Medicare Funding Weighs on Eli Lilly’s Revenue

Eli Lilly & Co. posted a lower-than-expected revenue for the latest quarter as the company provided more funding for seniors through a Medicare plan under a change in federal law that took effect this year.
The pharmaceutical company posted third-quarter revenue of $5.48 billion, up 3.2% from the same quarter last year but below the $5.5 billion analysts polled by FactSet had expected. Lilly said an 8% volume increase drove revenue up.
Shares of Lilly fell about 2.2% in midday trading. Lilly’s stock was down about 7.2% this year.
The Indianapolis company’s U.S. sales stayed about flat at $3.06 billion as higher sales for its key products, such as diabetes treatment Trulicity, psoriasis drug Taltz and migraine medication Emgality offset lower volume of erectile-dysfunction pill Cialis.
Cialis saw sales drop 61% from a year earlier, with the company attributing the decline to its loss of patent exclusivity.
Overseas sales rose 8% to $2.42 billion, Lilly said.
Trulicity sales, which rose 24% for the quarter compared with a year earlier, still missed expectations due to Lilly’s increased share of funding for seniors in the Medicare Part D drug benefit, Chief Executive David Ricks told The Wall Street Journal.
Under the change to Part D, companies like Lilly must now pay 70% of prescription costs when members reach a certain level of spending for the year, up from 50% last year.
More than one-third of Trulicity’s U.S. sales are through Part D, and many seniors hit a gap in coverage known as the doughnut hole from May through August. Lilly’s funding for seniors during the coverage gap reduced net pricing for Trulicity. Strong prescription volume growth for Trulicity, however, paints a “healthy picture,” Mr. Ricks said.
Also contributing to the sales miss was the company’s withdrawal of its Lartruvo cancer drug after a study showed that it failed to prolong overall survival in a clinical trial.
Lilly posted net income of $1.37 a share, up 22% from the comparable quarter last year. Adjusted earnings were $1.48 a share, up 10% from the prior year and beating the $1.40 a share analysts had expected.
For the full year, Lilly said it sees adjusted earnings to be between $5.75 a share and $5.85 a share, up from its previous guidance of between $5.67 a share and $5.77 a share. Analysts are expecting $5.72 a share for the full year.
The company said it is sponsoring a clinical study with the University of Southern California’s Alzheimer Institute to test whether Lilly’s drug solanezumab can slow the progression of memory problems in older people who don’t yet show symptoms of Alzheimer’s disease but are at risk of decline. The “A4” study for the drug, which failed to help patients already diagnosed with Alzheimer’s in past trials, is likely to yield results in 2022, Chief Scientific Officer Daniel Skovronsky said on a call with investors.
“We just have to wait patiently for those results to see if someone can have efficacy in this very early population,” Mr. Skovronsky said.
Biogen Inc. on Tuesday said it plans to seek regulatory approval early next year for an Alzheimer’s drug that had been considered a lost cause after the company pulled the plug on late-stage studies due to disappointing results.

https://www.marketscreener.com/ELI-LILLY-AND-COMPANY-13401/news/Eli-Lilly-and-Medicare-Funding-Weighs-on-Eli-Lilly-s-Revenue-Update-29442770/