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updated: 10/24/2012 9:24 AM

Eli Lilly 3Q profit climbs 7 pct, revenue slides

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Associated Press

INDIANAPOLIS -- Eli Lilly's third-quarter earnings climbed 7 percent, as a drop in expenses and a payment from a former partner helped offset an 11 percent slide in revenue, but it still fell short of expectations and shares edged lower in premarket trading.

The company has seen its revenue tumble since it lost U.S. patent protection last year for its all-time best seller, the antipsychotic Zyprexa. The drug once brought in more than $5 billion annually, but sales fell 68 percent in this year's third quarter to $374.5 million.

That and foreign exchange rates helped chop Lilly's revenue to $5.44 billion in the three months that ended Sept. 30, from $6.15 billion in last year's quarter.

It will lose patents protecting the antidepressant Cymbalta and the insulin Humalog next year. It has been planning for these expirations for several years now, and the company has set goals of recording at least $3 billion in annual net income and $20 billion in revenue through 2014.

The drugmaker said Wednesday it earned $1.33 billion, or $1.18 per share in this year's third quarter compared to $1.24 billion, or $1.11 per share, last year. Adjusted earnings were 79 cents per share, excluding a $787.8 million revenue-sharing payment from Amylin Pharmaceuticals that Lilly booked in the quarter.

Analysts expected earnings of 84 cents per share on $5.63 billion in revenue, according to FactSet. Analysts typically exclude one-time items from their earnings estimates.

The Indianapolis drugmaker also reaffirmed its earnings expectations for 2012.

Jefferies analyst Jeffrey Holford said that he expected Lilly to beat expectations and raise its 2012 forecast because the company had been pushing aggressive price increases for its drugs so far this year.

Company shares fell 2.6 percent, or $1.36, to $50.55 Wednesday before the opening bell.

Sales of Lilly's new top-selling drug, Cymbalta, climbed 16 percent to $1.24 billion in the quarter. But revenue from Lilly's third biggest seller, Humalog, fell 3 percent to $575.8 million. The drugmaker said U.S. sales were hurt because Humalog was removed this year from a list of drugs covered by a prescription plan.

Lilly's operating expenses fell 3 percent in the quarter, helped by an 8 percent drop in marketing, selling and administrative expenses to $1.76 billion.

The company has said it will cut costs, depend on sales in foreign markets and developing countries and develop new drugs to help replace the lost revenue. Shares of the drugmaker have climbed more than 20 percent since it first announced in late August that results from studies of its experimental Alzheimer's drug suggest it may modestly slow mental decline, especially in patients with mild cases of the disease.

On Wednesday, Eli Lilly and Co. reaffirmed its forecast for 2012 adjusted earnings of $3.30 to $3.40 per share on $21.8 billion to $22.8 billion in revenue.

Analysts expect, on average, earnings of $3.39 per share on $22.7 billion in revenue.

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