Eli Lilly and Co. on Thursday lowered its revenue outlook for the year after it lost a patent lawsuit over its attention
deficit hyperactivity drug Strattera.
The U.S. District Court for the District of New Jersey ruled against the company, saying its method-of-use patent for the
drug is invalid.
Strattera last year generated $609 million in revenue, about 3 percent of Lilly's total. The patent had been set to expire
in May 2017.
The drugmaker said it plans to appeal the ruling, but noted that it now faces the prospects of potentially having to compete
with a generic version of the drug.
"Assuming a launch of a generic version of Strattera in the U.S., the loss of revenue will undoubtedly add to the challenges
we will face during upcoming patent expirations on other key products," said John Lechleiter, the company's chairman
and chief executive.
As a result, the company said it now expects revenue growth this year to be in the low to mid-single digits. It previously
anticipated revenue to grow in the mid-single digits.
It also plans to lower its costs by at least $1 billion by the end of next year and reduce its full-time work force.
Lilly has announced more than 2,000 job cuts toward its goal of 5,500 cuts, which the company set in September.
Due to those measures, the company expects it will generate enough cash in the coming years to fund research and development
and make other necessary investments, Lechleiter said.
"In addition, we do not intend to deviate from our plan to maintain our dividend at least at its current level,"
he added.
The ruling on Strattera is the latest court setback for Eli Lilly in recent weeks.
Last month, the U.S. Court of Appeals for the Federal Circuit upheld a lower court's ruling that a patent on its cancer
drug Gemzar is invalid. The drug is set to lose patent exclusivity on Nov. 15.
The company is still waiting a court decision on its osteoporosis drug Evista. And a patent trial on the cancer drug Alimta
is set to start on Nov. 8.
Lilly’s lack of new medicines to replace best-selling drugs Zyprexa and Cymbalta, which will lose their patent protection
in 2011 and 2013, respectively, has spooked investors.
Eli Lilly shares fell 88 cents, or 2.4 percent, to $35.72 in aftermarket trading after slipping 11 cents to $36.60 during
the regular session.
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The 17-page report, â??Demythologizing the High Costs of Pharmaceutical Researchâ??, was written by Rebecca Warburton, associate professor in the School of Public Administration at the University of Victoria and Donald Light, professor in comparative health-care at the University of New Jersey and a visiting professor at Standford University.
Research and development costs of a new drug can range from virtually nothing to being very expensive, claims the study and explains that the pharmaceutical industry cites figures based on work by economists at a U.S. centre, which has received substantial funding from Big Pharma industry figures when it claims research and development costs in the billions of dollars to launch new drugs to the marketplace.
The entire study is an interesting read because it breaks down the leading reason that the big pharmaceutical companies use to justify Americans having the highest prescription drug costs in the world, and show that they often widely over estimate the cost of R&D and use it to excuse their gouging of American drug buyers.