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Lilly Pads Its Earnings
By Brian Lawler October 20, 2006
It's been a busy week for large-cap pharmaceutical investors, with almost all of the biggest companies reporting earnings this week. Yesterday, Motley Fool Income Investor pick Eli Lilly (NYSE: LLY) chimed in with its third-quarter results.
Sales were up 7% to $3.9 billion from the third quarter last year, and earnings grew 10% to $874 million and $0.80 a share. Of that sales increase, 71% was due to increased pricing for its drugs, rather than increased sales volume, which is a more sustainable form of revenue growth. (Still, sales growth is sales growth, no matter how it is achieved.) Thanks to the increased pricing, gross margins were up to 77.7%, and net margins expanded to a solid 22.6%.
Lilly's superstar, the schizophrenia drug Zyprexa, had an OK quarter: sales growth of 5% to $1.1 billion, but flat prescription growth. On the other hand, it was a solid quarter for many of Lilly's smaller drugs. Since nearly all of these have blockbuster potential and long-term patent exclusivity, they should drive years of earnings growth as they capture a larger percentage of Lilly's total sales.
Q3 sales* Y-O-Y Growth % of Total Sales Cymbalta $349 91% 9%
Cialis $246 25% 6.4%
Forteo $149 45% 3.9%
Byetta** $62 N/A 1.6%
The most interesting news for Lilly shareholders came on Monday, when Lily announced its intention to acquire ICOS (Nasdaq: ICOS), its partner on male sexual dysfunction drug Cialis, for $2.1 billion. As I mentioned then, Lilly's decision to acquire ICOS was probably due to its outlook for Cialis; the results announced today showed another strong quarter for the drug, with sales up 25% to $246 million.
Other logical acquisitions for Lilly in the future might be Cubist Pharmaceuticals (Nasdaq: CBST), since it already receives royalties from Cubist's lead product, or Amylin Pharmaceuticals (Nasdaq: AMLN), which shares profits with Lilly for its diabetes drug, Byetta. But at a nearly $6 billion market cap, Amylin might be a little too expensive for Lilly at the moment.
Lilly guided for total 2006 sales to grow at the bottom of its 7%-9% growth range for the year, and for earnings per share to come in at $3.10 to $3.20 a share (an 8% to 11% increase over its 2005 earnings per share, on an adjusted basis). Even though this isn't spectacular earnings growth, Lilly does have a nice 2.8% dividend yield to pacify investors until Cymbalta, Cialis, and Byetta sales reach more meaningful levels. That's something that should be worth waiting for.
For further Foolishness:
Semi-Gilded Lilly: Fool by Numbers
Lilly Doesn't Like Sharing Profits
Lilly Wilts
Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.
It's been a busy week for large-cap pharmaceutical investors, with almost all of the biggest companies reporting earnings this week. Yesterday, Motley Fool Income Investor pick Eli Lilly (NYSE: LLY) chimed in with its third-quarter results.
Sales were up 7% to $3.9 billion from the third quarter last year, and earnings grew 10% to $874 million and $0.80 a share. Of that sales increase, 71% was due to increased pricing for its drugs, rather than increased sales volume, which is a more sustainable form of revenue growth. (Still, sales growth is sales growth, no matter how it is achieved.) Thanks to the increased pricing, gross margins were up to 77.7%, and net margins expanded to a solid 22.6%.
Lilly's superstar, the schizophrenia drug Zyprexa, had an OK quarter: sales growth of 5% to $1.1 billion, but flat prescription growth. On the other hand, it was a solid quarter for many of Lilly's smaller drugs. Since nearly all of these have blockbuster potential and long-term patent exclusivity, they should drive years of earnings growth as they capture a larger percentage of Lilly's total sales.
Q3 sales* Y-O-Y Growth % of Total Sales Cymbalta $349 91% 9%
Cialis $246 25% 6.4%
Forteo $149 45% 3.9%
Byetta** $62 N/A 1.6%
The most interesting news for Lilly shareholders came on Monday, when Lily announced its intention to acquire ICOS (Nasdaq: ICOS), its partner on male sexual dysfunction drug Cialis, for $2.1 billion. As I mentioned then, Lilly's decision to acquire ICOS was probably due to its outlook for Cialis; the results announced today showed another strong quarter for the drug, with sales up 25% to $246 million.
Other logical acquisitions for Lilly in the future might be Cubist Pharmaceuticals (Nasdaq: CBST), since it already receives royalties from Cubist's lead product, or Amylin Pharmaceuticals (Nasdaq: AMLN), which shares profits with Lilly for its diabetes drug, Byetta. But at a nearly $6 billion market cap, Amylin might be a little too expensive for Lilly at the moment.
Lilly guided for total 2006 sales to grow at the bottom of its 7%-9% growth range for the year, and for earnings per share to come in at $3.10 to $3.20 a share (an 8% to 11% increase over its 2005 earnings per share, on an adjusted basis). Even though this isn't spectacular earnings growth, Lilly does have a nice 2.8% dividend yield to pacify investors until Cymbalta, Cialis, and Byetta sales reach more meaningful levels. That's something that should be worth waiting for.
For further Foolishness:
Semi-Gilded Lilly: Fool by Numbers
Lilly Doesn't Like Sharing Profits
Lilly Wilts
Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.
1 comment:
Eli Lilly 3Q 10% profit rise is nearly all from psyche drugs including zyprexa.
How have they schemed to squeeze more money from their zyprexa cash cow when pill production has actually gone down?
ANS-Eli Lilly profiteers have jacked up the price of zyprexa to the federal govt,from the Medicare D payouts.
Eli Lilly is a big drug company that puts profits over patients.
They covered up findings that their Zyprexa has a TEN times greater risk of causing type 2 diabetes
Only 9% of Americans trust big pharma,right around the same rating as tobacco companies.
Daniel Haszard Eli Lilly zyprexa drug caused my diabetes www.zyprexa-victims.com
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