Eli Lilly & Company
) reported third quarter 2013 adjusted earnings per share of
$1.11, well above the Zacks Consensus Estimate of $1.05 and 41%
above the year-ago earnings of 79 cents. Year-over-year growth
was attributable to the strong performance of several key
products, cost control, a lower tax rate as well as a lower share
Third quarter revenues increased 6% to $5.77 billion,
marginally above the Zacks Consensus Estimate of $5.76 billion.
Revenues increased despite the impact of the Zyprexa patent
expiry due to the strong performance of key products.
Reported earnings (including special items) declined 6% to
$1.11 per share in the third quarter of 2013.
Third quarter revenues increased 6% reflecting price increases
(5%) and higher volume (3%) that were partially offset by
unfavorable currency fluctuation (2%). The higher volume was
mainly due to the strong performance of several products like
Humalog, Alimta, Trajenta and Forteo and the Animal Health
segment. This was partially offset by the loss of exclusivity for
Zyprexa, which is facing competition from several generic players
as well as volume declines for Cymbalta.
U.S. revenues grew 11% to $3.3 billion mainly due to price
increases, especially for Cymbalta. Ex- U.S. revenues remained
flat at $2.5 billion mainly due to the unfavorable impact of the
depreciation of the Japanese yen.
During the third quarter, Zyprexa recorded a 26% decline in
revenues, which came in at $278.7 million. U.S. revenues fell 51%
due to lower prices. International revenues decreased 20%, mainly
due to the loss of market exclusivity in major markets apart from
Japan. Zyprexa sales in Japan were affected by the weakening
Products which performed well in the third quarter included
Alimta (up 7% to $690.5 million), Humalog (up 7% to $616
million), Cialis (up 9% to $526.7 million), Forteo (up 6% to
$306.7 million) and Strattera (19% growth to $173.2 million)
Cymbalta sales increased 11% to $1.4 billion. However, growth
was driven mainly by price increases. With the Cymbalta patent
expiry coming up (Dec 11), inventory levels were down both at the
wholesale and retail channels. The company expects U.S. sales to
drop to about $500 million in the fourth quarter.
Eli Lilly's Animal Health segment contributed $530.3 million
(up 11%) to revenues. Sales benefited from the withdrawal of
) food animal product from the U.S. market.
Effient revenues increased 14% to $124.9 million. While U.S.
revenues grew 15% to $92.7 million, due to higher prices, ex-
U.S. revenues increased 10% to $32.2 million driven by higher
volume and favorable currency movement.
Eli Lilly's adjusted operating expenses declined 2% to $3
billion. Research and development (R&D) expenses increased 3%
to $1.4 billion. Marketing, selling and administrative expenses
declined 6% to $1.7 billion reflecting the company's cost control
efforts. The company has cut down its sales and marketing
activities in the U.S. for Cymbalta and Evista, due to impending
EPS Guidance Narrowed
Eli Lilly narrowed its 2013 earnings guidance to $4.10 to
$4.15 per share (old guidance: $4.05 - $4.15 per share). Revenue
guidance remained unchanged at $22.6 billion - $23.4 billion. The
Zacks Consensus Estimate for earnings and revenues is currently
$4.12 per share and $22.9 billion, respectively.
Eli Lilly continues to expect marketing, selling and
administrative expenses of $7.0 - $7.2 billion and R&D
expenses of $5.3 - $5.5 billion.
Eli Lilly will start buying back shares under its new $5
billion share repurchase program shortly.
Eli Lilly's third quarter results were once again
better-than-expected with products like Cialis, Humalog, Alimta,
Forteo and the animal health segment managing to offset the
negative impact of the genericization of Zyprexa.
Eli Lilly expects revenues to remain flat or increase by about
3.5% in 2013 despite the expected loss of U.S. exclusivity for
Cymbalta later this year.
While revenues will be impacted by the loss of Cymbalta
exclusivity and the loss of the 15% royalty on exenatide sales,
products like Humalog, Humulin, Cialis, Strattera, Forteo,
Alimta, Cymbalta (outside the U.S.), Effient, Tradjenta and
Axiron, and the animal health segment should contribute to sales.
Emerging markets, especially China, should also drive sales.
However, revenue growth in Japan could be adversely affected by
the weak yen.
Eli Lilly is also working on controlling costs. Earlier this
year, Eli Lilly had announced a restructuring initiative to help
lessen the impact of the upcoming loss of patent exclusivity for
Cymbalta and Evista, changing consumer needs and the change in
the U.S. healthcare environment.
Eli Lilly currently carries a Zacks Rank #3 (Hold). Pharma
stocks that currently look attractive include
Johnson & Johnson
). While Roche carries a Zacks Rank #1 (Strong Buy), Johnson
& Johnson is a Zacks Rank #2 (Buy) stock.
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