Eli Lilly & Company
) reported first quarter 2014 adjusted earnings per share of 70
cents, in line with the Zacks Consensus Estimate but 39% below
the year-ago earnings of $1.14. Results were hit by the presence
of generic competition for Cymbalta in the U.S.
First quarter revenues fell 16% to $4.683 billion, missing the
Zacks Consensus Estimate of $4.767 billion.
Reported earnings (including special items) declined 52% to 68
cents per share in the first quarter of 2014.
First quarter revenues declined 16% reflecting lower volume
(8%), lower prices (6%) and unfavorable currency fluctuation
(2%). The lower volume was mainly due to the Dec 2013
genericization of Cymbalta in the U.S. Meanwhile, the price
decline was due to the launch of authorized generic versions of
Cymbalta and Evista.
U.S. revenues declined 34% to $2.084 billion mainly due to
lower volume resulting from the loss of patent protection on
Cymbalta and lower prices for Cymbalta and Evista. Wholesaler
buying patterns also had an adverse impact on revenues. Ex- U.S.
revenues increased 5% to $2.599 billion mainly due to higher
volume that was partially offset by unfavorable currency
movement, especially the Japanese yen.
During the first quarter, Zyprexa recorded a 1% decline in
revenues, which came in at $283.1 million. U.S. revenues fell
15%. International revenues increased 1% mainly due to higher
volume that was partially offset by unfavorable currency movement
and lower prices.
Cymbalta sales fell 64% to $478.2 million. U.S. sales dropped
83% to $176 million due to the loss of patent exclusivity in
December. Ex-U.S. sales grew 11% to $302.2 million.
Evista sales fell 38% to $150.1 million. U.S. sales dropped
43% to $98.0 million, due to the loss of exclusivity in Mar 2014.
Ex-U.S. sales declined 25% to $52.1 million due to lower prices
and unfavorable currency movement that was partially offset by
Products which recorded growth in the first quarter included
Alimta (up 2% to $632 million), Humulin (up 1% to $316.2
million), Humalog (up 3% to $650 million), Cialis (up 3% to
$532.4 million), Forteo (up 7% to $300.4 million) and Effient (up
3% to $119.3 million).
Eli Lilly's Animal Health segment contributed $527.4 million
(up 6%) to revenues. Higher prices and increased volume was
partially offset by unfavorable currency movement. Sales in the
U.S. grew 4% due to higher prices of companion animal
Eli Lilly is looking to strengthen its Animal Health division
and recently announced its intention to acquire
) animal health business.
Eli Lilly's adjusted operating expenses declined 14% to $2.594
billion. Research and development (R&D) expenses decreased
18% to $1.109 billion. Marketing, selling and administrative
expenses declined 10% to $1.485 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.
Eli Lilly updated certain parts of its guidance for 2014. The
company expects to earn $2.72 - $2.80 per share on revenues of
$19.4 billion - $20.0 billion. While earnings guidance remained
unchanged, the company had initially guided towards revenues of
$19.2 billion - $19.8 billion.
The Zacks Consensus Estimate for earnings and revenues is
currently $2.81 per share and $19.6 billion, respectively.
Eli Lilly's first quarter results were hit by the
genericization of Cymbalta and Evista. Basically, 2014 will be an
extremely challenging year for Eli Lilly with both products
expected to see a sharp decline in sales.
However, products like Humalog, Trajenta, Cialis, Forteo and
Alimta and the animal health business should help partially
offset the impact of genericization. China should also see strong
growth though Japan will be weaker due to currency movement.
Gross margin is expected to decline significantly in 2014
mainly due to the patent expirations. 2014 gross margin is
expected to be 73%.
Eli Lilly is also working on controlling costs. Marketing,
selling and administrative expenses should decline to a range of
$6.3 billion - $6.6 billion (from $7.1 billion in 2013). Research
and development expenses are expected to decline to $4.4 billion
- $4.7 billion from $5.5 billion in 2013. The company had
initially forecasted SG&A spend of $6.2 billion - $6.5
Eli Lilly should return to growth from 2015.
Eli Lilly is a Zacks Rank #3 (Hold) stock. Some better-ranked
stocks in the pharma sector include
Johnson & Johnson
). Both are Zacks Rank #2 (Buy) stocks.
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