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Lilly Protects Research Budget as Generics Loom

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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