Lilly woes take notch out of debt rating

Back to TopCommentsE-mailPrintBookmark and Share

Even with debt levels at Eli Lilly and Co. at paltry lows, the bad news finally forced Standard & Poor’s to lower its rating on the company’s senior unsecured debt. But the New York-based agency said it believes the Indianapolis-based drugmaker will eventually break its string of bad luck on developing products.

S&P dropped its rating on Lilly debt to AA- from AA on Aug. 19, citing the company’s string of late-stage clinical-trial failures, a couple of court losses over patents on existing drugs, the disappointing sales of its newest product, Effient, and, of course, looming patent expirations on its two top-selling drugs.

"The rating action considers the disappointments and delays for both new and existing products experienced by this top-tier drug company, which we believe weaken its ability to offset the lost revenues for products facing generic competition over the next three years," credit analyst David Lugg said in a statement.

Lugg noted that Lilly’s debt represents just 60 percent of the company’s cash flow, as measured by earnings before interest, taxes, depreciation and amortization. That’s well below S&P’s desired maximum of 150 percent.

Lugg and his colleagues retained their rating on Lilly’s bonds and their stable outlook for the company, saying that they hold the "expectation that Lilly will continue to pursue conservative financial policies while improving its new-product-development success rate.”

S&P’s downgrade decision was made before Lilly received a federal committee's recommendation to market its drug Cymbalta to treat chronic pain. The antidepressant is already Lilly’s No. 2 drug, behind the antipsychotic Zyprexa. Some analysts expect the new use to add $500 million to Cymbalta’s more than $3 billion in annual sales.

On Friday, Lilly won a delay of a court decision that invalidated its U.S. patent on Strattera, an attention-deficit hyperactivity disorder medicine with about $600 million in worldwide sales. Lilly is moving to appeal that decision.

Lilly also said last week it would push ahead with its second experimental Alzheimer’s drug after its first candidate actually worsened patients' condition during a large, late-stage clinical trial.


  • All the best
    Lilly has 40,000 of the best minds in the world working for them.
    China could be consumer for Lilly's cash cow Zyprexa which has been reproached in the States for adverse litigation.
    All the best for Eli Lilly and resolution of Zyprexa claims
    Daniel Haszard

Post a comment to this story

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

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. A Tilted Kilt at a water park themed hotel? Who planned that one? I guess the Dad's need something to do while the kids are on the water slides.

  2. Don't come down on the fair for offering drinks. This is a craft and certainly one that belongs in agriculture due to ingredients. And for those worrying about how much you can drink. I'm sure it's more to do with liability than anything else. They don't want people suing for being over served. If you want a buzz, do a little pre-drinking before you go.

  3. I don't drink but go into this "controlled area" so my friend can drink. They have their 3 drink limit and then I give my friend my 3 drink limit. How is the fair going to control this very likely situation????

  4. I feel the conditions of the alcohol sales are a bit heavy handed, but you need to realize this is the first year in quite some time that beer & wine will be sold at the fair. They're starting off slowly to get a gauge on how it will perform this year - I would assume if everything goes fine that they relax some of the limits in the next year or couple of years. That said, I think requiring the consumption of alcohol to only occur in the beer tent is a bit much. That is going to be an awkward situation for those with minors - "Honey, I'm getting a beer... Ok, sure go ahead... Alright see you in just a min- half an hour."

  5. This might be an effort on the part of the State Fair Board to manage the risk until they get a better feel for it. However, the blanket notion that alcohol should not be served at "family oriented" events is perhaps an oversimplification. and not too realistic. For 15 years, I was a volunteer at the Indianapolis Air Show, which was as family oriented an event as it gets. We sold beer donated by Monarch Beverage Company and served by licensed and trained employees of United Package Liquors who were unpaid volunteers. And where did that money go? To central Indiana children's charities, including Riley Hospital for Children! It's all about managing the risk.