Eli Lilly +2.26%
Compare with: Market Vectors Pharmaceuticals (PHH) +30% year-to-date
As you know, with pharmaceutical companies, one bad egg can spoil the whole carton. Eli Lilly (LLY) has had omelet-sized setbacks lately.
In addition to failed treatments for depression and Alzheimer’s, the company is now facing its most difficult challenge and subsequent consequences could be severe and rapid.
Cymbalta, its treatment for generalized anxiety disorder, will see its patent expire this month (December), a 31.8% contributor to US revenue. Eli Lilly has protection for Cymbalta in major European countries until August 2014. Its patent for Evista, an osteoporosis treatment, will expire in March 2014.
A total of seven major patent protected products, accounting for 68% of Eli Lilly’s worldwide revenue in 2012, recently have lost or will lose in the following couple of years. Heavily reliant on its pipeline, the company will be forced to increase spending in R&D, a figure that has risen from 18.85% in 2008 to 23.73% today.
There is a sliver of good news, however, from China and Japan where sales increased by 28% and 15%, respectively. Japan is the world’s third-largest market for pharmaceuticals.
Until Eli Lilly shows improvement in sales and a more reliant pipeline, stay away from this stock heading into 2014.