Eli Lilly earnings up 20 percent

INDIANAPOLIS -- Eli Lilly and Co. on Wednesday said earnings rose 20 percent after four consecutive quarters of declines, but the drug maker's shares dropped 8 percent as Lilly lowered its outlook for next quarter.\nLilly also offered no timetable for resolution of manufacturing problems that could hold up at least three new drugs.\nLilly reported net income of $683.9 million for the July to September period, or 63 cents per share, compared with income of $570.1 million, or 52 cents per share, for the year-ago period.\nThe rise was in part the result of a decline in one-time charges from the year-ago quarter, from nearly $229 million to $84 million this year.\nAdjusted for one-time items, Lilly posted earnings of 68 cents per share, meeting expectations of analysts surveyed by Thomson First Call.\nNet sales were down 3 percent to $2.79 billion from $2.87 billion, despite a 7 percent increase in sales of Lilly's key drugs.\nThat rise was more than offset by the plunge in sales of Prozac since Lilly lost patent protection for the anti-depressant in August 2001, leading to cheaper generic versions.\nThat problem was the key factor in Lilly's earnings declines in the previous four quarters of 27 percent, 25 percent, 22 percent and 20 percent, respectively.\nSidney Taurel, Indianapolis-based Lilly's chairman, president and chief executive, said the company's Prozac troubles were history.\n"We are now through the period during which the Prozac sales decline triggered by generic competition in the U.S. had the greatest impact on our performance," Taurel said.\nRobert Hazlett, an industry analyst with SunTrust Robinson Humphrey, said Lilly can expect robust growth starting in the second half of next year if it resolves manufacturing problems delaying new drugs.\n"In the near term, mediocre quarters aren't too troubling at this point," Hazlett said. "We just need to make sure those drugs get to market."\nLilly said it now expected earnings in this year's fourth quarter of 68 to 70 cents per share. Wall Street had been expecting 72 cents a share. Lilly said it now expects full-year earnings of $2.55 to $2.57 per share, while analysts had expected $2.60 per share.\nLilly said the move was driven by increasing investment to support its current top-seller, the anti-psychotic Zyprexa, which faces increasing competition, and to prepare for introduction of new drugs. Lilly also cited slow sales of some of its older drugs, and disappointing sales of Xigris, a blood-infection drug introduced in November.\nLilly shares dropped 8.3 percent, or $5.23 a share, to $57.77 in midday trading on the New York Stock Exchange.\nLilly shares hit a 52-week low of $43.75 in July after the company warned that the U.S. Food and Drug Administration's concerns about quality control at some manufacturing plants remained unresolved.\nThe problems, primarily at Indianapolis plants, are not expected to be cleared up until at least early next year, when follow-up FDA inspections are planned.\nLilly offered little information on the matter Wednesday, saying it had heard "nothing definitive" back from the FDA.\nThe problems could delay approval of three drugs produced in Indianapolis: Cymbalta, an anti-depressant; Forteo, for osteoporosis; and an injectable version of Zyprexa.\nLilly is awaiting FDA approval of two other drugs produced outside Indianapolis: Cialis, a medication for male erectile dysfunction that could compete with Viagra, and Strattera, for attention deficit disorder.\nLilly on Wednesday offered no specific forecast of next year's earnings, other than to say it expects "some earnings growth," assuming the FDA does not impose financial penalties over the manufacturing problems or other unexpected expenses occur.