Lilly to post 2008 loss on ImClone costs

Date: 11 Dec. 2008

NEW YORK (AP) — Eli Lilly & Co. said Thursday hefty costs related to its $6.5 billion acquisition of ImClone will force the drugmaker to post a loss for 2008 and significantly lower earnings for 2009.

The company also warned of slower sales growth due to the stronger dollar's dampening effect on overseas sales and generic competition for its cancer drug Gemzar.

The Indianapolis-based company, which makes the anti-psychotic Zyprexa and antidepressant Cymbalta, said it expects earnings of $4 to $4.25 per share in 2009, below analysts' average estimate of $4.26 per share, according to a Thomson Reuters poll.

Excluding the costs of its buyout of cancer drug maker ImClone Systems Inc., Lilly expects earnings of $4.35 to $4.55 per share.

Lilly spokesman Mark Taylor said his company's guidance includes the impact of the ImClone acquisition, which should range between 30 cents and 35 cents per share next year. He said that impact includes additional research and development costs, interest expense from debt issued for the acquisition and a reduction in interest income because of cash used for the deal.

Taylor said most analyst estimates have not factored in the full impact of the ImClone deal into their 2009 estimates. He said those estimates likely will move closer to the company's range.

Lilly said 2009 revenue will grow in the low single digits, as the stronger dollar's negative effect on overseas revenue will cancel out some sales gains. The company also said Gemzar will face generic competition in some markets, though the U.S. patents on the drug aren't scheduled to expire until 2013.

The company said it expects better sales of Cymbalta, cancer treatment Alimta, erectile dysfunction drug Cialis and its insulin Humalog. Lilly expects to begin selling its blood thinner prasugrel in the first half of 2009, pending a ruling by the Food and Drug Administration.

The company also said it plans to reduce the cost of bringing new biotech drugs to the market. Lilly estimated it spent $1.2 billion for each new drug in 2007, and wants to reduce that number to $800 million per product by 2010. It said it has so far cut that cost to $1 billion.

Separately, the company reiterated that it expects to seek FDA approval for a once-per-week version of its diabetes drug Byetta in the first half of 2009. Lilly, along with partners Alkermes Inc. and Amylin Pharmaceuticals Inc., plans to seek European Union approval later in the year.

Lilly backed its adjusted profit forecast for 2008, expecting to earn $3.97 to $4.02 per share, compared with analysts' average estimate of $4.01 per share on $20.64 billion in sales. But including the costs of the ImClone purchase, it now expects to report a loss of $1.56 to $2.06 per share for the year.

Analysts were already expecting slower sales growth for the company. Its revenue grew 19 percent in 2007, but analysts are expecting an improvement of just 6.6 percent in 2008. Eli Lilly said it expects its per-share profit to grow more than 10 percent per year through 2011.

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