Once again, Eli Lilly ($LLY) is promising that tomorrow is another day. With its 2014 guidance, the Indianapolis-based drugmaker sticks to its $3 billion earnings target but puts revenue for the year at $19.2 billion to $19.8 billion, less than the $20 billion CEO John Lechleiter called "minimum" late last year.
|Lilly CEO John Lechleiter|
At the low end of that guidance, it's a $3 billion drop for Lilly's top line, compared with 2012. Think about 2011 and it's even worse; that year, Lilly sales amounted to more than $24 billion.
So, this year's forecast marks the latest downward slide. But Lechleiter and CFO Derica Rice say next year will be different. Remember, this is Lilly's "trough" year, the worst of its patent cliff, with the top-selling antidepressant Cymbalta off patent as of last month, and osteoporosis and breast cancer therapy Evista on its way out in March.
"[W]e expect 2014 to be the most financially challenging year of Lilly's current period of patent expirations," Rice said in a statement. "We are prepared for this challenge and are positioned to return to growth and expand margins in 2015 and beyond."
Just how will Lilly pull that off? And how, for that matter, will it hit that $3 billion earnings goal? Despite the corruption scandal in China and its chilling effect on sales activities, Lilly is counting on big growth in the country. It's also looking to its diabetes franchise to help fill in sales lost to Cymbalta and Evista generics. Its erectile dysfunction med Cialis has been growing, thanks to a big advertising push. And then there's Alimta, its second-best seller with $2.59 billion in 2012 sales.
But with the forecast coming in below Lechleiter's $20 billion threshold, and the $3 billion earnings target unchanged, we'll be looking for more cost cuts. Already Lilly has frozen salaries and laid off more than 1,000 workers to prep for Cymbalta's patent loss. And as Lilly's own statement notes, the company is expecting operating expenses to "decrease substantially compared to 2013."
- read the Lilly release
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