Eli Lilly (LLY) has experienced a notable decrease in profits, mostly due to generics infringing on the success of its antipsychotic drug, Zyprexa.
Zyprexa, once the bestselling drug on the market, now has to face competition from generics as the patent on the drug recently expired. Consequently, Eli Lilly profits have fallen by 4% in the first quarter. It is important to note, however, that although profits have fallen, this decrease is not as bad as analysts expected. Eli Lilly still holds the patent for the drug in Japan, a positive indicator for international sales. In fact, Eli Lilly has even gone so far as to raise its earnings forecast for 2012.
Mylan (MYL) is just one of the companies that has recently been given FDA approval to market a generic for Zyprexa. Competitors will be able to cash in on the patent expiration, and the company that can market the best generic will even make a profit on Eli Lilly's lose.
On the other hand, Eli Lilly has still found some success, like that of the increased sales of drugs such as Cymbalta. Cymbalta has found a general increase in demand for the antidepressant drug. Sales of Forteo, a drug for osteoporosis, also increased, adding to the company's current improved state. In order to combat decreased revenue, the company has also decided to "cut costs and said it will depend on its pipeline of drugs under development, the animal health business, and sales in Japan and emerging foreign markets like China to get through the revenue slump". Eli Lilly has also increased its sales of animal drugs, another factor in its improved performance.
The company does not plan to initiate any further cuts in costs. Recently, Eli Lilly warned investors to expect a steady decline in sales over the next few years, as it hopes to invest in the development of new drugs. The company is quite open with investors: "Buying Lilly today means you're investing in our pipeline and that is going to be the means that we emerge and resume growth." Essentially, you are placing your faith in the future of the company if you buy Eli Lilly. This may not be the worst thing that you do, however, as the stock does have some potential for the future. Consider, for example, the fact that Eli Lilly was recently listed as one of the top companies for diversity.
One of Eli Lilly's main competitors, Spectrum Pharmaceuticals (SPPI), recently announced its intention to increase the manufacturing capacity of Fusilev. This drug, approved by the FDA about a year ago, is aimed at treating colorectal cancer, one of the most commonly diagnosed cancer types in the country. Spectrum's goal is to ensure that no patient with the disease is left untreated, and the success of Fusilev may make Spectrum a formidable competitor for years to come.
Keryx Biopharmaceuticals (KERX) also appears to have recovered from the hit it took after its drug Perifosine failed in the final trials. Shares increased dramatically by no less than 25%, following Keryx announcing the overwhelming success of the phase three trials of a new drug, Zerenex. This marks Keryx, also, as a pharmaceutical company moving up while Eli Lilly may be staying still.
Unfortunately, there is no such positive news to report on behalf of GlaxoSmithKline (GSK). The main news this week is that its profits have been lower than expected, resulting in a serious decrease in shares for the company. This does not really come as a surprise when one considers the economic instability in Europe combined with the unrest in the Middle East. The two factors have led to a decrease in sales of vaccines and other pharmaceuticals worldwide. GSK is struggling to keep afloat under this pressure and it looks as though they are not the safest option to back at present. For Eli Lilly, though, it's good to see another powerhouse not doing well, as it buys Eli Lilly sometime to develop drugs without surrendering too much market share.
A Pfizer (PFE) subsidiary and Teva (TEVA) recently reached a settlement that is meant to offset litigation regarding patents of a generic epinephrine auto-injector. According to the terms of the settlement, Teva will, under very specialized circumstances, be able to launch its own a generic epinephrine auto-injector. The generic epinephrine auto-injector that Teva is interested in launching has yet to be approved by the FDA. At this point, the FDA has not given even its most tacit of approvals for the drug. The additional terms of the contract are not yet public and the settlement itself is still subject to review.
There's been some great news for Sanofi (SNY), on the other hand. This company announced recently that "its experimental medicine Lemtrada led to an improvement in disability scores in patients with multiple sclerosis compared to an older treatment." MS, or multiple sclerosis, is one of the hardest illnesses to live with and one of the more difficult to fight. This drug represents a breakthrough for the company. Sanofi stock has been in flux recently, so the breakthrough should help stabilize the price for growth. The good news for Sanofi is, needless to say, bad news for Eli Lilly.
In comparison to its competitors, Eli Lilly appears to be doing just about average. Some competitors are struggling while others are making breakthroughs. As things stand the company is improving, but without any immediacy. Buying Eli Lilly may be a long ride for now, but at $41 per share it could be a steal down the line. For now, wait out the drop brought on by Zyprexa generics and hope that Eli Lilly can come up with another great drug sometime soon.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.