Lilly raises earnings forecast on demand for new drugs

ELI LILLY, the maker of prozac antidepressant pills, raised its 2003 earnings forecast on demand for psychiatric medications including zyprexa for schizophrenia and new drugs such as cialis to treat impotence.

Lilly, based in Indianapolis, expects full-year net income of at least $2.32 a share, chief financial officer Charles Golden told investors at a meeting in New York. That's compared with its previous estimate of $2.27 to $2.37.

Chief executive Sidney Taurel is counting on new medicines to boost earnings as zyprexa, Lilly's top product with $3.69bn in sales last year, faces pressure from competitors such as Bristol-Myers Squibb Co's Abilify. Demand for cialis, under review for US approval, has exceeded expectations in the countries where it's been introduced, the company said.

"Lilly has one of the best new product lines in the industry," said Samuel Isaly, manager of the Eaton Vance Worldwide Health Sciences Fund, which owns about 1.9 million Lilly shares. Cialis and strattera for attention-deficit disorder "will become billion-dollar drugs." The company had net income of $2.50 a share last year.

This year's profit will be hurt by costs already taken in the first quarter to cut jobs and write down the value of assets.

Shares of Lilly rose 45 cents to $61.49 in New York Stock Exchange composite trading. They've risen 9.6% in the past 12 months, beating a 1.7% gain in the 12-member Standard & Poor's 500 Pharmaceuticals Index.

Pfizer Inc, the world's biggest drugmaker, has reduced estimates for 2003 because of costs for the company's acquisition of Pharmacia Corp.

In addition to the recent introductions of cialis, strattera and forteo for osteoporosis, Lilly said it's preparing to roll out four new products, including alimta for cancer and symbyax for bipolar disorder. The company said it expects to have four drugs with annual sales of more than $1 billion by the end of next year, compared with just one now.

"Lilly is suffering less than rivals such as Merck & Co and Pfizer from expiring patents, said Victor Polak, who helps manage $250 million in assets at Citigroup Asset Management.

"Lilly for a long time was the story of only prozac. They saw prozac wouldn't have eternal life and took timely measures."

A US study showing that zyprexa isn't more likely to cause diabetes than rival drugs may have also encouraged Lilly to raise the guidance, said David Moskowitz, an analyst with Friedman Billings Ramsey in Arlington, Virginia.

"There was a view that zyprexa was one of the worst offenders in causing diabetes, and now they have something from a credible source that says quite the opposite," said Moskowitz.

In the study of more than 19,000 patients by the Veterans Administration, zyprexa compared favourably with AstraZeneca Plc's seroquel in terms of diabetes risk, Lilly said.

Lilly said it must conduct more tests on its duloxetine incontinence drug before US regulators will approve the treatment. The company also has applied to sell the same medicine under the name cymbalta for use in treating depression.

Regulatory approval of cymbalta this year would have helped Lilly boost 2004 sales as zyprexa faces competition, including a patent challenge from Indian rival Dr Reddy's Laboratories Ltd, which is developing a generic version. Some analysts say cymbalta will reach annual sales of $1.5 billion within three years.

The Food and Drug Administration has been reviewing plants in Indianapolis after Lilly failed two previous inspections.

The agency has refused to approve the company's new drugs until the manufacturing issues are resolved.