Thursday, April 14, 2011

Eli Lilly & Co. (NYSE: LLY): Q1 Earnings Preview 2011

Eli Lilly & Co. (NYSE: LLY) is scheduled to release first-quarter earnings before the opening bell on Monday, April 18, 2011. Analysts, on average, expect the company to report earnings of $1.16 per share on revenue of $5.70 billion. In the year-ago period, the company reported earnings of $1.18 per share on revenue of $5.49 billion.

Eli Lilly and Company develops, manufactures, and sells pharmaceutical products worldwide. Its products are sold in approximately 125 countries. s products include neuroscience products, endocrinology products, oncology products, cardiovascular products, animal health products and other pharmaceuticals.

In the preceding fourth quarter, the Indianapolis, Indiana-based company’s net income was $1.17 billion or $1.05 per share, compared with $915.4 million or $0.83 per share last year. On an adjusted basis, the company earned $1.11 per share in the fourth quarter. Revenue rose 4 percent to $6.19 billion from $5.93 billion in the prior-year quarter. Analysts, on average, expected the company to report earnings of $1.10 per share on revenue of $5.99 billion.

At its last earnings call in Janauary, Lilly forecasts full-year 2011 earnings per share in a range of $3.92 - $4.07 on a reported basis and $4.15 - $4.30 on a non-GAAP basis. The company's guidance includes the dilutive impact of the upfront fee and other anticipated expenses related to the collaboration with Boehringer Ingelheim, but excludes potential restructuring charges from the previously announced strategic actions.  The company also expects that total revenue growth will be flat to slightly up for fiscal 2011, with a $400 million to $500 million impact of the U.S. health care reform. Excluding anticipated sales decline of Zyprexa and Gemzar outside Japan and the incremental impact of the U.S. health care reform, revenue is projected to grow in the mid- to high-single digits. The company expects gross margin as a percentage of revenue to decline 2 percentage points. 

Like many of its peers among the world's biggest pharmaceutical companies, Eli Lilly is facing plunging sales due to a series of patent lapses and stiff competition from generic drugmakers. Industry experts expect Eli Lilly's earnings to fall steadily from this year through to 2014 as it loses patent protection on many of its best-selling drugs. Lilly’s bestselling drug is the schizophrenia treatment Zyprexa, which begins the flood of U.S. patent losses later this year. Zyprexa sales topped $5 billion last year. The next highest seller at $3.5 billion and 15% of revenues is Cymbalta, used to treat depression and fibromyalgia, and is on patent until at least June 2013. Alimta, a cancer treatment, has patent protection until 2016. Alimta, had $2.2 billion in sales in 2010, a 29% growth over 2009, and indications are that Alimta sales will continue to grow. 

To bolster its earnings prospects, Eli Lilly is increasing focus on its animal health unit, one of the bright spots in the firm and where growth has far outpaced that in the core drug business.Last month, the company agreed to buy Johnson & Johnson's animal health unit for an undisclosed sum to bolster its presence in Europe. 

Lilly also has touted its pipeline of potential drugs under development and sales in emerging markets and Japan as other key growth outlets. The company also plans to introduce a number of new drugs to China over the next few years. 

The company's stock currently trades at a forward P/E (fye Dec 31, 2012) of 9.72. In terms of stock performance, LLY shares have lost nearly 2 percent since the beginning of the year.

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