INDIANAPOLIS (AP) – Health care reform charges helped chop Eli Lilly and Co.’s first-quarter profit by 5 percent, offsetting strong sales growth from some of its top-selling drugs.
The Indianapolis drugmaker said Monday it took a one-time charge of $85 million in the three months that ended March 31 due to its retiree prescription drug coverage, and it expects Medicaid-related rebates to shrink revenue by $350 million to $400 million this year.
As a result, Lilly reduced its 2010 adjusted earnings guidance to between $4.40 and $4.55 per share. The company said late last year it expected a profit of between $4.65 and $4.85 per share for 2010.
Analysts polled by Thomson Reuters expect, on average, earnings of $4.73 per share for 2010.
For the first quarter, Lilly said it earned $1.25 billion, or $1.13 per share. That’s down from the $1.31 billion, or $1.20 per share, last year.
Excluding charges, the adjusted profit was $1.18 per share.
Revenue rose 9 percent to $5.49 billion.
Analyst polled by Thomson Reuters expected, on average, a profit of $1.10 per share on revenue of $5.54 billion. Wall Street analysts typically exclude one-time charges or items, and Lilly spokesman Mark Taylor said they did not account for the impact of health care reform.
Sales for Lilly’s best-selling drug, the anti-psychotic Zyprexa, rose 8 percent to $1.2 billion, and sales of the cancer drug Alimta soared 57 percent to $527 million.
In contrast, the company’s newest drug, the blood thinner Effient, brought in only $8.8 million in the quarter. Lilly developed Effient with Japanese drugmaker Daiichi Sankyo Co.
Lilly’s research and development expenses rose 10 percent to $1.04 billion in the quarter mainly due to costs tied to late-stage drug trials. Lilly drugs in late-stage testing include a couple potential Alzheimer’s disease treatments.
Lilly said it took a charge of 8 cents per share in the quarter due to its retiree prescription drug coverage and the health care reform law passed last month by Congress. Several major corporations have already reported similar charges.
Under the new law, businesses will be prohibited starting in 2011 from writing off a federal subsidy that covers part of the cost of retiree prescription drug coverage. The government provides the subsidies so companies will continue offering coverage to retirees, which keeps them off government-funded Medicare Part D.
Lilly also took a charge of 4 cents per share in the quarter due to an increase in the rebate Lilly provides the government for drugs covered by Medicaid, the state-federal program that offers coverage to the elderly and disabled.
Lilly anticipates that the rebate increase will reduce earnings by 27 cents per share in 2010.
Shares of the company slipped 2.7 percent in premarket trading to $35.55 from Friday’s close of $36.54.
Date: April 19, 2010
Source: Associated Press
Filed Under: Drug Discovery