While expecting to meet or exceed its current earnings per share guidance for 2011 of $3.84-$3.89, Eli Lilly says profits for 2012 will be $3.10-$3.20 per share, well below analysts' estimates.
The latter forecast is based on 2012 revenues of $21.8-$22.8 billion, which includes an expected decline of over $3 billion in sales of the antipsychotic Zyprexa (olanzapine), due to patent expirations in most markets. This will be partially offset by the likes of the antidepressant/fibromyalgia blockbuster Cymbalta (duloxetine) and the lung cancer drug Alimta (pemetrexed).
Lilly added that earnings will also be hit by "anticipated pricing actions in Japan" and the impact of patent expirations, including Zyprexa, in some emerging market countries.
Chief executive John Lechleiter noted that "2012 is an important year" for Lilly, with Zyprexa off-patent and Cymbalta will lose exclusivity in the USA at the end of 2013. "We've been preparing to meet these challenges for many years", he said, "and have the plans in place to enable us to bridge this period and return to sustainable growth after 2014".
Dr Lechleiter said Lilly has "successfully rebuilt our mid- to late-stage pipeline" and has 12 assets now in Phase III, "exceeding our goal of 10 by the end of 2011". He stated that "we continue to drive productivity gains across our business to fund the R&D necessary to fuel our future growth, recapitalise our physical assets and maintain our dividend at least at its current level".
Derica Rice, chief financial officer, added that "from now through 2014, on an annual basis we still expect revenue to be at least $20 billion, net income to be at least $3 billion and operating cash flow to be at least $4 billion".
The news came as little surprise to analysts. Tim Anderson at Sanford Bernstein issued a research note saying that Lilly has "one of the steepest, most prolonged patent cliffs of the different US and EU names we cover", which accounts for the "dim consensus outlook" on the company as an investment opportunity.