Global Insight Perspective | |
Significance | Eli Lilly posted a strong set of first quarter financial results yesterday, headlined by a standout performance from the company's anti-depressant Cymbalta (duloxetine HCl), which saw sales surge by 118% y/y to US$233.3 million. |
Implications | Lilly's strong sales performance for the quarter, and its ongoing efficiency gains, which allowed it to further trim cost-of-sales expenses for the quarter by 6% on the year, have given the company the flexibility to continue its impressive research and development (R&D) investment. R&D expenditure rose by 5% y/y to US$740.8 million, primarily due to an increase in discovery research and clinical trial expenses. |
Outlook | Lilly remains bullish about its future outlook, and strongly touted the impressive 59% y/y growth of its newer products, which now contribute around 22% of the company's total sales, up from just 14% in the first quarter of 2005. |
U.S. drug heavyweight Eli Lilly has posted a strong set of first-quarter financial results, as the company's earnings, which rose by 13% year-on-year (y/y) to US$834.8 million, were boosted by solid growth in net sales and its ability to control the growth of its operating expenses.
Eli Lilly: Financial Results, Q1 2006 (US$mil.) | ||
Q1 2006 | % Change, Year-on-Year | |
Net Sales | 3,714.7 | 6 |
Cost of Sales | 806.5 | -6 |
Research & Development | 740.8 | 5 |
Marketing and Administrative | 1,142.9 | 5 |
Operating Income* | 1,024.5 | 21 |
Net Income | 834.8 | 13 |
Source: Company report, except * Global Insight estimate, calculated as net sales minus cost of sales, R&D and marketing and administrative expenses. | ||
Lilly Touts Strength of Newer Products
In a press release, Lilly highlighted the fact that its newer products - which include Alimta, Byetta, Cialis, Cymbalta, Forteo, Strattera, Symbyax, Xigris and Yentreve – were the primary drivers of the company's strong first-quarter sales figures. Sales of these products collectively grew by over 59% y/y, and their proportion of the company's total sales rose significantly too, to 22%. The fact that these products performed so well is crucial to Lilly's confident future outlook, and is one of the major factors that sets it apart from the majority of Big Pharma companies, who are currently operating under the dark clouds of generic competition to some of their most valuable products. Two of the most notable performers were:
- The stand-out performer for the quarter – and a key representative of Lilly's newer drugs, having been launched in the third quarter of 2004 - was undoubtedly Cymbalta (duloxetine HCI), the company's drug for the treatment of major depressive disorder and diabetic peripheral neuropathic pain. This drug garnered Lilly US$233.3 million in sales during the first quarter, marking a 118% y/y rise, as it continues to wrestle market share away from the selective serotonin reuptake inhibitors (SSRIs) that are the mainstay treatments for depression and anxiety.
- Sales of severe osteoporosis drug Forteo (teriparatide) were also outstanding compared to 2005, rising by 90% y/y to US$127.1 million. U.S. sales of the product increased by 106% y/y, while sales outside of the U.S. market rose by 62% y/y.
Zyprexa and Evista Sales Continue to Slide
Despite the strong positives that Lilly can draw from the performance of its newer products, sales of its top-selling product, the anti-psychotic Zyprexa (olanzapine), have struggled, slipping by 3% y/y. While Zyprexa continues to dominate the global anti-psychotic market, it has suffered over recent quarters from the negative impact of its link to severe weight gain in certain patients, and the virtual saturation of the U.S. anti-psychotic market. Nevertheless, there is still some potential for an expansion of Zyprexa sales in markets outside the United States, where the product's sales slump was not as dramatic, at just 1%. Furthermore, with Zyprexa performing well in the recent large-scale U.S. government-funded CATIE study, comparing the efficacy of a number of major anti-psychotics, it appears likely that sales of Zyprexa will stabilise over the next few quarters.
Another of Lilly's drugs that slipped during the quarter was the company's older selective estrogen receptor modulator (SERM) osteoporosis treatment Evista (raloxifene HCl). Sales of this product fell by 6% y/y to US$149.1 million, with Lilly citing competitive pressures as the main cause. However, on the upside for this particular product, Lilly has recently announced findings from a number of studies confirming that Evista has a clinically significant effect - comparable to older cancer drug tamoxifen, but without some of that treatment's side-effects - in reducing the risk of invasive breast cancer in menopausal women. Lilly now intends to file a New Drug Application (NDA) for raloxifene in this indication, and will be hoping that this will allow Evista to retain some market share, despite the increasingly competitive outlook for the osteoporosis market. One notable source of such competition for Evista is likely to come from U.S. drug-maker Wyeth's investigational osteoporosis treatment bazedoxifene.
Eli Lilly: Key Pharmaceutical Product Sales (US$mil.) | ||
Q1 2006 | % Change, Year-on-year | |
Zyprexa | 1,007.4 | -3 |
Diabetes Care | 763.4 | 5 |
Gemzar | 338.8 | 11 |
Evista | 241.6 | -3 |
Cymbalta | 233.3 | 118 |
Strattera | 152.2 | 27 |
Alimta | 130.1 | 39 |
Forteo | 127.1 | 90 |
Source: Eli Lilly & Co | ||
Outlook and Implications
Overall, the first three months of 2006 represented another strong quarter for Lilly. The company managed to post solid sales growth, while maintaining control of its cost base, and this was suitably reflected by the company's strong bottom-line results. This continued strength has allowed Lilly to invest impressively in R&D over recent quarters, and this trend has carried through into the first quarter of 2006. R&D investment rose by 5% y/y to US$740.8 million, compared to US$702.2 million in the first quarter of 2005, putting expenditure in this area at 20% of the company's total revenues - ahead of the industry average. Lilly's industry-leading ability to maintain its high expenditure on R&D is one of the many keys to the company's success, and it has allowed the drug-maker not only to have a product portfolio that is full of new growth-driving products, and the envy of many other companies in the industry, but also to develop a robust pipeline that will assure the company's future in the medium-to-long term.
In the first quarter of 2006, major pipeline developments for the company included the filing of an NDA for ruboxistaurin mesylate (proposed branded name Arxxant) with the U.S. FDA, and the initiation of a clinical study to assess whether the company's long-acting release (LAR) formulation of Byetta (exenatide) is at least as good as a twice-daily version of the drug. Should this clinical trial into once-weekly exenatide LAR prove positive, the company anticipates that it will form a part of the company's filing to U.S. regulators for the drug. This extended-release formulation of Byetta has been strongly touted as having a huge market potential, with yearly sales likely to reach US$2 billion. This would provide a significant boost to Lilly's already strongly performing diabetes care portfolio, and would mitigate any damage to sales in this area that may result from Japanese drug-maker Takeda's decision to end its agreement with Lilly, which allowed the latter to sell Actos (pioglitazone) in the United States.
Related Articles:
- United States : 6 April 2006: CATIE Phase II Data Shows Patients Quit Anti-Psychotic Treatment Due to Efficacy and Side-Effects
- United States : 12 December 2005: Eli Lilly Announces Bullish Outlook and Seeks to Extend Cymbalta's Indications