(Reuters) – Eli Lilly and Co (LLY.N) soundly beat quarterly profit estimates on lower-than-expected spending on research and marketing, but revenue slipped as the stronger dollar hurt sales outside the United States.
The U.S. drugmaker hopes to begin rebounding this year from three years of plunging sales and earnings caused by patent expirations on some of its biggest products. First-quarter earnings were hurt by generic competition for its Cymbalta depression drug and its Evista treatment for osteoporosis, it said on Thursday.
“Lilly has weathered one of the industry’s most challenging storms of patent expirations and is primed to grow,” said Suntrust Robinson Humphrey analyst John Boris.
Boris said Lilly had “a very good quarter,” and newer treatments for cancer and diabetes should ensure average annual earnings growth in the mid-teens percentage range from 2015 to 2020, topping expected industry growth of about 12 percent.
Lilly earned $530 million, or 50 cents per share, in the quarter, compared with $728 million, or 68 cents per share, a year earlier..
Excluding items, the company earned 87 cents per share, well above the analysts’ average estimate of 77 cents. Research spending fell 6 percent to $1.04 billion, which Sanford Bernstein analyst Tim Anderson said was about 10 percent below his estimate.
Results also benefited from increased stocking of its medicines by distributors, as well as a 42 percent jump in sales of animal health products to $750 million.
Animal health is a growing focus for Lilly as people in developing countries rely more on farm animals for dietary protein and embrace companion animals. In January Lilly completed a $5.4 billion purchase of Novartis AG’s (NOVN.VX)(NVS.N) animal health business, making its Elanco unit the world’s No. 2 animal-health group by revenue, up from No. 4.
The company affirmed its full-year profit forecast of $3.10 to $3.20 per share, excluding special items.
While earnings beat expectations, largely on cost-cutting, revenue was just in line, falling about 1 percent to $4.64 billion.
First-quarter revenue would have risen 5 percent if not for the stronger dollar, which lowers the value of sales abroad.
Lilly shares were down less than 1 percent at $71.83 in morning trading, amid a moderate downturn for the drug sector.
(Additional reporting by Natalie Grover in Bengaluru; Editing by Simon Jennings, Jeffrey Benkoe and Lisa Von Ahn)