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Eli Lilly Expects Challenging 2014 Due to Patent Expirations

Written by Gene Quinn
Patent Attorney & Founder of IPWatchdog, Inc.
Principal Lecturer, PLI Patent Bar Review Course
Posted: January 7, 2014 @ 5:15 pm

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Eli Lilly world headquarters

Eli Lilly and Company (NYSE: LLY), the giant pharmaceutical company headquartered in Indianapolis, Indiana, is a globally renowned developer of patented, brand name drugs. The company has been in operation since 1876, and has recently suffered through some tough times thanks patent expirations, such as the expiration of the patent for the prescription depression drug Cymbalta.

Earlier today the company announced its financial guidance for 2014, highlighting key events for the upcoming year and reiterating its strategy to return to growth beginning in 2015. The company also indicated that its 2013 financial expectations remain unchanged, and announced that its fourth quarter and full-year 2013 financial results will be released on January 30, 2014.

“With the U.S. patent expiration of Cymbalta last December and that of Evista coming in March, we expect 2014 to be the most financially challenging year of Lilly’s current period of patent expirations,” said Derica Rice, Lilly executive vice president, global services and chief financial officer. “We are prepared for this challenge and are positioned to return to growth and expand margins in 2015 and beyond.”

While patent expirations are expected to drive a substantial decline in U.S. Cymbalta® and U.S. Evista® sales, the company says they expect these revenue shortfalls to be partially offset by growth from a portfolio of other products including Humalog®, Trajenta®, Cialis®, Forteo® and Alimta®, as well as the animal health business.

Despite this news Eli Lilly stock closed down only marginally from its opening price, opening today at $51.72, reaching an intra-day high of $52.04, and then closing at $51.19.

“We continue to focus on the three strategic priorities that have guided our efforts throughout an extended period of patent expirations,” said John C. Lechleiter, Ph.D., Lilly’s chairman, president and chief executive officer. “First and foremost, we are replenishing and advancing our pipeline. Today, we have 13 potential new medicines in Phase III testing or submission stage, with 26 more in Phase II.  We anticipate obtaining regulatory approvals for and successfully launching multiple products each year for the next few years. At the same time, we aim to sustain strong performance for our currently marketed brands and key growth areas. Finally, we continue to drive productivity gains across our business in order to adequately fund R&D, invest in the launch of new products, support necessary capital spending, engage in business development and return additional cash to shareholders through our dividend and our share repurchase program. We believe our strategy is the right one for Lilly and one that will continue to create value for all of our stakeholders.”

 2014 Guidance

  • Earnings Per Share: Eli Lilly announced that it expects full-year 2014 earnings per share to be in the range of $2.77 to $2.85. Earnings per share expectations for 2014 reflect completed share repurchases from 2013 (including $500 million completed in the fourth quarter of 2013) and potential share repurchases in 2014.
  • Anticipated 2014 Revenue: Estimated at between $19.2 billion and $19.8 billion.
  • Growth in Asia: Strong revenue growth is expected in China, while a weaker Japanese yen will dampen revenue growth in Japan.
  • Gross Margin as Precent of Revenue: Estimated that gross margin as a percent of revenue will be approximately 74% in 2014.
  • Total Operating Expenses in 2014: Total operating expenses in 2014 are expected to decrease substantially compared to 2013. Marketing, selling and administrative expenses are expected in the range of $6.2 billion to $6.5 billion. Research and development expenses are expected to be in the range of $4.4 billion to $4.7 billion.
  • Net Income and Operating Cash Flow: The company expects to meet its 2014 net income and operating cash flow goals of $3.0 billion and $4.0 billion, respectively. Operating cash flows are expected to be sufficient to pay the company’s dividend of approximately $2.1 billion, allow for capital expenditures of approximately $1.3 billion, and fund potential business development activity and share repurchases.

The company’s 2014 financial guidance does not include a potential charge related to the collaboration with Pfizer to develop and commercialize tanezumab. As previously explained, if the partial clinical hold for the molecule is removed and Lilly and Pfizer move forward with development, Lilly will pay a $200 million upfront fee to Pfizer.

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Posted in: Companies We Follow, Eli Lilly, Gene Quinn, IP News, Articles, Patents

About the Author

is a Patent Attorney and the founder of the popular blog, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.


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