(LLY) Eli Lilly Misses Earnings Reports by a Penny

January 28th, 2010

This morning, Eli Lilly (LLY) reported fourth quarter and fiscal 2009 results. The company reported earnings per share (EPS) of 83 cents, compared to a loss of $3.31 in the corresponding period last year. However, after making adjustments for certain items, Lilly’s EPS came in at 91 cents, which missed the Zacks Consensus Estimate by a penny and was lower than the year ago quarter’s $1.02. Revenues recorded a 14% year-over-year increase to $5.93 billion driven by an increase in volume, prices as well as a favorable impact of foreign exchange.

For the full year, Lilly reported a 7% growth in revenues, which came in at $21.8 billion driven by increased volume and prices, partially offset by foreign exchange rates. EPS of $4.42 increased 16% compared to last year.

During the fourth quarter, Lilly’s lead candidate, Zyprexa recorded a 19% year-over-year growth to $1.4 billion. Sales of the drug in both US and international market increased 10% and 28%, respectively. Withdrawal of generic competition in Germany in early 2009 led to an increase in international demand of the drug. Other products maintained their growth momentum – Cymbalta (15% growth to $830.8 million), Humalog (16% growth to $530.8 million), Alimta (64% growth to $523.6 million) and Cialis (19% growth to $439.5 million). Gemzar recorded a 25% decline in revenues to $310.5 million due to the entry of generics in the major markets.

The US market accounted for 55% of Eli Lilly’s total revenues during the reported quarter. Revenues from the US increased 11% to $3.3 billion due to higher prices and wholesale buying pattern. The growth momentum was maintained in the international market as well. Revenues increased 18% to $2.67 billion due to increased demand and positive impact of foreign exchange rates, partially offset by lower prices.

Gross margin during the quarter declined 660 basis points to 75.9%. A 57% year-over-year increase in cost of sales, due to the impact of foreign currency on international inventories sold during the quarter, brought down the margin.

On the operational front, total operating expenses increased 14%, compared with the corresponding period last year. R&D expenses were 15% higher due to the ImClone acquisition Incorporatedreased incentive compensation, and increased late-stage clinical trial costs. Apart from this, marketing, selling and administrative expenses increased 13% driven by higher expenses in the international market and the impact of foreign exchange rates.

Lilly took charges totaling $37.9 million in the quarter Incorporatedluding asset impairment and restructuring charges related to severance costs associated with various strategic decisions meant to reduce the cost structure. Another $90 million of charge was recognized due to the in-licensing agreement with Incyte Corp. (INCY).

In addition, Lilly reiterated its earnings guidance for 2010, which it had earlier announced in December 2009. EPS is expected in the range of $4.65 – $4.85.

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(LLY) Eli Lilly Misses Earnings Reports by a Penny

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