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Lilly's insulin dip concerns analysts

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Eli Lilly and Co. suffered a tough week on the stock market, in part because of a disturbing bit of news buried in its third-quarter earnings report: Lilly’s insulin sales are down.

The Indianapolis-based drugmaker is relying heavily on sustaining $3.5 billion in annual sales of its Humulin and Humalog insulins to carry it through its current string of patent expirations on other drugs—at least until it can launch new drugs to pick up the slack.

But in the third quarter, sales of Humalog fell 3 percent and sales of Humulin fell 5 percent, compared with the same quarter a year ago. Lilly officials said they lost share in the insulin market in the first half of the year, although the situation has stabilized now.

Still, those problems sparked a lot of questions from Wall Street analysts during a conference call Oct. 24. And Lilly’s share price slipped 3 percent from its close on Oct. 23 until the end of the week. The stock closed Friday at $50.26 per share.

“The Humalog and Humulin sales were light relative to our expectations,” noted Goldman Sachs analyst Jami Rubin during the conference call with Lilly executives. She added, “Insulin scripts have been strong. So what’s happening with the pricing environment?”

Both Humalog and Humulin suffered because they were removed from the formulary of a large third-party payer this year, Lilly reported. Also, the contract between Lilly and Wal-Mart to use Humulin for Wal-Mart’s ReliOn brand was terminated.

But in addition to those things, Lilly officials said, third-party payers are more aggressively threatening to remove or de-emphasize each drugmaker’s insulins from their formularies if the drugmakers don’t offer better prices.

“The negotiations that we basically have with some of the major payers are more difficult. And we have seen their leverage increase as they have the ability to be able to move share as they restrict access to products given the contracts that they're able to establish,” said Enrique Conterno, president of Lilly’s diabetes unit. “So, yes, there is some pressure.”

And in addition to that, doctors are prescribing insulin later to diabetics because they first try to control blood sugar with a relatively new class of oral medicines called DPP-4s, such as Januvia and Tradjenta, and through injectible medicines known as GLP-1s, such as Byetta, Bydureon and Victoza.

“To some extent, that is delaying the initiation on insulin and some of the earlier use of insulin,” Conterno said. “We believe that some of these impacts are more short term. I think we saw similar impacts when, for example, metformin was introduced in the U.S. many years ago. So my sense is that we will continue to see long-term insulin growth rates that are much more aligned with historical rates. But we are seeing some depressed rates now.”

Lilly’s overall results in the third-quarter were “ho-hum,” according to one analyst. The company lowered its full-year profit forecast by 4 cents per share.

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  1. Cramer agrees...says don't buy it and sell it if you own it! Their "pay to play" cost is this issue. As long as they charge customers, they never will attain the critical mass needed to be a successful on company...Jim Cramer quote.

  2. My responses to some of the comments would include the following: 1. Our offer which included the forgiveness of debt (this is an immediate forgiveness and is not "spread over many years")represents debt that due to a reduction of interest rates in the economy arguably represents consideration together with the cash component of our offer that exceeds the $2.1 million apparently offered by another party. 2. The previous $2.1 million cash offer that was turned down by the CRC would have netted the CRC substantially less than $2.1 million. As a result even in hindsight the CRC was wise in turning down that offer. 3. With regard to "concerned Carmelite's" discussion of the previous financing Pedcor gave up $16.5 million in City debt in addition to the conveyance of the garage (appraised at $13 million)in exchange for the $22.5 million cash and debt obligations. The local media never discussed the $16.5 million in debt that we gave up which would show that we gave $29.5 million in value for the $23.5 million. 4.Pedcor would have been much happier if Brian was still operating his Deli and only made this offer as we believe that we can redevelop the building into something that will be better for the City and City Center where both Pedcor the citizens of Carmel have a large investment. Bruce Cordingley, President, Pedcor

  3. I've been looking for news on Corner Bakery, too, but there doesn't seem to be any info out there. I prefer them over Panera and Paradise so can't wait to see where they'll be!

  4. WGN actually is two channels: 1. WGN Chicago, seen only in Chicago (and parts of Canada) - this station is one of the flagship CW affiliates. 2. WGN America - a nationwide cable channel that doesn't carry any CW programming, and doesn't have local affiliates. (In addition, as WGN is owned by Tribune, just like WTTV, WTTK, and WXIN, I can't imagine they would do anything to help WISH.) In Indianapolis, CW programming is already seen on WTTV 4 and WTTK 29, and when CBS takes over those stations' main channels, the CW will move to a sub channel, such as 4.2 or 4.3 and 29.2 or 29.3. TBS is only a cable channel these days and does not affiliate with local stations. WISH could move the MyNetwork affiliation from WNDY 23 to WISH 8, but I am beginning to think they may prefer to put together their own lineup of syndicated programming instead. While much of it would be "reruns" from broadcast or cable, that's pretty much what the MyNetwork does these days anyway. So since WISH has the choice, they may want to customize their lineup by choosing programs that they feel will garner better ratings in this market.

  5. The Pedcor debt is from the CRC paying ~$23M for the Pedcor's parking garage at City Center that is apprased at $13M. Why did we pay over the top money for a private businesses parking? What did we get out of it? Pedcor got free parking for their apartment and business tenants. Pedcor now gets another building for free that taxpayers have ~$3M tied up in. This is NOT a win win for taxpayers. It is just a win for Pedcor who contributes heavily to the Friends of Jim Brainard. The campaign reports are on the Hamilton County website. http://www2.hamiltoncounty.in.gov/publicdocs/Campaign%20Finance%20Images/defaultfiles.asp?ARG1=Campaign Finance Images&ARG2=/Brainard, Jim

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