UPDATE: Lilly still eyeing deals despite loss-WEB ONLY

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Even after Eli Lilly and Co. wiped out its 2008 profit to buy ImClone Systems, CEO John Lechleiter said his company still has plenty of powder for more purchases.

But Lechleiter said he has no plans to do a mega-deal on par with Pfizer Inc.’s acquisition of Wyeth, announced this week. Instead, Lechleiter wants to play the role of scavenger, and scoop up any assets Pfizer and Wyeth divest as part of their merger.

“Any time there is any large combination like this, we’re looking at opportunities … in the best of the assets,” Lechleiter told analysts during a conference call this morning. “We’ve got our eye on that.”

Lilly posted a $3.6 billion fourth-quarter loss because of its $6.5 billion acquisition of New York-based ImClone Systems Inc.

Not counting that deal, however, Lilly’s profits beat the expectations of Wall Street analysts by 2 cents per share.

New York-based Pfizer, the world’s largest drugmaker, announced its merger with Wyeth, a huge drugmaker based in New Jersey, on Monday. The deal, valued at $68 billion, still requires shareholder and antitrust approval.

But Lechleiter told Bloomberg News today that he’s not interested in merging with a similar-sized company.

“We have been clear that we do not believe these large combinations in the long term have sustained value,” Lechleiter said in an interview. “Consolidation is obviously happening and there may be additional consolidation. If we see a small or midcap opportunity, like ImClone, we’ll go for it.”

Some analysts questioned whether Lilly has the money to do that, but Lechleiter insisted it does. Lilly’s operations, excluding the ImClone deal and a legal settlement involving Lilly’s bestseller Zyprexa, generated cash flow of $7 billion in 2008.

“I don’t think the ImClone acquisition is going to place any kind of damper on any future deals,” Lechleiter said. “We have the wherewithal still to consider small- to midcap kinds of acquisitions.”

Lilly earned $1.07 per share excluding the ImClone purchase. Analysts were expecting $1.05 per share, according to a survey by Thomson Financial. A year ago, Lilly earned 90 cents per share, excluding extraordinary items. With the ImClone deal, Lilly lost $3.31 per share.

Total sales for the quarter were flat at $5.2 billion.

For the year, Lilly’s sales topped $20 billion, an increase of 9 percent over 2007. Because of the ImClone deal and the Zyprexa settlement, Lilly posted a $2 billion loss for the year, compared with a $3 billion profit in 2007.

Lilly reaffirmed its profit forecast for 2009, saying it should fall between $4 and $4.25 per share. In 2008, Lilly’s earnings per share, excluding one-time items, totaled $4.02.

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