Lilly Misses Estimates as Patent Expirations Cut Sales

Eli Lilly & Co. fell short of analyst earnings estimates as sales of its biggest drugs plummeted in what the company has said will be a down year.

Third-quarter net income fell 58 percent to $501 million, or 47 cents a share, from $1.2 billion, or $1.11, a year earlier, the company said today in a statement. Profit excluding one-time items of 66 cents a share missed by 1 cents the average of 12 analysts’ estimates compiled by Bloomberg.

Revenue declined 16 percent to $4.88 billion, from $5.77 billion a year earlier.

“We knew going into this year this was going to be one of the toughest years in our history,” Chief Executive Officer John Lechleiter said in a telephone interview. The current sales decline will be offset by new drugs, he said, including three products approved by the U.S. Food and Drug Administration in the third quarter. “I cannot remember a quarter with so many positive developments in our pipeline.”

The Indianapolis, Indiana-based drugmaker is facing a wave patents expiring on its top-selling treatments. In December, Lilly lost exclusive marketing rights for Cymbalta, an antidepressant which sold $5.08 billion last year and is projected to sell $1.55 billion this year.

“Everybody’s looking to 2015 and what that incremental revenue will look like,” Tony Butler, an analyst at Guggenheim Securities LLC, said in a telephone interview. This year is “a bit of a wash.”

Lilly shares fell less than 1 percent to $64.35 at the close in New York.

Guidance Lowered

Lilly lowered the top end of its annual sales guidance, citing what it called rapid and severe declines in sales of Cymbalta and the osteoporosis drug Evista. Lilly now expects 2014 sales to be from $19.4 billion to $19.8 billion, after previously forecasting revenue of as much as $20 billion.

Cymbalta sales were $368 million in the third quarter, beating estimates of $336 million. Evista lost patent protection in March and its sales fell 65 percent to $90 million, beating estimates of $83 million.

The company reported increasing competition in its animal health business, which delivered $585 million of sales in the quarter, up 10 percent.

“We’re seeing the entry of generic versions of some of our products in production animals and food animals,” Lechleiter said. “This is a very competitive space, we’re not getting the kind of growth that we might have anticipated.”

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