Eli posts an increase in sales, expenses

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Eli Lilly has posted positive sales for the first fiscal quarter of 2008 due to positive drug sales; however, the company endured much greater expenses due to ongoing litigations and the acquisition of ICOS, the maker of Cialis.

The worldwide reported sales for the quarter were $4.81 billion, an increase of 14 percent compared with the first quarter of 2007, according to Lilly. The worldwide sales volume increased 8 percent, while exchange rates and selling prices contributed 5 percent and 1 percent of sales growth, respectively.

Lilly said the gross sales margin decreased by 1.3 percentage points to 76.9 percent, which the company attributed to the foreign exchange rates and manufacturing expenses growing at a slower rate than sales.

Overall, marketing, selling and administrative expenses rose 16 percent to $1.55 billion, according to the Indianapolis-based Lilly. The company said the increase was due to the ICOS acquisition, which increased marketing expenses in support of products, such as depression medication Cymbalta, impotence drug Cialis and diabetes treatment Humalog; the impact of foreign exchange rates; and increased legal costs, including a $15 million settlement related to Zyprexa (anti-psychotic drug) litigation with the state of Alaska.

The research and development expenses were $877.1 million, or 18 percent of sales, compared to the first quarter of 2007, when research and development expenses grew 5 percent.

Lilly said the increase was primarily due: to increased discovery research and late-stage clinical trial costs, offset by lower prasugrel clinical trial costs; the first quarter 2007 costs associated with the consequences of the FDA's rejection of Lilly's appeal of the approvable letter for Arxxant for diabetic retinopathy; and the withdrawal of the Arxxant application in Europe.

The company reported net income that increased to $1.06 billion, respectively, compared with first quarter 2007 net income of $508.7 million due primarily to the in-process research and development charge associated with the ICOS acquisition in the first quarter of 2007 and the resolution of the IRS tax audit in the first quarter of 2008.