Lilly Profit Rises on Sales of Newer Drugs


Eli Lilly on Thursday posted a 6 percent rise in quarterly profit on increased demand for its Cymbalta anti-depressant and better than expected sales of its top-selling schizophrenia medicine Zyprexa.

The Indianapolis-based drugmaker also raised its 2007 forecast, saying it expects sales growth to outpace operating expenses.

Net income rose to $926.3 million, or 85 cents per share, from $873.6 million, or 80 cents per share, a year earlier.

Excluding a charge of 6 cents per share related to insurance recoveries, Lilly earned 91 cents per share, topping analysts' average expectations by 4 cents, according to Reuters Estimates.

"The beat came mostly from stronger than expected sales, driven largely by Zyprexa," Morgan Stanley analyst Jami Rubin said in a research note.

Sales of Zyprexa, Lilly's largest selling product, rose 8 percent to $1.17 billion, while Cymbalta sales jumped 47 percent to $513 million.

Lilly CEO John Lechleiter said on this morning's "Squawk Box" that the company has made progress developing several of its drugs awaiting Food and Drug Administration approval, and is expecting the momentum to carry over to solid fourth-quarter results.

"We’ve gotten great top-line performance this year," Lechleiter said. "This is the best volume growth that we’ve had since 2001."

Total sales rose 19 percent in the quarter to $4.59 billion, edging Wall Street expectations of $4.53 billion.

Goldman Sachs analyst James Kelly said sales of Gemzar for cancer, diabetes treatment Humalog and Evista for osteoporosis also topped expectations. He added that the raised forecast and volume-driven growth should boost Lilly's share price.

Excluding a one-time research and development charge, the company sees fourth-quarter earnings per share of 86 cents to 91 cents, and it raised its 2007 adjusted earnings forecast to a range of $3.50 to $3.55 per share, representing growth of 16 to 17 percent compared with full-year 2006.

Analysts expect the company to earn 87 cents per share in the fourth quarter and $3.47 per share for 2007, according to Reuters Estimates.

"We remain on pace for a very solid year," Chief Executive Sidney Taurel, said in a statement, citing a focus on volume-based revenue growth and cost containment.

The 3-cent-per-share one-time research and development charge relates to a licensing agreement announced Thursday under which Lilly acquired rights to an experimental Type 1 diabetes drug from MacroGenics Inc. The deal includes an initial payment by Lilly of $41 million.

"This agreement will expand Lilly's pipeline of late stage molecules and will strengthen one of our core therapeutic areas," David Moller, vice president of endocrine and cardiovascular research and clinical investigation said in a statement.

Lilly reduced its expected product liability insurance recoveries in the third quarter of 2007 following a settlement with one of its insurance carriers over Zyprexa product liability claims. This resulted in a charge of $81.3 million.