Lilly Protects Research Budget as Generics Loom

Thursday, 30 Jun 2011 | 7:17 AM ET

Eli Lilly signaled it could maintain or even boost research spending through 2014, even as company sales and earnings tumble due to expected generic competition for its biggest-selling medicines.

Justin Ouellette | Getty Images

The strategy would stand in stark contrast to rival drugmakers, most notably Pfizer , that are slashing their research budgets in hard times.

Lillyreaffirmed it expects annual revenue of at least $20 billion between 2011 and 2014, down from more than $23 billion last year.

It expects full-year net income of at least $3 billion during the period, meaning a possible 40 percent decline from the $5.1 billion generated in 2010.

Even so, Lilly plans to earmark as much as 25 percent of annual sales for research and development.

That would mean perhaps $5 billion or more during the three-year patent cliff.

That compares with R&D spending last year of $4.88 billion, which represented 21 percent of sales.

"We're pursuing a research and development-based strategy in full knowledge that the bar for innovative medicines has never been higher," Chief Executive John Lechleiter said in a release, as hundreds of industry analysts and fund managers prepared to gather for a half-day meeting with company officials in New York.

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