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Lilly prepares for $3bn hit from Zyprexa patent loss

Pharma firm outlines expected impact of generic competition on its earnings

Eli Lilly & Company expects revenues for Zyprexa (olanzapine) to fall by $3bn this year after the antipsychotic loses its patent protection.

The drug, which had sales of $3.9bn for the first three quarters of 2011, began facing generic competition in most markets outside Japan in October 2011 with Teva Pharmacuetical and Dr Reddy's quick to launch their version of olanzapine.

Lilly said it would struggle to replace the lost revenue and warned total annual sales would fall to between $21.8bn and $22.8bn during 2012, down from $23.1bn in 2010.

The pharma company has yet to publish its full 2011 results, but did record revenues of $18.2bn for the nine months to the end of September – an 8 per cent increase on the year before.

Lilly's 2012 earnings forecast falls short of analyst predictions and excludes charges related to the company's diabetes collaboration with Boehringer Ingelheim as well as asset impairment and restricting charges, including costs related to the withdrawal of Xigris.

Lilly has long been aware of the issues it would face following the loss of patents for big selling drugs like Zyprexa and antidepressant Cymbalta (due to lose protection in 2013), and the company's chairman, president and CEO, Dr John Lechleiter has termed the period the 'Years YZ'.

"We've been preparing to meet these challenges for many years, and have the plans in place to enable us to bridge this period and return to sustainable growth after 2014,” he said. “We remain focused on executing this plan."

Lilly's strategy to manage the change includes strong growth from its Elanco Animal Health business, as well as an increased focus on emerging markets.

Lechleiter also said the company's mid- to late-stage pipeline had been “successfully rebuilt” with 12 candidates in phase III development.

Key brands still under patent expiration, including Cialis and Humalog, as well as newer products such as Effient, Axiron and Tradjenta are all expected to see growth over the next few years too.

Forecasts beyond 2012 were modest, however, with Derica Rice, Lilly executive vice president, global services and chief financial officer, predicting figures would not exceed the company's 2008 results before 2014.

He said: "From now through 2014, on an annual basis we still expect revenue to be at least $20bn, net income to be at least $3bn, and operating cash flow to be at least $4bn."

6th January 2012

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