New drug sales boost Lilly revenue, yet profits tumble
- Eli Lilly on Tuesday reported revenue increased by 5% in the first quarter on higher sales of several new drugs, but steeper income taxes and a currency devaluation in Venezuela helped send profits tumbling down 17%.
- Global performance was mixed, as a 16% increase in U.S. revenues was partially offset by declining revenues abroad. In the U.S., Lilly saw strong performance from its new type 2 diabetes drug Trulicity, among several other new drugs.
- Lilly ramped up its R&D spending as several key drugs in its pipeline move through late-stage testing. Compared to the first quarter of 2015, R&D expenses increased 17% to $1.22 billion.
Several new drugs helped drive revenue for Lilly in the first quarter and offset declining sales among several older mainstay drugs.
Trulicity and the cancer drug Cyramza led the way among new drugs, accounting for nearly $275 million in Q1 global sales. Much of that revenue came in the U.S., with Trulicity pulling in $119 million there. Additionally, Lilly saw strong growth from Jardiance, the first diabetes drug with a proven cardiovascular benefit. U.S. sales spiked 96% to just over $30 million.
Lilly and development partner Boehringer Ingelheim have high hopes for Jardiance. The companies recently announced two new outcomes trials to explore the drug's benefit in treating chronic heart failure, aiming at strengthening the drug's cardiovascular profile.
Heavier investment in late-stage R&D, including for Jardiance, led to significantly higher development expenses. R&D in the first quarter accounted for 25.1% of revenue. Together with AstraZeneca, Lilly pushed its BACE inhibitor drug for treatment of early Alzheimer's disease into Phase 3 trials. The company also continued its late-stage study of solanezumab, another treatment for Alzheimer's.
Despite the higher volume from new drugs, profits dropped substantially. A portion of that decline was due to $204 million non-deductible charge tied to the Venezuelan currency crisis. Tight currency controls and runaway inflation have made it difficult for big pharma companies to repatriate locally-earned profit. For Lilly, Venezuela-related expenses led in part to a higher income tax rate of 22.4% for the first quarter.
Sales of Humalog, Lilly's top earner, fell 11% due to lower realized prices.
Overall, Lilly's first quarter results demonstrated both the promise and cost of Lilly's drug development efforts. A steady acceleration in sales for new drugs should help buffer the company from declines in older drugs like Humalog. But Lilly needs its R&D investments to pay off, especially with its two late-stage Alzheimer's drugs—a therapeutic space which has seen its share of flame-outs.
- Wall Street Journal Eli Lilly Revenue Boosted by New Drug Sales
- Bloomberg Eli Lilly Raises 2016 Profit Forecast After Tax Benefit
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