|Eli Lilly CEO John Lechleiter|
Nobody expected stellar first-quarter results from Eli Lilly ($LLY), which is this year in the thick of its sales decline. That said, the Indianapolis-based drugmaker hit the profits numbers analysts did expect, with a soon-to-be-expanded animal health division holding the company's sales dip to just below Wall Street's predictions.
Earnings for the quarter hit 70 cents a share, Lilly announced Thursday, matching the estimates average compiled by Bloomberg. Sales, hurt primarily by generic competition for a pair of newly off-patent drugs, sank 16% to reach $4.68 billion, missing the $4.8 billion analysts had expected.
CEO John Lechleiter echoed the frank statements he's made on the grim sales anticipated for 2014, noting that the Q1 results bear out his warnings to investors last year. As a result, ISI Group Mark Schoenebaum wrote in a note, "we doubt most shareholders will care" about the fact that it was "overall not a great quarter."
Despite growth from drugs like osteoporosis med Forteo, pharma revenues slid. That's thanks to Cymbalta, the former top-seller that lost patent protection in December. Sales of the antidepressant plummeted 64% year-over-year; Evista, whose IP shield expired in March, sank 38% to contribute to the decline.
Lilly has been preparing for that one-two punch, having plenty of patent cliff experience; copycat rivals decimated sales of its blockbuster antipsychotic Zyprexa in 2011. The company last year hiked prices and announced 1,000 layoffs, and it recently froze salaries and cut bonuses for 2014.
But there were bright spots for the drugmaker, with animal health sales swelling 6% over the year-ago quarter to tally $527.4 million. And with a just-announced, $5.4 billion deal to buy Novartis' animal health unit--a business the Swiss pharma dropped to focus on its areas of expertise--those sales will only be getting bigger.
"You're seeing companies build on their strengths, add to existing areas of strength and get rid of assets where they might be sub-scale," Lechleiter said on a conference call, as quoted by Bloomberg. "Animal health is one of the few opportunities we have to diversify in a meaningful way that still has synergies to our pharma business."
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