Health Care and Eli Lilly and Co. and Health Care Businesses and Health Care & Life Sciences and Health Care & Insurance

Lilly CEO says cost-cutting won’t solve sales losses

April 13, 2012

Eli Lilly and Co., facing generic competition to two of its top drugs, needs to rely on new medicines rather than cost-cutting to overcome the revenue loss, CEO John Lechleiter said Thursday in Boston at the annual meeting of the Pharmaceutical Research and Manufacturers of America.

Lechleiter becomes chairman of the powerful industry trade group Friday.

Pfizer Inc., the world’s largest drugmaker is wrestling with sales losses after its cholesterol pill Lipitor began facing generic versions and has pledged to trim $1 billion from operations in 2012.

A similar focus on costs won’t be enough for Lilly, Lechleiter said. Medicines accounting for about half the Indianapolis-based drugmaker’s 2011 revenue will face copycats by June 2013.

“I don’t think we can save our way out of the enormous challenge we face,” Lechleiter said. “The best course is to maintain our focus on advancing our pipeline.”

Lilly’s leading experimental product is solanezumab, a treatment for Alzheimer’s disease that is in the last of three rounds of testing usually needed to gain regulatory approval. Clearance for the drug could be a “lottery ticket” worth as much as $9 billion in 2020, Tim Anderson, an analyst with Sanford C. Bernstein & Co., said in December.

“Lilly’s future does not depend on solanezumab,” Lechleiter said. “While we hope the molecules that we take into Phase 3 will be successful, we’ve said all along this is a high-risk program,” he said.

As many as 5 million Americans have Alzheimer’s disease, according to the U.S. Centers for Disease Control and Prevention in Atlanta. Alzheimer’s is a degenerative neurological condition with no approved treatment to slow brain cell death.

Nor would a failure for solanezumab end the company’s efforts to fight the disease. “We have other approaches and other molecules in our pipeline that we will continue to move forward,” Lechleiter said.

Lilly’s antipsychotic Zyprexa lost patent protection last year, while exclusivity for the depression treatment Cymbalta will end in 2013.

Lilly shares rose nearly 1 percent Thursday to close at $39.58 each. The company's stock has gained 10 percent in the past 12 months.

Lechleiter reiterated that company will maintain its dividend of 49 cents a share.

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