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Lilly sales beat forecast; drugmaker raises view

By Ransdell Pierson

NEW YORK (Reuters) - Eli Lilly and Co reported a drop in quarterly earnings as generic competition increased for its Gemzar cancer medicine, but sales beat forecasts, and the drugmaker boosted its full-year profit outlook.

Second-quarter earnings fell to $1.2 billion, or $1.07 per share, from $1.35 billion, or $1.22 per share, a year earlier.

Excluding items, the Indianapolis-based company earned $1.18 per share, matching the average forecast of analysts polled by Thomson Reuters I/B/E/S.

Global revenue rose 9 percent to $6.25 billion, but would have risen only 5 percent if not for the weaker dollar, which raises the value of sales in overseas markets. Sales topped Wall Street expectations of $6.03 billion.

Lilly is girding for one of the industry's worst generic onslaughts, with its $5 billion-a-year Zyprexa schizophrenia drug losing U.S. marketing exclusivity in October. Its Cymbalta anti-depressant faces generics in mid-2013, with copycat forms of its Evista osteoporosis drug flooding the market in 2014.

The company's "patent cliff" began in November, with the lapse of its U.S. patent on Gemzar. Second-quarter sales of the drug plunged 62 percent to $112 million.

"Lilly's earnings peaked in the first quarter, and we're not likely to get back to that point for several years," said Atlantic Equities analyst Richard Purkiss, who has an "underweight" rating on the company's stock.

Lilly has vowed to avoid large-scale mergers as its patent lapses mount, and to rely instead on its pipeline of experimental drugs to eventually restore earnings growth.

"The whole dynamic of this company now is how much you buy into their pipeline, but I think it's high-risk," Purkiss said.

Although Lilly's products in late stages of testing have big sales potential, especially a treatment for Alzheimer's disease, Purkiss said the likelihood of success in clinical trials for that drug and many others was questionable.

Lilly said on Thursday that it expected 2011 earnings of $4.25 to $4.35 per share, excluding special items. It had previously forecast $4.15 to $4.30.

Though an improvement, the new forecast translates into a profit decline of 8.2 percent to 10.3 percent from last year.

Lilly shares were down 0.4 percent at $38.02 in trading before the market opened.

(Reporting by Ransdell Pierson; Editing by Lisa Von Ahn and Ted Kerr)

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