Eli Lilly Posts Net Loss Amid Charges

Eli Lilly and Co. (LLY) on Wednesday reported a fourth-quarter net loss on charges for restructuring and taxes related to the return of overseas profits as sales of prescription drugs rose only slightly.

Sales of schizophrenia treatment Zyprexa (search), Lilly's biggest product that has been hurt by concerns over side effects, fell further in the quarter, and sales of diabetes drugs also declined amid competition with rival products.

The Indianapolis-based drugmaker had a net loss of $2.4 million, or nil per share, compared with a net profit of $747 million, or 69 cents, in the year-ago quarter.

"Lilly did about as expected, delivering no big surprises," said Cathay Financial analyst Sena Lund.

The loss included a charge of $465 million for taxes on Lilly's plans to return $8 billion in past overseas earnings under a new U.S. law that grants a reduced tax rate on the return of profits held by foreign subsidiaries.

Lilly also took $494 million in charges for a previously announced restructuring and asset writedowns.

Excluding special items, Lilly earned 75 cents per share. Analysts, on average, expected 74 cents per share, according to Reuters Estimates.

Quarterly global sales rose 5 percent to $3.64 billion, but would have risen only 2 percent if not for the benefit of the weak dollar, which raises the value of overseas sales when they are converted into dollars.

Results were helped by a 3 percent decline in marketing and administrative expenses and a 1 percent cutback in research spending.

Lilly repeated its outlook for 2005 earnings of $3.05 to $3.15 a share, compared with Wall Street's average estimate of $3.10 per share.

Sales of Zyprexa, fell 5 percent to $1.09 billion in the quarter. The drug has been hurt by concerns of weight gain that can increase the risk of diabetes, and from competition in the United States with newer products deemed safer.

Lilly, meanwhile, is bracing for a federal judge in Indianapolis to rule on whether generic versions of Zyprexa can be sold in the United States.

Generic drugmakers Ivax Corp. (IVX), India's Dr. Reddy's Laboratories (search) and Israel's Teva Pharmaceuticals (search) have challenged the validity of a Zyprexa patent that Lilly contends extends through April 2011.

Cathay Financial's Sund said Wall Street remains skittish of Lilly because of uncertainty about whether the company will win the Zyprexa patent battle.

Quarterly sales of diabetes drugs declined 5 percent to $673 million. But revenue from cancer drug Gemzar jumped 17 percent to $330 million, helped by its recent U.S. approval for the additional use of treating metastatic breast cancer.

Sales of Strattera, a new treatment for attention deficit disorder, rose 38 percent to $183 million. Analysts have cautioned that future sales could be hurt by a serious new warning on its label that it may raise the risk of liver damage.

Sales of recently launched impotence treatment Cialis, which Lilly markets under a joint venture agreement with ICOS Corp. (ICOS), decreased slightly from sales in the third quarter to $153 million due to wholesaler stocking patterns.