A Lehman Brothers analyst says manufacturing problems continue to hurt drugmaker

Eli Lilly

(LLY) - Get Report

, raising the risk of longer drug approval delays, including its highly anticipated impotence fighter, Cialis.

The cautious words, delivered in a downgrade note, were enough to send shares of Lilly and biotech partner

Icos

(ICOS)

sharply lower in Friday afternoon trading. Icos is developing Cialis with the drugmaker.

Lilly shares are down $2.43, or more than 4%, to $57.40 in recent trading.

More dramatic is the action on the tape of Icos. After soaring by 15% to $19.03 earlier in the day, shares of the biotech firm tanked on heavy volume when the Lehman note was issued around 1:30 p.m. EDT. Icos shares lost about $2 in less than 30 minutes, and are now trading up just 63 cents, or 3%, to $17.19.

Lehman analyst Tony Butler, a well-known Lilly bull, downgraded the drugmaker to buy from strong buy, citing continuing manufacturing problems that could further delay the approval and launch of three highly anticipated drugs -- Cialis in erectile dysfunction, the osteoporosis drug Forteo and the antidepressant Duloxetine.

"Our due diligence suggests that Lilly has made significant strides at resolving these manufacturing issues. However, we understand that the risk is not diminished and additional delays may make the timing of the launch of the products mentioned above in jeopardy," Butler wrote in his note. His firm doesn't have a banking relationship with Lilly.

Lilly is expected to address its manufacturing problems on its second-quarter conference call set for July 18. But the drugmaker has reportedly set aside 90 minutes for the call instead of the normal 60 minutes, which has some fund managers fearful that Lilly will use the extra time to deliver bad news.