It hasn't been easy the last few years to be a shareholder of Eli Lilly and Co.
Lilly's stock price has languished as the company's vaunted drug pipeline has suffered hiccups and as legal troubles over its best-selling drug, Zyprexa, have lingered.
So as Lilly shareholders gather April 16 for their annual meeting, two key questions hang in the air. Both center on Zyprexa, an anti-schizophrenia drug, which accounts for one-quarter of Lilly's revenue and even more of its profit.
Will Zyprexa sales hold up until the drug loses patent protection in 2011, after which generic drugmakers can copy it?
And by then, will Lilly's up-andcomer drugs have ramped up enough to offset the sure loss of Zyprexa sales?
The answers, according to stock analysts who cover Lilly, are, respectively, "We think," and, "We hope." Lilly needs to successfully answer both questions to satisfy its increasingly impatient shareholders.
One big Lilly investor, Calpers, is criticizing the company for its stock performance, which for five years has lagged its peer drugmakers and the S&P 500. The pension fund for California's state workers will push at the shareholders meeting to make it easier to amend Lilly's bylaws.
Analysts, however, have been recently encouraged by trends in Lilly's business. Most important, a recent drop in prescriptions of Zyprexa leveled off late last year.
As for the legal troubles, it's hard to say if they'll yield further damage. Lilly already has settled most of the product liability lawsuits against Zyprexa, paying $1.2 billion to 26,000 plaintiffs. Lilly still faces about 1,300 more cases.
Meanwhile, seven states have sued Lilly for allegedly encouraging doctors to prescribe Zyprexa for uses not OK'd by the U.S. Food and Drug Administration.
And three shareholder lawsuits have been filed in federal court in New York, claiming investors lost money because Lilly allegedly suppressed data showing that Zyprexa causes weight gain and diabetes. Those suits cite internal Lilly documents disclosed in The New York Times late last year-information a judge later ruled had been illegally leaked.
"They are a concern, but litigation risk is hard to quantify," said Les Funtleyder, a health care analyst at Miller Tabak & Co. "Unless there is a dramatic change to what we know already, litigation is not on the top of the list of worries for Lilly."
Higher on the worry list is competition for Zyprexa from cheaper generic versions of antipsychotic drugs. For example, Risperdal, made by New Jersey-based Johnson & Johnson, will lose patent protection this year.
Still, most analysts project Zyprexa will ring up at least $4 billion in revenue each year until 2010. It posted global sales of $4.4 billion last year, or 28 percent of Lilly's total sales. The biggest concern is how to replace those dollars after that.
The Lilly drug that has analysts most excited is prasugrel, an anti-blood-clotting medicine that could compete with Plavix, the world's fourth-highest-selling drug. It racked up $5.8 billion in sales last year.
Lilly is testing prasugrel head-to-head with Plavix in a huge clinical trial involving 13,000 patients. Lilly has indicated it will announce results from the trial late this year. Earlier trials gave some indication that prasugrel could help patients for whom Plavix does not work.
James Kelly, a pharmaceutical analyst at Goldman Sachs, projects prasugrel could reach $1.4 billion in sales by 2011, if it is as safe as Plavix. If it's safer, prasugrel could be a mega-blockbuster.
"Prasugrel is the most attractive nearterm candidate in Lilly's pipeline," Kelly wrote to investors in a March research note.
Five other drugs Lilly already sells that have been growing rapidly-Cymbalta for depression, Cialis for impotence, Alimta for lung cancer, Byetta for diabetes, and Forteo for osteoporosis-collectively grew sales 47 percent last year to $3.8 billion.
"They've got this group of products that's growing nicely," said Joe Tooley, an analyst at A.G. Edwards.
Several analysts raised their outlook on Lilly after it posted stronger-than-expected results in its fourth quarter. Other analysts, however, say the uncertainties outweigh the positives for Lilly in the longer term.
They point to drug trials Lilly has suspended-such as Arxxant to treat diabetic eye disease-because of results that didn't satisfy the FDA. Such setbacks make it less likely Lilly will replace Zyprexa's revenue before its patent runs out.
"The evidence we have right now does not favor it," Funtleyder said. "But it's early."