By Saumya Joseph and Manas Mishra
(Reuters) – Eli Lilly and Co <LLY.N> posted a higher-than-expected fourth-quarter profit on Thursday on strong demand for diabetes drug Trulicity and psoriasis treatment Taltz, helping ease investor concerns over the impact of fierce competition for its growth products.
Sales of Trulicity surged nearly 31% to $1.21 billion in the quarter, accounting for about a fifth of total sales and surpassing expectations of $1.15 billion, according to Refinitiv data. Taltz sales rose about 37% to $420 million, also beating estimates of $395.7 million.
The results alleviate investors’ “exaggerated concerns” over the launch of Novo Nordisk’s <NOVOb.CO> once-daily oral diabetes pill, Rybelsus, Citi analyst Andrew Baum said.
Rybelsus, approved late last year, is expected to be embraced by patients with an aversion to needles used to deliver treatments such as Trulicity.
“The injectable GLP-1 class continues to add new patients despite the entry of a new oral therapy,” Chief Financial Officer Joshua Smiley said on a conference call with analysts.
The Indianapolis drugmaker has been leaning on newer medicines to spur growth while going on a deal-making spree to build its treatment portfolio, as older medicines such as erectile dysfunction treatment Cialis lose market share to generic competition.
“With Trulicity and Taltz looking very strong relative to expectations and growth not being dampened by any competition or pricing, that’s more the focus for investors,” UBS analyst Navin Jacob told Reuters.
Lilly shares initially fell about 1% after it announced it was not planning further trials of the experimental lung cancer drug pegilodecakin it acquired with its $1.6 billion purchase of Armo Biosciences due to disappointing trial results.
Shares later reversed course and were up 1.5%. Although the company will continue to pursue “higher-risk, high reward” drug candidates such as pegilodecakin, these will be a smaller part of the portfolio in the future, said Chief Scientific Officer Daniel Skovronsky.
Earlier this month, Lilly said it was targeting roughly one $1 billion to $5 billion deal every quarter in 2020.
Chief Executive David Ricks told Reuters the company aims to build on last year’s acquisition of Loxo Oncology and focus on targeted cancer drugs going forward. “We see a lot of runway there.”
Its recent $1.1 billion acquisition of skin disease specialist Dermira Inc <DERM.O> helped it slightly raise its 2020 revenue forecast to between $23.7 billion and $24.2 billion from $23.6 billion and $24.1 billion
Excluding items, the company earned $1.73 per share, beating analysts’ average estimate by 21 cents.
Revenue rose 8.5% to $6.11 billion, above expectations of $5.91 billion.
(Reporting by Manas Mishra and Saumya Sibi Joseph in Bengaluru and Carl O’Donnell in New York; Editing by Arun Koyyur and Bill Berkrot)