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Patent expirations up pressure on Lilly

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Eli Lilly and Co. lost patent protection on its $5-billion-a-year best-seller Zyprexa in October, plunging the company into the long-awaited zone of uncertainty that it calls “Years YZ.”

But instead of pursuing a merger, CEO John Lechleiter kept the Indianapolis-based drugmaker’s chips bet entirely on the ability of its research and development teams to launch new drugs to offset the massive revenue losses the company is now suffering.

Starting with cancer drug Gemzar in late 2010, Lilly began to lose patent protection on a string of five blockbuster drugs, ending with Cymbalta in 2013, which have accounted for nearly half of Lilly’s annual revenue. Zyprexa, an antipsychotic, was the biggest.

Lilly’s top brass no longer makes an effort to suggest that the next three years won’t be ugly for Lilly’s balance sheet: Revenue and profits will almost certainly decline. The company’s stock price, already stagnant for three years, likely will remain so.

Instead, executives now take the Paul Harvey approach, constantly telling the rest of the story. They point to how sales of Lilly’s products in animal health, emerging markets and Japan are growing rapidly, which will offset some of the losses from its blockbuster drugs.

Some, but by no means all. To help patch up the rest of the revenue hole, Lilly has been slashing staff: 5,500 workers worldwide and nearly 2,000 in Indianapolis.

After 2014, Lilly officials promise, its pipeline will have produced new medicines that will put the company back on a path to growth.

It had certainly better, because if Lilly hasn’t generated anything new by 2016 and 2017—when it will lose patent protection on its newer star drugs—Alimta, Strattera and Cialis—the company will be in serious trouble.

Lechleiter constantly touts the historic number of molecules Lilly is testing in humans. (Currently 66.) But Lilly’s pipeline production has been disappointing since at least the 2005 launch of the diabetes injection Byetta.

Lilly did launch in Europe this year the potential blockbuster Byrdueon—a sister drug to Byetta—with California-based partner Amylin Pharmaceuticals Inc. But after a legal dispute between the companies, Lilly sold the rights to Bydureon back to Amylin for current and future payments up to $1.5 billion.•

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  1. With Pence running the ship good luck with a new government building on the site. He does everything on the cheap except unnecessary roads line a new beltway( like we need that). Things like state of the art office buildings and light rail will never be seen as an asset to these types. They don't get that these are the things that help a city prosper.

  2. Does the $100,000,000,000 include salaries for members of Congress?

  3. "But that doesn't change how the piece plays to most of the people who will see it." If it stands out so little during the day as you seem to suggest maybe most of the people who actually see it will be those present when it is dark enough to experience its full effects.

  4. That's the mentality of most retail marketers. In this case Leo was asked to build the brand. HHG then had a bad sales quarter and rather than stay the course, now want to go back to the schlock that Zimmerman provides (at a considerable cut in price.) And while HHG salesmen are, by far, the pushiest salesmen I have ever experienced, I believe they are NOT paid on commission. But that doesn't mean they aren't trained to be aggressive.

  5. The reason HHG's sales team hits you from the moment you walk through the door is the same reason car salesmen do the same thing: Commission. HHG's folks are paid by commission they and need to hit sales targets or get cut, while BB does not. The sales figures are aggressive, so turnover rate is high. Electronics are the largest commission earners along with non-needed warranties, service plans etc, known in the industry as 'cheese'. The wholesale base price is listed on the cryptic price tag in the string of numbers near the bar code. Know how to decipher it and you get things at cost, with little to no commission to the sales persons. Whether or not this is fair, is more of a moral question than a financial one.

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