Exchange rates help boost Lilly profit-WEB ONLY

Shares of the Indianapolis-based drugmaker were flat in morning trading, in line with broader markets, even though Lilly boosted its year-end profit forecast by a nickel per share.

Lilly shares had risen 3 cents apiece, to $34.48, as of 11:25 a.m.

In the second quarter, Lilly earned $1.16 billion, or $1.06 per share. Those results included a $105 million after-tax charge Lilly recorded to prepare for an expected legal settlement involving its bestseller Zyprexa. Excluding that charge, Lilly would have earned $1.12 per share.

While those results handily beat analysts’ expectations of $1.02 per share, it was largely due to benefits from changing foreign exchange rates. A stronger dollar this year hurt sales, but has helped profits as Lilly can buy supplies and pay workers at comparatively lower costs.

“Most of the surprise in results was because they got a big benefit on the gross margin because of currency,” said Barbara Ryan, an analyst at Deutsche Bank, in a telephone interview today. “The focus from here is clearly on Effient and its launch.”

Lilly won U.S. market approval for Effient on July 10 and will launch the drug in the first week of August. Effient will compete against Plavix, made by New York-based Bristol-Myers Squibb Co. and France-based Sanofi-Aventis SA, which racked up $9.4 billion in sales last year.

Lilly will price Effient at $5.45 per pill – 18-percent higher than Plavix. Lilly said it would have nearly all pharmacies stocked with the drug when it launches. The company is also trying to spur insurance companies and pharmacy-benefit-management firms to place it on their drug-formulary lists as quickly as possible.

“We expect things to move very quickly,” said Javan Collins, vice president of Lilly’s U.S. cardiology business, in a conference call with analysts.

Lilly’s revenue for the quarter was $5.29 billion, flat from a year ago but higher than analysts’ expectations.

“Lilly continues to deliver solid financial results notwithstanding the challenging global economic environment,” Lilly CEO John Lechleiter said in a statement. “Our business remained strong in the second quarter, with volume-driven revenue growth, good operating leverage and double-digit earnings-per-share growth.”

Lilly’s sales were helped by lung cancer drug Alimta, which achieved sales growth of 40 percent. The antidepressant Cymbalta saw its sales rise 14 percent. Sales of Humalog insulin rose 9 percent.

Lilly now expects to earn $4 to $4.30 per share this year, excluding the legal charge.

At the end of the first quarter, Lilly predicted it would earn $4 to $4.25 per share in profit this year.

Lilly said it is in advanced discussions with the attorneys general of several states that have accused Lilly of improper marketing of Zyprexa and have not participated in previous settlements.