Lilly 4Q profit falls 27 pct, hurt by patent loss

INDIANAPOLIS (AP) ? Eli Lilly and Co.'s net income tumbled 27 percent in the last quarter of 2011 as the drugmaker faced another revenue-sapping patent expiration for a key product.

The Indianapolis company lost U.S. patent protection in October for its all-time best-selling drug, the antipsychotic Zyprexa, which generated 19 percent of its third-quarter revenue. Zyprexa sales fell 44 percent in the fourth quarter to $749.6 million.

Lilly also was hurt by a 62 percent drop in revenue from the cancer treatment Gemzar, which lost patent protection in 2010. But sales for its antidepressant Cymbalta and top-selling insulin Humalog made up for some of these losses, and the drugmaker's results beat Wall Street expectations.

Lilly shares climbed nearly 3 percent, or $1.15, to $40.40 in premarket trading Tuesday, after the company released results.

Lilly earned $858.2 million, or 77 cents per share, in the three months that ended Dec. 31. That's down from $1.17 billion, or $1.05 per share, in the final quarter of 2010.

Revenue fell 2 percent to $6.05 billion.

Adjusted earnings, which exclude some one-time charges, were 87 cents per share.

Analyst surveyed by FactSet expected, on average, adjusted earnings of 81 cents per share on $5.89 billion in revenue.

The drugmaker is entering a stretch where it faces patent expirations that will expose several drugs to cheaper generic competition. It loses patent protection for Cymbalta and Humalog next year. Sales for those drugs climbed 20 percent to $1.18 billion and 21 percent to $662 million, respectively, in the fourth quarter.

Lilly still has patent protection for Zyprexa in Japan, but it expects revenue from the drug to plunge by more than $3 billion this year.

The company has spent years preparing for these patent losses. It has cut more than $1 billion in costs since 2009 and trimmed its workforce.

It will depend on its pipeline of drugs under development, its animal health business, and sales in Japan and emerging markets like China to get through the expected revenue slump caused by the patent expirations.

Lilly has a dozen potential drugs in late-stage clinical testing, the last phase before a company seeks regulatory approval. That includes potential treatments for Alzheimer's disease, cancer and the immune system disorders lupus and psoriasis.

Some analysts doubt Lilly's ability to recover from the patent expirations without the aid of a major acquisition, and they wonder about the future of Lilly's dividend, which currently stands at a quarterly rate of 49 cents per share. Company officials have said repeatedly they expect to at least maintain their dividend and they plan no major deals.

For the full year, Lilly earned $4.35 billion, or $3.90 per share, on $24.29 billion in revenue, as seven drugs topped $1 billion in sales. Adjusted earnings for 2011 were $4.41 per share.

Lilly said earlier this month it expects to earn between $3.10 and $3.20 in 2012, which would represent a drop of between 27 percent and 30 percent. Analysts expect earnings of $3.21 per share.

Lilly has said it should record annual earnings of at least $3 billion on revenue of at least $20 billion through 2014.

Associated Press

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