Diabetes boost can't save Lilly from Q4 miss as CEO delays call to meet with Trump

Lilly
Eli Lilly announced lower-than-expected earnings for the fourth quarter of 2016, but touted its diabetes franchise, including its new biosimilar insulin, Basaglar.

Eli Lilly CEO David Ricks was on his way to the White House Tuesday for a meeting on drug prices with President Trump when his company announced mixed Q4 results.

Lilly beat revenue estimates on higher-than-expected sales of its diabetes drugs and erectile dysfunction drug Cialis. But it fell short on earnings, because of expenses that soared past analysts’ expectations.

Lilly reported that its fourth-quarter revenues grew 7% to $5.8 billion and that non-GAAP earnings came in at $1 billion, or 95 cents per share. Analysts had been hoping for per-share earnings at 98 cents. For the full year, Lilly reported a 6% sales boost to $21.2 billion, with EPS up 3% to $3.52.

Analysts had to wait a few extra hours for Ricks to finish up at the White House before they could ask how much of the earnings miss stemmed from currency woes, but they already knew Lilly faces tough moves to get control of its expenses.

Just 10 days ago, the company revealed it was cutting 485 jobs, mostly in its Alzheimer’s unit, which is reeling from the phase 3 failure of solanezumab. The company had staffed up its sales force in anticipation of a success, but warned reps in December that there would be cutbacks. The company also offered voluntary exit packages to some employees in its animal health division.


Related: Eli Lilly targets sales force for job cuts in wake of Alzheimer's failure


During the fourth quarter, diabetes was most definitely a bright spot for Lilly. The company’s new entries, the weekly GLP-1 drug Trulicity and SGLT2 med Jardiance, brought in $337 million and $76.1 million respectively. Sales of its insulin injection Humalog were up 3% year-over-year to $819.8 million.

Other standouts included the osteoporosis treatment Forteo, which jumped 12% to $422.5 million. Sales of Cialis were up 6% during the quarter to $676.3 million, though that gain came largely through higher prices charged in the U.S., the company said in the earnings release. Demand is actually falling for Cialis, which faces patent expirations in the U.S. and Europe this year.

Some market-watchers spotted other signs of weakness in the top line. Credit Suisse analyst Vamil Divan called out cancer drug Erbitux’s Q4 sales of $153.7 million as “light.” It was a 13% year-over-year decline, and way under the consensus estimate of $182 million, Divan said in a note to investors.

Lilly pointed to two new market entries that made their debuts during the fourth quarter: Basaglar, its biosimilar version of Sanofi’s insulin blockbuster Lantus, which it is co-marketing with Boehringer Ingelheim; and Galliprant, which it is co-marketing with Aratana Therapeutics for dogs with osteoarthritis.

No doubt analysts will try to get some color from Ricks during the earnings call about its efforts to bring down expenses and its pipeline of potential new blockbusters, not to mention the meeting in Washington. In addition to Ricks, the confab included Stephen Ubl, president of the trade group PhRMA, Novartis’ Joe Jimenez, Merck's Kenneth Frazier, and Joaquin Duato of Johnson & Johnson. They sat down with Trump, who just before the inauguration accused the drug industry of “getting away with murder” when it comes to pricing.

Meanwhile, Lilly held firm on its 2017 its guidance, saying it still expects sales of $21.8 billion to $22.3 billion and non-GAAP EPS of $4.05 to $4.15.