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Big pharma Eli Lilly ( LLY ) issued mixed first-quarter earnings and guidance Tuesday, sending its stock down in early trading. Lilly’s earnings, excluding one-time items, shrank 5% from the year-earlier quarter to 83 cents a share, missing analysts’ consensus by 2 cents, according to Thomson Reuters. Revenue rose 5% to $4.87 billion, beating consensus by $45 million. Lilly added 5 cents to its 2016 EPS guidance range, now $2.68 to $2.78. It also raised its sales guidance slightly to $20.6 billion to $21.1 billion. At the same time, it shaved a percentage point off its gross-margin guidance, now 76%, as it also lifted its guidance for R&D and sales, general and administrative spending. Lilly stock was down nearly 2% in morning trading on the stock market today , below 77. Improved foreign-exchange rates were responsible for much of the upside, along with a 5-cent-a-share tax benefit in Q1. At the same time, the bottom line was hit by rising R&D expenses, including a $55 million milestone payment to biotech partner Incyte ( INCY ) upon the submission for approval of their jointly developed drug baricitinib. On the level of individual products, diabetes drug Humalog provided the biggest surprise, with its $606 million in Q1 sales falling 11% from the prior year and missing consensus by $100 million, according to Evercore ISI. Lilly said demand for the drug had actually increased, but so had rebates and discounts that Lilly negotiated with payers. Lilly said it does not expect the downtrend to continue the rest of the year. Revenue from a newer diabetes drug, Jardiance, doubled compared with last year, though since Lilly splits the take with partner Boehringer Ingelheim, it only received $38 million in Q1. U.S. sales beat expectations, and Lilly said it’s taking more share of the growing SGLT2 class of diabetes drugs, perhaps accounting for the underperformance of Johnson & Johnson ‘s ( JNJ ) SGLT2 drug Invokana, as shown in J&J’s Q1 report last week. Leerink analyst Seamus Fernandez wrote that while there were various upsides and downsides to the report, “we expect a limited impact as investor concerns about a significant Q1 miss diminish, and the focus shifts to abemaciclib data at ASCO (the American Society of Clinical Oncology meeting in June) and the conclusion of Expedition 3 (trial of solanezumab in Alzheimer’s disease) in Q4 2016,” he wrote in his research note. Scalper1 News
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