What do analysts make of Lilly chief's stoic strategy?

Is Lilly ($LLY) CEO John Lechleiter (photo) a brave stalwart or simply a stubborn mule? That's essentially the question a long Reuters analysis asks, and the answers fall on both sides. Facing a major "patent trough," Lechleiter refuses to consider a big merger and vows that Lilly's pipeline will see it through, despite some evidence to the contrary. Analysts--and other industry observers--are plenty willing to judge that approach.

Take Avik Roy, a healthcare analyst at Monness, Crespi, Hardt & Co. He tells Reuters that Lechleiter is right to suspect the megamerger as a business strategy, citing the fact that internal politics tend to trump good judgment as companies integrate their operations. "John Lechleiter is showing intellectual courage by being willing to suck up and take the punch of the approaching earnings decline, while recognizing the long term value of the company will be driven by internal research and development productivity," Roy says.

On the other side, find Sam Isaly of OrbiMed Advisors, who considers Lechleiter's pipeline faith misguided. "Those guys have their heads in the sand--deep, real deep in the sand--when you consider their [R&D] productivity has been close to zero," Isaly said. He figures Lilly will need to spend billions to bring in new drugs: "They might have to shell out $20 billion or more to find the assets to tide them over."

But to hear Lechleiter's CFO talk, even medium-sized deals, such as Sanofi-Aventis' attempted buyout of Genzyme at $18.5 billion, aren't in the cards. Lechleiter himself speaks stoically about rebuilding from the low point of Lilly's patent trough. And it's this calm in the face of danger--"toughing it out," as Standard & Poor's analyst Herman Saftlas put it--that simply baffles some Lilly-watchers. "It's a very strange position they're taking, considering what they're facing," Saftias told the news service. "They have to do something, or the patent cliff will kill them."

- check out the Reuters analysis

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