Drug maker Eli Lilly and Co. (LLY) on Friday reported a 41 percent decline in profit for the fourth quarter from last year, as revenues and margins were hurt by U.S. patent expirations of Cymbalta and Evista as well as the impact of a stronger U.S. dollar.
However, adjusted earnings per share beat analysts' expectations, while revenues missed their estimates. Looking ahead, the company affirmed its earnings outlook for fiscal 2015, but lowered its revenue guidance, citing the strengthening of the U.S. dollar.
John Lechleiter, Lilly's chairman, president and chief executive officer said, "While Lilly's fourth-quarter 2014 results continue to reflect the impact of patent expirations, we are moving to a period of growth led by diabetes, oncology and animal health. Despite the loss of significant revenue for Cymbalta and Evista following the expiration of our U.S. patents, we saw strong performance from many other products."
For the fourth quarter, Eli Lilly's net income declined to $428.5 million or $0.40 per share from $727.5 million or $0.67 per share in the previous year.
On an adjusted basis, earnings for the latest quarter were $0.75 per share, compared to $0.74 per share in the year-ago quarter. On average, 19 analysts polled by Thomson Reuters expected the company to report earnings of $0.74 per share for the quarter. Analysts' estimates typically exclude special items.
Revenue for the quarter declined 12 percent to $5.12 billion from $5.81 billion in the prior-year period. Analysts' consensus revenue estimate for the quarter was $5.20 billion.
The decline in sales was driven by the impact of U.S. patent expirations for Cymbalta and Evista as well as the unfavorable impact of foreign exchange rates, partially offset by volume growth in several other products.
Total revenue in the U.S. declined 19 percent to $2.45 billion, reflecting lower demand for Cymbalta and Evista following their patent expirations as well as wholesaler buying patterns.
Total revenue outside the U.S. decreased 3 percent to $2.67 billion, primarily driven by the unfavorable impact of foreign exchange rates. This was partially offset by higher volume, including the impact of products acquired from Lohmann Animal Health.
Group gross margin for the quarter decreased 13 percent to $3.87 billion.
For fiscal 2014, Eli Lilly's net income decreased to $2.39 billion or $2.23 per share from $4.68 billion or $4.32 per share last year. Adjusted earnings for the year were $2.78 per share, compared to $4.15 per share in the previous year.
Revenue for the year declined 15 percent to $19.62 billion from $23.11 billion in the prior year.
Street expected the company to report earnings of $2.78 per share for the year on revenues of $19.68 billion.
Looking ahead to fiscal 2015, Eli Lilly affirmed its outlook for earnings per share in a range of $2.40 to $2.50 on a reported basis, and adjusted earnings per share in a range of $3.10 to $3.20.
The company noted that its 2015 financial guidance does not include a potential charge related to the collaboration with Pfizer Inc. (PFE) to develop and commercialize tanezumab, an NGF monoclonal antibody being studied for the treatment of pain.
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. This charge would cause Lilly's reported tax rate to be roughly 1 percentage point lower and would reduce reported earnings per share by about $0.12.
The company now anticipates 2015 revenue in a range of $19.5 billion to $20 billion, down from the prior range of $20.3 billion to $20.8 billion. The revised outlook reflects the recent strengthening of the U.S. dollar compared with several other currencies.
Analysts expect the company to report earnings of $3.18 per share for the year on revenues of $20.67 billion.
LLY closed Thursday's trading at $72.11, up $1.14 or 1.61 percent on a volume of 4.42 million shares.
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