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Generics take toll on Lilly’s 2011 financial results

Sales of antipsychotic Zyprexa fall 44 per cent in fourth quarter

Eli Lilly & Company continued to feel the effects of patent expirations in the fourth quarter of 2011, with revenues dropping 2 per cent to just over $6bn thanks to generic competition to some of its biggest-selling products.

Top-selling antipsychotic drug Zyprexa (olanzapine) fell 44 per cent in the quarter to $750m, with smaller declines in previous quarters accelerating sharply following the loss of patent protection in the US in October 2011.

Generic competition for cancer drug Gemzar (gemcitabine) was also a major reason for the revenue decline, with sales of the former blockbuster plunging 62 per cent to $93m.

On the plus side, antidepressant Cymbalta (duloxetine) grew 20 per cent to $1.18bn, helping the product break through the $4bn barrier for the year, while Humalog (insulin lispro) for diabetes grew 21 per cent to $662m, topping $2bn in sales for the calendar year.

Both these products are scheduled to lose patent protection in 2013, however, adding additional pressure to Lilly's top line.

The pressure on revenues was evident in Lilly's net income, which fell 27 per cent to $858m despite cost-cutting efforts at the company which have seen more than 5,500 staff removed from its headcount since the middle of 2009 and $1bn cut from annual expenses.

Analysts said the sales erosion was already factored in and Lilly had actually performed a little better than expected in the fourth quarter, but forecasts for 2012 were shy of their expectations, mainly because Zyprexa's sales decline seems to be happening faster than anticipated.

The company is banking on its mid- to late-stage pipeline to pull steer it back to growth, and chief financial officer Derica Rice noted that Lilly now has 12 molecules in phase III development, two more than its end-2011 target.

Highlighting just one of these, Lilly is cautiously optimistic about its experimental Alzheimer's drug candidate solanezumab, noting that an independent committee recently recommended that it continue two ongoing phase III trials of the drug, without modifications, based on interim safety and futility analyses.

If successful, solanezumab could achieve double-digit billion sales at peak thanks to the lack of treatments that address the underlying neuronal damage that characterises the disease.

1st February 2012

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