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Eli Lilly CEO Says Cost Cutting Won’t Solve Drug Sales Loss

Eli Lilly & Co. (LLY), facing generic competition to two of its top drugs, needs to rely on new medicines rather than cost-cutting to overcome the revenue loss, Chief Executive Officer John Lechleiter said.

Pfizer Inc. (PFE), the world’s largest drugmaker wrestling with sales losses after its cholesterol pill Lipitor began facing generic versions, has pledged to trim $1 billion from operations in 2012. A similar focus on costs won’t be enough for Lilly, Lechleiter said. Medicines accounting for about half the Indianapolis-based drugmaker’s 2011 revenue will face copycats by June 2013.

“I don’t think we can save our way out of the enormous challenge we face,” Lechleiter said today during an interview in Boston at the annual meeting of the Pharmaceutical Research and Manufacturers of America. “The best course is to maintain our focus on advancing our pipeline,” he said.

Lilly’s leading experimental product is solanezumab, a treatment for Alzheimer’s disease that is in the last of three rounds of testing usually needed to gain regulatory approval. Clearance for the drug could be a “lottery ticket” worth as much as $9 billion in 2020, Tim Anderson, an analyst with Sanford C. Bernstein & Co., said in December.

“Lilly’s future does not depend on solanezumab,” Lechleiter said. “While we hope the molecules that we take into Phase 3 will be successful, we’ve said all along this is a high- risk program,” he said.

5 Million Americans

As many as 5 million Americans have Alzheimer’s disease, according to the U.S. Centers for Disease Control and Prevention in Atlanta. Alzheimer’s is a degenerative neurological condition with no approved treatment to slow brain cell death.

Nor would a failure for solanezumab end the company’s efforts to fight the disease. “We have other approaches and other molecules in our pipeline that we will continue to move forward,” Lechleiter said.

Lilly’s antipsychotic Zyprexa lost patent protection last year, while exclusivity for the depression treatment Cymbalta will end in 2013.

Lilly’s shares rose less than 1 percent to $39.58 at the close in New York. The company has gained 10 percent in the past 12 months.

Lechleiter reiterated that company will maintain its dividend of 49 cents a share.

To contact the reporter on this story: Drew Armstrong in New York at darmstrong17@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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