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Eli Lilly 1Q earnings beat Street, but FDA delivers disappointing recommendation for new arthritis drug

Last updated: 22:30 24 Apr 2018 AEST, First published: 22:03 24 Apr 2018 AEST

Giant drugmaker raises earnings and revenue guidance for the full year
Giant drugmaker raises earnings and revenue guidance for the full year

Eli Lilly and Co. (NYSE:LLY) has reported first-quarter results that beat analyst estimates, but expressed disappointment that its new arthritis drug was not recommended for approval at a higher dosage by a US Food and Drug Administration committee.

Lilly said its net income in the quarter that ended 31 March 2018 totaled US$1.22bn, or US$1.16 a share. In the year-earlier quarter, Lilly posted a net loss of US$110.8mln, or US$0.10 a share, as bottom-line results mainly were brought down by what Lilly called an "in-process research and development charge" associated with its acquisition of CoLucid Pharmaceuticals.

Excluding charges in both periods, Lilly said its net income increased 35%, to US$1.41bn, or US$1.34 a share, from US$1.04bn, or US$0.98 a share, a year earlier.

According to Yahoo Finance, analysts on average expected earnings of US$1.13 a share.

Revenue in the quarter rose 9%, to US$5.7bn from US$5.23bn. Analysts on average expected revenue of US$5.49bn.

Shares rose 1.6% to US$81.49 in early trade.

Lilly chairman and CEO David Ricks said results in the latest first quarter were "fueled by revenue growth of new products and continued productivity gains that together resulted in robust earnings growth and an improved financial outlook for the year."

"We are in the early stages of a new growth era, driven by the strong uptake of our new products, ongoing margin expansion, and the momentum we are producing in our pipeline," Ricks said.

READ: Eli Lilly & Co. Inc. has stock rating, price target raised by BMO Capital

However, Lilly did acknowledge it was disappointing that it did not win the blessing of an FDA advisory committee for use at a higher dosage of its new drug baricitinib for treating adults with moderate to severe rheumatoid arthritis.

"While we are pleased that yesterday's FDA Arthritis Advisory Committee supported the efficacy of both the 2-mg and 4-mg doses of baricitinib, and recommended overall support for 2-mg, we are disappointed that the committee did not recommend approval of the 4-mg dose," said Daniel Skovronsky, Lilly senior vice president for clinical and product development and incoming president of Lilly Research Labs.

"We are confident in the benefit-risk profile of both baricitinib 2-mg and 4-mg for the treatment of patients living with rheumatoid arthritis, supported by the clinical data generated to-date, and by the more than 40 countries in which both doses are approved," Skovronsky said. "We'll continue to work with the FDA on this important application."

Looking ahead, Lilly said it has raised its earnings-per-share guidance for all of 2018 to a range of US$4.52 to US$4.62 on a reported basis and US$5.10 to US$5.20 on a non-GAAP basis to reflect expectations of higher operating income and a lower effective tax rate. Yahoo Finance puts the average estimate of analysts at US$4.88 a share.

Lilly also anticipates 2018 revenue of US$23.7bn and $24.2bn. The company said the increase from prior guidance is due to lower anticipated rebates and discounts in the U.S. as a result of lower expected Medicaid utilization and favorable payer mix for several products, as well as the impact of foreign exchange rates. Yahoo Finance puts the average estimate of analysts at US$23.36bn.

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