Lilly's third-quarter 2014 earnings per share were $0.66, in line
with the Zacks Consensus Estimate but 41% below the year-ago
earnings. Third-quarter revenues fell 16% to $4.876 billion,
reflecting generic competition for Cymbalta and Evista in the U.S.
However, revenues were slightly above the Zacks Consensus Estimate
of $4.83 billion. The biggest near-term challenge for Lilly will be
to replace the revenues lost due to the Zyprexa, Cymbalta and
Evista genericization. The Animal Health business and the diabetes
franchise should provide some downside support. We are also pleased
to see Lilly pursuing small acquisitions and in-licensing deals to
boost its pipeline. We remain Neutral on the stock.
Indianapolis, IN based Eli Lilly and Company is a global
healthcare company with core products in a number of primary-care
pharmaceutical markets. Lilly generates revenues from its
pharmaceutical product and animal health segments. The
pharmaceutical product segment consists of several divisions:
neuroscience (Zyprexa, Cymbalta, Strattera, and Prozac),
endocrinology products (Humalog, Humulin, Actos, Evista, Forteo,
and Humatrope), oncology (Alimta and Gemzar), and cardiovascular
(Cialis, ReoPro, Xigris, and Effient).
The company's portfolio includes Zyprexa (schizophrenia and
bipolar disorder), Gemzar (pancreatic cancer), Evista
(osteoporosis), Cymbalta (depression), Cialis (erectile
dysfunction), Strattera (attention deficit hyperactivity disorder -
ADHD), and Alimta (chemotherapy). The $6.5 billion purchase of
ImClone Systems in Nov 2008 brought with it blockbuster cancer
compound Erbitux. In addition, Lilly develops drugs in the areas of
antibiotics, growth hormones, anti-ulcer agents, cardiovascular
therapies and animal health products. These products (other than
Erbitux) are manufactured either at its own or leased facilities,
and are sold in approximately 120 countries around the world.
However, many of these products are facing generic competition.
Over the past few years, Lilly has been actively seeking
acquisitions and in-licensing deals to boost its product portfolio
and pipeline. While the ImClone acquisition helped expand Lilly's
oncology pipeline and biotechnology capabilities, the Aug 2008
acquisition of SGX Pharmaceuticals, Inc. gave Lilly access to SGX's
fragment-based, protein structure guided drug discovery technology,
and several preclinical oncology compounds. The Jan 2007
acquisition of ICOS Corporation gave Lilly full control over
erectile dysfunction drug, Cialis.
Other acquisitions include those of Hypnion, Inc. (a
neuroscience drug discovery company focused on sleep disorders) and
Ivy Animal Health, Inc. (an applied research and pharmaceutical
product development company focused on the animal health industry).
Lilly also expanded its animal health business through the
acquisition of the European rights to some of Pfizer's animal
health products, consisting of vaccines, parasiticides and feed
additives for both companion and production animals, and the
acquisition of the animal health business of Janssen. Lilly also
acquired ChemGen Corp., which specializes in the development and
commercialization of innovative feed enzyme products that improve
the efficiency of poultry, egg, and meat production.
The company is boosting its animal health business further
through the acquisitions of Lohmann Animal Health, a privately-held
company headquartered in Cuxhaven, Germany, and Novartis' animal
health segment. While the Lohmann deal closed in Apr 2014, the
Novartis animal health acquisition is slated to go through in the
first quarter of 2015.
Lilly has collaboration agreements with several companies
including Bristol-Myers Squibb and Merck KGaA (Erbitux), Daiichi
Sankyo (Effient), Boehringer Ingelheim (diabetes) and TPG-Axon
Capital (solanezumab) among others.
Eli Lilly & Company (LLY): Read the Full
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