Lilly Challenged to Hit Sales Goal Announces Buyback

Eli Lilly & Co. (LLY), saying that meeting its sale target will be a challenge, plans to repurchase $5 billion in shares and introduce new diabetes drugs to help navigate past four years of patent losses.

Less-than-expected profit in emerging markets and a decline in the yen have slowed growth across the pharmaceutical industry. That may make it more difficult for Lilly to meet a reaffirmed goal of at least $20 billion in revenue through 2014, the Indianapolis-based company said in a statement today.

The new products and buybacks are part of Lilly’s strategy to return to growth after next year. Pfizer Inc. (PFE), the biggest U.S. drugmaker, is splitting its businesses to offset its patent losses, while Merck & Co. earlier this week increased job cuts and refocused its research program.

“I am confident in our outlook to return to a period of growth and expanding margins,” Lilly Chief Financial Officer Derica Rice said in the statement.

Lilly reiterated goals of at least $3 billion in net income and $4 billion in operating cash flow through next year.

The company filed U.S. and European regulatory submissions for two diabetes treatments -- empagliflozin and dulaglutide -- and a European submission for a new insulin glargine product.

Cancer Drugs

Lilly also is seeking approval for ramucirumab to treat advanced gastric cancer. Necitumumab, a lung-cancer medicine, performed well in a trial and the company may file for regulatory approval as early as next year, according to the statement.

Investors will keep a close eye on the pipeline, said Mark Schoenebaum, an analyst with International Strategy & Investment Group LLC in New York, in a note today.

“Will Lilly hit this guidance even if the pipeline fails?” Schoenebaum said was the question on investors’ minds. “We would like to understand if there if a ’Plan B’ exists.”

Lilly is meeting with investors today in Indianapolis. The company’s shares fell 1.4 percent to $49.86 at 9:38 a.m. New York time.

“Market factors, including the devaluation of the yen and slower market growth in key emerging market countries, have moderated the company’s near-term revenue growth expectations,” Lilly said in the statement. “These headwinds will make it challenging for the company to meet the minimum revenue goal of $20 billion in 2014.”

To contact the reporters on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net; Drew Armstrong in Washington at darmstrong17@bloomberg.net

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