Bucking the trend of many big pharma companies, with the notable exception of Merck & Co, Eli Lilly has reiterated its intention to increase its R&D spend and rejected the idea of any large-scale merger or acquisition.
Speaking to the investment community in New York, chief executive John Lechleiter said "our future relies upon our ability to successfully discover and develop innovative medicines". He added that "we're pursuing an R&D-based strategy in full knowledge that the bar for innovative medicines has never been higher and that our industry faces many challenges".
Despite these challenges, Dr Lechleiter believes "global demographic and economic trends make a compelling case for innovative medicines". He argued that "the need is great, the scientific knowledge base is expanding exponentially, and the R&D tools continue to improve", saying Lilly has "moved quickly to transform and re-energise our innovation engine".
Patent expiries to hit revenues by $7 billion
The company estimates that various patent expirations affecting the antipsychotic Zyprexa (olanzapine), the antidepressant Cymbalta (duloxetine), the chemotherapy Gemzar (gemcitabine) and the osteoporosis/breast cancer drug Evista (raloxifene) will reduce annual revenue by roughly $7 billion from 2010 to 2014. However R&D chief Jan Lundberg feels Lilly's pipeline is strong enough to combat this problem.
He told investors that the firm has has 70 potential new medicines in its pipeline, "providing a solid substrate to support a series of launches between 2011 and 2017". Some 24 drugs are in Phase II, and nine more in Phase III, up from only seven molecules in 2005.
Dr Lundberg said Lilly has built an R&D engine with "global reach that can deliver new medicines accepted by regulators, reimbursed by payers, and benefiting patients, while generating a positive return for shareholders over the long term". Chief financial officer Derica Rice added that "we are on track to achieve our goals of cutting $1 billion from our cost structure and reducing our global workforce by 5,500 excluding strategic additions by the end of 2011".
By doing this, he added that "we've created the capacity to absorb the patent losses, re-base the company, fund the maturing pipeline, recapitalize our physical asset base and maintain our dividend at least at its current level". Mr Rice reaffirmed Lilly's medium-term financial outlook during the major patent expiry years of 2011 to 2014, including at least $20 billion of revenue, $3 billion of net income and $4 billion of operating cash flow annually.