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Thursday, March 28
The Indiana Daily Student

Eli Lilly quarterly earnings dip

Income drops 2 percent in spite of 17 percent sales growth

INDIANAPOLIS -- Monday Eli Lilly and Co. said first-quarter earnings dipped 2 percent in part because of a $362 million expense related to an acquisition, but the drug maker's results still beat analysts' expectations.\nLilly also reported its fifth straight quarter of double-digit sales growth, driven in part by strong early sales of Cialis, Lilly's competitor to Pfizer's erectile dysfunction drug Viagra. The sales gain was offset in part by higher marketing and research expenses.\nThe Indianapolis-based company reported net income of $400 million, or 37 cents per share, for the January-March period compared with $407 million, or 38 cents a share, a year ago when Lilly recorded a $354 million one-time charge for employee severance costs.\nSales rose 17 percent to $3.38 billion from $2.89 billion in the first quarter of 2003.\nThis year's $362 million charge covers costs from Lilly's November purchase of biotechnology company Applied Molecular Evolution, Inc.\nExcluding one-time expenses and gains, Lilly's net income rose 15 percent to nearly $763 million, or 70 cents per share, compared with $661 million, and 61 cents a share, a year earlier.\nAnalysts surveyed by Thomson First Call forecast a profit of 66 cents per share for the latest quarter.\nLilly shares closed up 95 cents at $73.40 on the New York Stock Exchange.\nLilly's top-selling drug, the anti-psychotic Zyprexa, posted a 15 percent first-quarter sales gain and $1.1 billion in sales, accounting for about one-third of overall Lilly sales. Zyprexa, undergoing a patent challenge and facing competition from newer anti-psychotics, posted 2 percent U.S. sales growth compared with 36 percent growth overseas. A judge who heard evidence in a patent trial this past winter is expected to rule on the challenge by generic drug companies this summer.\nSix of Lilly's newest drugs combined to post $309 million in sales for the quarter, accounting for about 9 percent of Lilly's overall sales.\nCialis posted $108 million in sales. After four months on the U.S. market, the heavily-marketed drug has surpassed another new Viagra competitor, Levitra, in weekly share of new and total prescriptions written, Lilly said.\nCialis, the result of a Lilly joint venture with Bothell, Wash.-based ICOS Corp., won U.S. approval in November, three months after Levitra, marketed by GlaxoSmithKline and Bayer AG.\nCialis can remain effective for up to 36 hours, compared with roughly four hours for Viagra and Levitra. Industry analyst Bert Hazlett of SunTrust Robinson Humphrey expects that selling point will help drive global Cialis sales this year to $600 million. Hazlett expects Viagra sales to be flat this year at about $1.9 billion.\n"Cialis is clearly differentiated compared with the other two drugs," he said. "We have every expectation it will challenge Viagra over time."\nCialis promotions helped boost the company's first-quarter marketing and administrative expenses by 16 percent. Research and development costs grew 22 percent.\nNew drugs Lilly expects to begin marketing this year and next give the company a short-term pipeline many analysts consider the best in the industry. One key drug is Cymbalta, an antidepressant expected to win approval this summer. Some analysts forecast Cymbalta sales could eventually top $2 billion annually.\n"With our multiple launches and outstanding pipeline, we are positioned well to deliver on our promise of strong, sustained earnings growth," said Sidney Taurel, Lilly's chairman, president and chief executive.\nFor the second quarter, Lilly forecasts earnings of 67 cents to 69 cents per share excluding one-time items -- in line with analysts' expectations -- and full-year earnings of $2.80 to $2.85.\nAfter the earnings announcement, shareholders at Lilly's annual meeting elected four board members. The California Public Employees' Retirement System, the nation's largest pension fund, withheld votes for three of those directors in a campaign to curb potential conflicts of interest in corporate governance. The three board members were on a committee that authorized Lilly's auditor to provide non-audit services, which can be considered a conflict of interest.\nInvestors also overwhelmingly rejected shareholder proposals that would have required Lilly to impose caps on executive compensation and issue a report on drug affordability.

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