Eli Lilly's Q2 beats the Street as newer products, animal health buy pitch in

Eli Lilly CEO John Lechleiter

Eli Lilly ($LLY) stirred up some rough waters earlier this year, with lagging sales for older meds and a 2015 forecast that fell short of analysts' expectations. But CEO John Lechleiter predicted good things ahead--and now it looks as if Lilly has reached calmer waters.

Pointing to early numbers for new products and added sales from the Novartis ($NVS) animal health unit it picked up in January, Lilly raised that earlier, disappointing forecast, thanks to street-beating revenues for the quarter. The Indianapolis, IN-based company grew sales by 1% to $4.97 billion, compared with expectations of $4.89 billion.

Lilly can partly thank sales from its new animal unit for the increase. The company snatched up Novartis' veterinary business in January for $5.4 billion, forming the second-largest animal health company after Zoetis ($ZTS). That buy helped boost the unit's sales to $840.8 million--a 40% increase from the same quarter last year. Stronger-than-expected sales of older pharma products--including Zyprexa and Cymbalta--also helped, Leerink Partners analyst Seamus Fernandez said.

Now, Lilly is expecting revenues of $19.7 billion to $20 billion this year, up from its previous range of $19.5 billion to $20 billion. The numbers are "all the more remarkable" given the strong currency headwind the company faces, Bernstein analyst Tim Anderson said in a note to investors.

But it wasn't all rainbows and butterflies for Lilly during Q2. Generic competition for antidepressant Cymbalta and osteoporosis drug Evista continued to take their toll on the company. Though Cymbalta sales came in higher than analysts had figured, they did drop by 32% to $274.1 million. Evista sales slid 45% to $59.7 million. Net income also fell 18% to $600.8 million.

Still, promising numbers for new launches gave Lilly a welcome boost. Diabetes meds Jardiance and Trulicity, and oncology drug Cyramza met or slightly exceeded analysts' expectations, which is "clearly good news," Evercore ISI analyst Mark Schoenebaum said in a note to investors. Jardiance (empagliflozin) brought in $11 million in Q2, including sales from a combo drug that pairs the SGLT2 med with Tradjenta (Linagliptin), an older DPP-4 product. Trulicity posted $44 million in sales after getting off to a slow start. And Cyramza raked in $88 million--a 542% increase year-over-year. But sales for Lilly's fast-acting insulin, Humalog, dropped 7% to $654.3 million during the quarter.

Lilly will need all the help it can get to keep up the positive momentum. The company is hard at work on its CETP inhibitor evacetrapib, which works to lower bad cholesterol. And Lilly recently won EU approval to market Synjardy, its Type 2 diabetes med that combines Jardiance with the standard diabetes therapy metformin.

- read Lilly's earnings statement

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