After meeting with analysts in New York yesterday to describe its forward strategy and forecasts, shares of drugmaker Eli Lilly dropped 1.6%. Analysts looking at the short-term projection laid out were unhappy to discover the company's pending acquisition of biotech drugmaker ICOS Corp. (producer of Cialis) would shave a greater-than-expected 10 cents off of earnings in 2007. Expected earnings-per-share were are the $3.25-$3.35 range - a gain of just 5%; Thomson Financial had the consensus for 2007 at $3.39 while UBS analyst Roopesh Patel viewed the guidance as "a bit disappointing,'' after predicting the ICOS acquisition would lower EPS by just three cents. Going forward, Lilly expects to introduce at least one major drug a year through 2010 and two a year after that. The company also expects earnings growth of high single to low upper digits growth after FY 2007.
• Sources: Bloomberg, Business Week, MSNBC, Washington Post
• Related commentary: Searching for Value Investments in the Drug Stock Universe, Eli Lilly ICOS Buyout Is Not Arm's Length, ICOS Shareholders to Board: Eli Lilly Bid Is at a Discount, Not a Premium
• Potentially impacted stocks and ETFs: Eli Lilly (LLY), ICOS Corp. (ICOS). Competitors: Merck & Co. (MRK), Pfizer (PFE), GlaxoSmithKline (GSK), Bristol Myers Squibb (BMY), Wyeth (WYE), Schering-Plough Corporation (SGP), ETFs: iShares Dow Jones US Pharmaceutical Indx (IHE), Pharmaceutical HOLDRS (PPH), SPDR Pharmaceuticals (XPH), Vanguard Health Care (VHT)
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