during the first quarter of 2005 vs. the same period last year. Lilly predicts "a slight decline" in worldwide sales for Zyprexa this year.
Ward noted that the company faces "no major patent expirations for the remainder of the decade."
Revenue from other drugs was mixed. The company reported what it called a strong performance from some new drugs - the antidepressant Cymbalta ($106.8 million) and the lung cancer drug Alimta ($93.9 million).
But sales of Strattera fell 15% to $119.8 million in the first quarter. Lilly attributed the decline to de-stocking of inventory by wholesalers, a
stricter label on the drug warning against possible liver damage and reduced sales growth among all ADHD drugs.
Lilly said Monday that it expects Strattera's sales to continue declining this year "primarily due to greater than anticipated wholesaler de-stocking...as well as adverse conditions in the ADHD market."
Among its largest-selling -- and older -- products, Lilly said sales of its group of diabetes treatments rose 6% to $724.6 million during the first quarter of 2005 vs. the same period of 2004; sales of Gemzar, for certain cancers, rose 9% to $304.6 million; and revenue from Evista, for osteoporosis, gained 7% to $248.9 million.
Cialis, the impotence drug comarketed with
, recorded first quarter sales of $150.1 million, up 39% from the same period last year.
In early trading Monday, Lilly's stock was up 4 cents to $58.11.