Eli Lilly to Combat Generics (NYSE: LLY),(NYSE: BMY),(NYSE: MRK)

The CEO of Eli Lilly & Co. (NYSE:LLY), John Lechleiter, has this to say, “Many companies are seeking to lower risk by reducing their focus on innovative medicines. This is not our path.”  It seems Eli Lilly is making plans to counter the stiff competition it will soon receive from generic drug makers as some of Lilly’s top drugs (Cymbalta and Zyprexa) will be opened up to generic makers.

According to the Burrill Report, “In an effort to prepare for the increased competition from generics as key patents expire, Eli Lilly CEO John Lechleiter told an annual meeting of investors that the company will focus on developing and acquiring new medicines, including biotechnology-based molecules, which now represent over one-third of its clinical-stage pipeline.

Altogether, the company's R&D pipeline includes more than 60 molecules in clinical development, including 25 in mid- and late-stage development.

Lilly's top research executive, Steven Paul, says he expects the company to have at least 10 molecules in late-stage clinical development by the end of 2011 and plans to launch two new medicines per year beginning in 2013.

The company is also looking to expand approved indications for Erbitux, which is currently approved to treat colorectal, head and neck cancer in certain cases. With its partners, Bristol Myers Squibb Co. (NYSE:BMY) and Merck KGaA [a separate company from Merck & Co., Inc. (NYSE:MRK) ], it hopes to expand that drugs approved uses to lung cancer and gastric cancer.

The strategy was spelled out as Lilly told investors that it was lowering profit expectations for 2012 and beyond. Investors sent Lilly shares down more than 4 percent December 10 in response to the news.

Lilly, the world's ninth largest pharma company by sales, reaffirmed its 2009 guidance for earnings per share of $3.90 to $4.00 and painted a positive picture of 2010, during which it expects volume-driven revenue growth to increase its earnings per share of $4.65 to $4.85. That estimate excluded potential impacts of U.S. healthcare reform legislation.

Nonetheless, Wall Street analysts expressed concern over the company's annual revenue projection of at least $20 billion for 2012 to 2014 and beyond, since they had been expecting 2011 company revenue of about $22.9 billion, according to Thomson Reuters. During period, Lilly will begin to face generic competition for a number of its top sellers, including its antidepressant Cymbalta and its schizophrenia drug Zyprexa.”