INDIANAPOLIS (AP) — Eli Lilly and Co. will give investors on Tuesday its first quarterly earnings report since the drugmaker lost U.S. patent protection for its best-selling drug, the antipsychotic Zyprexa.
WHAT TO WATCH FOR: Analysts know Lilly will take a hit from generic competition for Zyprexa, which generated 19 percent of the company's total revenue in the third quarter. On Tuesday, they will gain a little more insight into how much of a hit.
Zyprexa is Lilly's all-time best seller, and it topped $5 billion in worldwide sales last year. The company still has patent protection for Zyprexa in Japan, but it has said it expects rapid erosion of sales for the drug, which now faces competition in the United States from two companies making generic versions.
Lilly lost patent protection for the drug in October, so it has yet to feel the full impact of the sales drop. The drugmaker said earlier this month it expects 2012 earnings of between $3.10 and $3.20 per share. That equates to a drop of about 27 percent from its prediction for 2011earnings.
Lilly has been preparing for years for the Zyprexa expiration and other key, upcoming patent losses. The company has cut costs and said it will depend on its pipeline of drugs under development, its animal health business, and sales in Japan and emerging foreign markets like China to get through the expected revenue slump.
It expects annual earnings of at least $3 billion on revenue of at least $20 billion through 2014. Analysts will be looking for updates on the company's pipeline.
Lilly also has said rebates and fees required under the health care overhaul have affected its performance in 2011. The company recorded a $465 million hit in the third quarter from the law, which aims to eventually cover millions of people.
WHY IT MATTERS: Lilly, based in Indianapolis, is the world's 10th largest drugmaker by annual revenue, according to the latest ranking from drug data firm IMS Health.
Some analysts doubt Lilly's ability to recover from the patent expirations without the aid of a major acquisition, and they wonder about the future of Lilly's dividend, which currently stands at a quarterly rate of 49 cents per share. Company officials have said they expect to at least maintain their dividend and they plan no major deals.
WHAT'S EXPECTED: Analysts surveyed by FactSet expect, on average, earnings of 81 cents per share on $5.89 billion in revenue.
2010 QUARTER: Lilly's fourth-quarter earnings jumped 28 percent, helped by a 19 percent sales increase from its second best-seller, Cymbalta. Overall, Lilly earned $1.17 billion, or $1.05 per share, in the final quarter of 2010. Revenue climbed 4 percent to $6.19 billion.
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