Lilly stock rises on solid earnings

Drugmaker reports increase in sales, earnings and reaffirms guidance, but fate of pipeline remains uncertain.

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By Aaron Smith, staff writer

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NEW YORK ( -- Eli Lilly & Co.'s stock edged up Tuesday after the drugmaker reported an increase in fourth-quarter profit and sales that edged past analysts' expectations and reaffirmed its guidance for 2008.

Lilly (LLY, Fortune 500) said its profit rose 10% to $986 million, or 90 cents per share, without charges. This beats expectations from a consensus of analysts, who forecast 89 cents per share, according to Thomson Financial.

Including charges, Lilly's net income surged to more than $850 million, or 78 cents per share, a six-fold increase from $130 million, or 12 cents per share, during the year-ago quarter. This includes one-tme charges from cost-cutting and the acquisition of ICOS, a biotech.

The Indianapolis-based pharma company also reported a 22 percent jump in fourth-quarter sales to $5.19 billion. This was driven by a 10% sales increase for anti-psychotic Zyprexa to $1.27 billion, as well as a 48% sales surge for antidepressant Cymbalta to about $630 million.

For the full-year 2007, Lilly reported an 11% jump in net profit to nearly $3 billion without charges, or earnings of $2.71 per share and a 19% increase in sales to $18.6 billion.

Lilly reaffirmed its 2008 guidance for adjusted earnings per share of between $3.85 and $4.00. This is based on the company's expectations that sales for core products like Cymbalta, the sexual dysfunction drug Cialis and the diabetes drug Byetta will continue to grow.

Pipeline uncertainty

But the guidance does not included projected sales from Lilly's experimental anti-clotting drug prasugrel, also known by its trade name Effient. An application for prasugrel has been filed with the Food and Drug Administration, and its fate is uncertain. Lilly spokesman Mark Taylor said that even if the drug gets approved by the FDA and enters the market this year, its sales wouldn't make it a growth driver until after 2008.

Prasugrel is designed to prevent heart attacks in patients as they receive stents, which are tubes that prop open arteries to prevent clots. Late-stage experiments show that prasugrel works better than its potential competition, Bristol-Myers Squibb's (BMY, Fortune 500) blockbuster Plavix.

But studies show that bleeding effects caused by these types of drugs are significantly worse in prasugrel than in Plavix, which caused many analysts to back away from their blockbuster forecasts.

Barbara Ryan, of Deutsche Bank North America, considers prasugrel to be "approvable" based on its "striking efficacy results." But the drug could be constrained by FDA-mandated warnings and cautious prescribing by doctors, said Ryan.

Les Funtleyder, analyst for Miller Tabak, expects the FDA will approve prasugrel with significant warnings on its label. But even if it is approved, it would soon face the challenge of generic Plavix.

"I don't think it's going to be a big robust market, particularly as Plavix is coming off patent in three years," said Funtleyder.

The analysts did not have sales projections for prasugrel. To top of page

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