Lilly Posts Higher Drug Sales, Plans to Increase Dividend

  • Diverse pipeline will help revenue growth over next decade
  • Adjusted earnings of 86 cents a share match analyst estimates

Eli Lilly CEO: Getting Back to Annual Dividend Increase

Eli Lilly & Co. posted second-quarter earnings that matched analysts’ estimates as revenue surged, led by growing U.S. sales of the company’s top drugs such as the erectile dysfunction pill Cialis and the diabetes treatment Humalog.

Profit excluding some items totaled 86 cents a share, the company said Tuesday in a statement, equaling an average of analysts’ estimates compiled by Bloomberg. Revenue rose 8.7 percent to $5.4 billion, topping estimates of $5.15 billion. The shares were little changed at $81.92 at 1:27 p.m. in New York trading.

The smallest of its U.S. major pharmaceutical peers by market value, Lilly had regained momentum by beating profit estimates for four straight quarters, starting with the fourth period of 2014, though it fell short in the next two. After losing key patents in 2011 and 2013, the Indianapolis-based drugmaker is betting on sales growth from recently introduced drugs such as diabetes medicine Trulicity and cancer treatment Cyramza.

Revenue will grow by at least 5 percent a year, mostly through prescription volume, through the end of the decade, and profit margins will improve, Chief Executive Officer John Lechleiter said in the statement. The company also promised to increase the company’s dividend, which was unchanged from 2008 to 2014, according to data compiled by Bloomberg.

Lilly Chief Financial Officer Derica Rice told analysts on a conference call that the growth will come from rolling out drugs now in trials and awaiting approvals, though the timing of those launches is unclear. The growth is projected even if the company’s much-anticipated Alzheimer’s drug solanezumab -- with final-phase clinical data expected to be released later this year -- “is a zero,” he said.

Lilly is a “pipeline-driven return-to-growth story,” and solanezumab remains a “major potential turbo charger,” analyst Tim Anderson of Sanford C. Bernstein wrote in a note.

Rice also told analysts on a conference call that increased drug rebates and discounts are still expected to hurt sales of prescription drugs next year.

“We know that we’re looking to go into highly competitive spaces in terms of some of our new product launches,” he said. “Our focus has been on driving volume-driven revenue growth.”

Unlike some of its Big Pharma competitors, Lilly hasn’t made large-scale purchases in recent years. Its last acquisition outside of animal health for more than $1 billion was in 2007, when it acquired ICOS Corp. for $2.43 billion. Lechleiter said Tuesday on Bloomberg TV that Lilly is always considering deals, but only targets smaller companies, not large-scale possibilities.

Drug Sales

Sales of Jardiance totaled $40.1 million, falling short of analysts’ projections of $51.9 million. Hopes are high for the diabetes treatment, which was developed with Boehringer Ingelheim GmbH and approved in 2014.

Sales of the drug may surpass $1.62 billion in 2020 if claims for cardiovascular and kidney benefits are allowed, according to analysis by Bloomberg Intelligence. A Food and Drug Administration advisory panel recently recommended approval of an expanded label saying the drug helps reduce the risk of death from cardiac events. It would be the first diabetes treatment to carry such a claim, and company executives said Tuesday that they are planning a “very robust” marketing plan.

More highlights from the second quarter:

  • Net income rose to $747.7 million, or 71 cents a share, from $600.8 million, or 56 cents, a year earlier.
  • Animal health sales rose 2.3 percent to $859.8 million. Sales by the unit have more than doubled since 2010 as Lilly acquired a series of companies and expanded its portfolio of medicines for pets.
  • Insulin drug Humalog sales increased 7.3 percent to $701.9 million, less than analysts’ estimates of $709 million.
  • Cialis sales rose 11 percent $630.5 million, topping estimates for $582.8 million.

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