Eli Lilly’s first-quarter income dipped 5% for the first quarter of 2010 despite a respectable rise in sales, as results were knocked by a higher tax rate and the impact of US healthcare reform.
The group posted a 9% rise in revenues to $5.5 billion, with growth driven by an increase of 4% due to higher volume, 3% due to the impact of foreign exchange rates, and 1% due to higher prices, the company said.
US revenues were up 6% at $3.0 billion due to higher prices (offset in part by around $60 million in higher rebates resulting from healthcare reform) and higher demand for products, while sales elsewhere grew 13% to $2% billion due to increased demand and a helping hand from foreign exchange rates.
Turnover of Lilly’s top-selling drug, the antipsychotic Zyprexa (olanzapine), was up 8% at $1.2 billion, but the biggest growth came from the lung cancer drug Alimta (pemetrexed), sales of which rocketed 57% to $527.4 million. Other products faring well during the period were: the erectile dysfunction drug Cialis (tadalafil), up 14% to $408.3 million; the antidepressant Cymbalta (duloxetine), up 13% to $803.2 million; and the insulin Humalog, up 12% at $506.4 million.
On the downside, sales of the chemotherapy Gemzar (gemcitabine) dropped 22% to $287.8 million, as lower demand on the back of generic competition ate into its market share outside the US, revenues of the ADHD drug Strattera (atomoxetine) dipped 8% to $146.4 million, on low demand and lower prices in the US, and the osteoporosis drug Evista (raloxifene) fell 6% for $241.6 million, following lower global demand for the drug.
Also knocking first-quarter results were charges of $50.0 million related to acquired in-process research and development associated with the in-licensing deal with Acrux, and $26.2 million for restructuring, primarily related to severance and other related costs from the company’s ongoing business reshuffle.
In addition, the effective tax rate was 26.9% compared to 22% in the first quarter of 2009, driven by a one-time charge of $85.1 million linked to the imposition of tax on the prescription drug subsidy of the company’s retiree health plan as part of US healthcare reform, and the expiration of the R&D tax credit. This helped depress net income 5% to $1.5 billion and earnings per share were down to $1.13 from $1.20 a year ago.
Still, the company remained upbeat about its performance during the year. “Lilly delivered strong operational performance in the first quarter, even as we experienced continued weakness in the US dollar versus prior periods and began to account for the impact from recently-enacted US healthcare reform,” said the company’s chairman and chief executive John Lechleiter.
2010 guidance revised
Furthermore, he said that the group “expects that the new US healthcare reform legislation, while not perfect, will help seniors in the Medicare system better afford their prescriptions and will provide greater access to our medicines for millions of Americans who are currently uninsured,” but added that as a result, Lilly “will incur substantial costs to our business”.
Consequently, the group has revised its 2010 earnings, now expecting EPS to be in the range of $4.35 to $4.50 (reported), including an approximate $0.35 per share anticipated reduction due to the impact of US healthcare reform, as well as expectations of stronger underlying business performance.
