Eli Lilly and Company
) were down about 0.8% over the two trading sessions immediately
after the company announced guidance for 2014.
While the company reiterated its 2013 guidance (issued at the
time of reporting third quarter results: earnings of $4.10 to
$4.15 per share on revenues of $22.6 billion - $23.4 billion),
Eli Lilly now expects 2014 revenues of $19.2 billion - $19.8
billion. 2014 earnings are expected in the range of $2.77 - $2.85
per share. Earnings guidance was in-line with expectations - the
Zacks Consensus Estimate for 2014 is $2.83 per share.
Meanwhile, the revenue guidance was below the company's
earlier forecast of revenues of at least $20 billion through
2014. Basically, 2014 will be an extremely challenging year for
Eli Lilly with two major products - Cymbalta and Evista - facing
generic competition this year. Cymbalta has already lost
exclusivity in the U.S. and should see a sharp decline in sales
and Evista is slated to lose exclusivity in March.
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 74%.
Eli Lilly expects a significant decline in total operating
expenses in 2014. While marketing, selling and administrative
expenses are expected in the range of $6.2 billion to $6.5
billion (down about 10% compared to 2013 guidance), research and
development expenses are expected in the range of $4.4 billion to
$4.7 billion (down about 15% compared to 2013 guidance).
The company said that it remains on track to meet its goals of
generating net income and operating cash flow of $3 billion and
$4 billion, respectively, this year. Eli Lilly is looking to
continue paying dividends at the current level at least and will
continue pursuing share buybacks and business development
The 2014 guidance does not include the impact of a $200
million upfront fee that will be payable to
) if the partial clinical hold on pipeline candidate, tanezumab,
is lifted. Eli Lilly expects to return to growth from 2015.
Eli Lilly's 2014 guidance was mostly in line with
expectations. This will be a tough year for the company with two
products facing generics. However, Eli Lilly is progressing with
its pipeline and has several pipeline-related events lined up
especially for ramucirumab (oncology), empagliflozin (type II
diabetes), and dulaglutide (type II diabetes) among others.
Eli Lilly currently carries a Zacks Rank #3 (Hold). Some
better-ranked large-cap pharma stocks include
) with both carrying a Zacks Rank #2 (Buy).
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