Lilly blames healthcare reform for weak Q1

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Eli Lilly reported a net income dip of 5 percent in its financial results for the first quarter of 2010, compared with first quarter of 2009.

The net income decreased to $1.25 billion in the 2010 first quarter, compared with first quarter 2009 net income of $1.31 billion. In total, the company said its first quarter 2010 earnings were reduced by $0.12 per share due to the impact of U.S. healthcare reform, comprised of both the approximate $60 million in higher rebates and the one-time tax charge of $85.1 million.

"Lilly delivered strong operational performance in the first quarter, even as we experienced continued weakness in the U.S. dollar versus prior periods and began to account for the impact from recently-enacted U.S. healthcare reform," said John C. Lechleiter PhD, Lilly's CEO and chairman.

"We expect that the new U.S. healthcare reform legislation, while not perfect, will help seniors in the Medicare system better afford their prescriptions and will provide greater access to our medicines for millions of Americans who are currently uninsured,” Lechlieter added. “However, as a result of the new legislation, Lilly will incur substantial costs to our business. The initial financial impact is captured in our first quarter results, while the full-year impact is reflected in our revised 2010 financial guidance."

In the first quarter of 2010, worldwide total revenue was $5.49 billion, an increase of 9 percent compared with the first quarter of 2009. This 9 percent revenue growth was comprised of an increase of 4 percent due to higher volume, 3 percent due to the impact of foreign exchange rates and 1 percent due to higher prices (numbers are not exact due to rounding), according to the company.

The Indianapolis-based pharmaceutical company said its total revenue in the U.S. increased 6 percent to $3.03 billion due to higher prices, “offset in part by approximately $60 million in higher rebates resulting from U.S. healthcare reform, and, to a lesser extent, increased demand.” Total revenue outside the U.S. increased 13 percent to $2.45 billion due to increased demand and the positive impact of foreign exchange rates, partially offset by lower prices.

According to Lilly, its marketing, selling and administrative expenses increased 6 percent compared with the first quarter of 2009, to $1.6 billion. “The increase was driven by higher marketing and selling expenses outside the U.S. and the impact of foreign exchange rates, partially offset by lower litigation expense,” the company reported. Its research and development expenses were $1.04 billion, or 19 percent of total revenue. Compared with the first quarter of 2009, research and development expenses grew 10 percent due primarily to increased late-stage clinical trial costs.

Worldwide Effient (prasugrel) sales were $8.8 million in the first quarter of 2010, Lilly reported. U.S. Effient sales were $4.5 million, and sales outside the U.S. were $4.3 million.

Specific to its diabetes drug, Lilly recognizes its 50 percent share of Byetta's (exenatide injection) gross margin in the U.S., 100 percent of Byetta sales outside the U.S., and its sales of Byetta pen delivery devices to its partner, Amylin Pharmaceuticals. For the first quarter of 2010, Lilly saw total revenue of $115.7 million for Byetta, an increase of 19 percent. Worldwide Byetta sales were $188 million in the first quarter of 2010, a 4 percent increase compared with the first quarter of 2009, driven by “growth in international markets,” Lilly said. U.S. sales of Byetta decreased 5 percent to $149.8 million compared with the first quarter of 2009, while sales of Byetta outside the U.S. were $38.2 million.