Eli Lilly Earnings Top Estimates, Sales Outlook Disappoints

The drugmaker Eli Lilly & Co. (LLY) on Monday said its profit climbed in the first quarter, beating expectations on strong sales of newer products, but said its profit for the second quarter would be below current Wall Street estimates.

Its shares rose 6 cents to $58.13 on the New York Stock Exchange (search). They have traded in a range of $50.34 and $76.95 over the past 52 weeks.

Earnings rose to $736.6 million, or 68 cents per share, in the January-March period from $400.4 million, or 37 cents per share, a year ago. Year-ago figures reflect acquired in-process research and development expenses of $362.3 million. Excluding that expense, and assuming the expensing of stock options, net income for the 2004 quarter was $671.4 million, or 62 cents per share.

The result for the latest quarter topped the company's previous estimate for earnings of 65 cents to 67 cents per share and the consensus estimate of analysts surveyed by Thomson Financial, who were looking for earnings of 66 cents.

Sales rose 4 percent to $3.5 billion from $3.38 billion, and would have risen about 7 percent if not for roughly $130 million of reductions in wholesaler inventory levels during the quarter as a result of the company's recent restructuring of arrangements with its U.S. wholesalers, Lilly said.

Sales of the company's top selling schizophrenia treatment Zyprexa (search) fell 5 percent to $1.04 billion. A U.S. federal court ruled last week that Lilly's patent on Zyprexa is valid until 2011. Sales of Zyprexa dropped 17 percent in the U.S, and the company expects a slight decline in worldwide sales of the drug for all of 2005.

Sales of Lilly's diabetes care products rose 6 percent to $724.6 million.

Newer products, such as Cialis (search) for erectile dysfunction, Cymbalta (search), which treats depression and pain related to diabetes, and Alimta for second line non-small cell lung cancer, contributed $503.2 million to first-quarter sales and accounted for 14 percent of total sales, up from 9 percent of total sales in the year-ago period.

For the second quarter, Lilly expects net income to rise to 65 cents to 68 cents per share from the 63 cents earned a year ago excluding charges and assuming the expensing of stock options. The estimate is below analysts' expectations for 69 cents per share.

Full year earnings are expected to be $2.80 to $2.90 per share, up 9 percent to 12 percent from the $2.58 per share reported for 2004, excluding charges and assuming stock option expensing. Sales for 2005 are expected to grow 8 percent to 10 percent, with growth accelerating in the second half of the year. Analysts are expecting Lilly to post earnings of $2.83 per share on sales of $14.93 billion. Sales were $13.86 billion in 2004.

"We are pleased with our financial performance in the first quarter," said Sidney Taurel, Lilly chairman, president and chief executive officer. "Furthermore, we expect acceleration of sales and earnings growth in the second half of this year driven by our newer products."