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Patent 'Cliff' a Challenge, but Manageable: Lilly CEO

Eli Lilly will be "very challenged" by the loss of exclusivity on several blockbuster drugs, CEO John Lechleiter told CNBC on Tuesday, but added the company is engaged in other ways to revive growth next year.

Victor J. Blue | Bloomberg | Getty Images

Eli Lilly will be "very challenged" by the loss of exclusivity on several blockbuster drugs, CEO John Lechleiter told CNBC on Tuesday, but added the company is engaged in other ways to revive growth next year.

Lilly is one of many drug manufacturers confronting a wave of patent expirations that imperils its ability to profit from key drugs. The "patent cliff," which it's called by many industry watchers, could shave as much as $25 billion off drug sales this year, according to estimates from Fitch Ratings.

Although Lechleiter said his company would be "very challenged" by the loss of key patents, he told CNBC's "Squawk on the Street" that Lilly was cultivating new lines of medicines and existing markets.

"We saw the patent cliff coming as recently as the middle of the last decade and began to invest in our pipeline," the CEO said, giving management time to respond with new drug trials. He said Lilly has about 35 drugs in various stages of testing.

"Unfortunately, the timing of the launch of the first of those products doesn't precisely coincide with the loss of revenue from our patents," Lechleiter said.

In 2011, a federal court ruled that generic drug companies could not sell versions of Eli Lilly's blockbuster Cymbalta until this June, when the patent protection is expected to lapse.

"But the guidance we've given is we expect to resume growth after 2014, when we will feel the brunt of the loss of the Cymbalta patent," he said, speaking of Lilly's anti-depression drug. "We're very confident we can achieve that."

Lechleiter stated that the patent cliff had impacted Lilly's decision to hike its dividend payments.

"We provided guidance in 2009, so roughly three years ago, that as we go through this period, we're going to be very challenged with the loss of several of our patented products," he said, adding that the company's goal "was to maintain the dividend at the current level and, of course, that's what we've done."

An earlier version of this story misstated the number of drugs in various stages of testing. The correct number is 35.

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