IBJNews

Health reform dings Lilly's earnings

Back to TopCommentsE-mailPrintBookmark and Share

Eli Lilly and Co.’s profit fell in its first quarter as its selling costs spiked and the new health care reform law forced it to record a hefty tax.

The Indianapolis-based drugmaker also lowered its forecast for full year profits because the new health care law grants bigger rebates on prescription drugs to federal health insurance programs.

The company earned $1.25 billion, down 5 percent from the same quarter last year. On a per-share basis, Lilly’s profits shrank from $1.20 a year ago to $1.13 in this year’s first quarter.

Excluding expenses for an acquisition and severance payments as Lilly lays off employees, the company would have earned $1.18 per share in the quarter.

Those results beat the expectations of Wall Street analysts, who were expecting earnings of $1.10 per share, according to a survey by Thomson Financial Network.

Lilly’s revenue for the quarter rose 9 percent to $5.49 billion, slightly below analysts’ expectations of $5.54 billion.

“We expect that the new U.S. health care reform legislation, while not perfect, will help seniors in the Medicare system better afford their prescriptions and will provide greater access to our medicines for millions of Americans who are currently uninsured,” Lilly CEO John Lechleiter said in a statement. “However, as a result of the new legislation, Lilly will incur substantial costs to our business.”

Lilly expects larger federal rebates to cost it $350 million to $400 million this year, or about 27 cents per share. It will also have to pay taxes on the prescription drug benefit offered to its retirees, which resulted in a hit this year of $85.1 million, or 8 cents per share.

Those costs forced Lilly to reduce its profit forecast to a range of $4.40-$4.55 per share. In January, Lilly predicted it would earn $4.65-$4.85 per share this year.

The company said its underlying business is performing better than expected. But Lilly’s international profits were tempered in the first quarter by a weaker dollar. Also, the company’s cost of sales spiked 37 percent.
 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. How is the private developer going to repay the bonds. Is this going to be a toll road?

  2. As well as a Portillio'S!!!!!!

  3. A Lou Malnati's would be awesome!!!!!!!!

  4. We aren't broke. We just aren't willing to raise revenues for this that we should be raising them.

  5. OK. now that the state is taking illegal immigrants, willing or not. There is a major concern that needs to be addressed. First: School starts here in 3 weeks in most parts of the country and probably in Indiana. So is the state going to vaccinate these kids before they intermingle with our kids in school? The problem we are going to have here in the US and possibly in Indiana is that some of these kids could be carrying health issues or diseases that are pretty much eradicated in the US. This could cause a major health issue in the US. Second: Who is going to pay for this building disaster? We are flat out broke….. Down here in Texas, we have 14 counties that have been so swamped with kids, (numerous thousands of them), they are on the verge of financial collapse. Now this is happening in counties in New Mexico, Arizona and California. The system is massively overloaded. Swine flu has started back up in San Antonio since they have nearly 2500 kids that have been placed there and lice is rampant. Not to be insensitive, but we need to stop this madness. I find it amazing that we cannot take care of our veterans and yet give carte blanche to illegals entering the country. Recently an article mentioned that these kids and teenagers can get on planes without TSA screening? What? What the Hell???? Keep in mind this about protecting our national sovereignty as a nation and also living under the rule of law. Not only the terrorist threat that can come over the border. This is a deliberate and irresponsible and illegal act from administration ignoring the constitutional duty of protecting the borders and also upholding the supreme law of the land. This is a classic Cloward and Piven strategy to overload the system until it collapses.

ADVERTISEMENT