At its annual review, Lilly spoke about its need to increase productivity and lower its cost structure, including applying Six Sigma across its global operations. It intended to double its manufacturing capacity for insulin with a new factory, reflecting the continuing need for diabetes drugs.
The company spoke of maintaining the July 2004 hiring limits that have already reduced headcount by 3,100 or nearly 7 per cent, without using disruptive layoffs; and leveraging outsourcing when the work represents non-core business or can be done at a lower cost and similar quality.
"Biotech companies that took part in a respected IBM survey ranked Lilly number one in our partnering capabilities," said Sidney Taurel, chairman and chief executive officer for Lilly.
Lilly revealed that initial efforts have resulted in productivity increasing about 15 per cent in 2005 compared with 2004 as measured by adjusted operating income per Lilly employee.
Lilly's drug pipeline formed much of the company's major meeting. "Given our products, pipeline and the fact that we expect no major patent expirations for the rest of this decade, Lilly is positioned to deliver sustained earnings growth," said Sidney Taurel, chairman and chief executive officer for Lilly.
Despite an overall flat US antidepressant market in 2005, Cymbalta has led all branded and promoted products in share-of-market growth during this period. Overseas, Cymbalta performed well at its German launch.
Lilly outlined its early-to-mid-stage pipeline developments, which by the end of 2006, should have at least five anti-obesity compounds in clinical development, including a molecule with a novel mechanism of action in Phase 2.
In particular, its focus on developing medicines is aimed at blocking or slowing the progression of diabetes at all points of the continuum of the disease.
Inhaled insulin is Lilly's lead project, which also includes an oral DPP-IV inhibitor for type 2 diabetes currently in Phase 1; naveglitazar, an oral PPAR alpha/gamma agonist, for type 2 diabetes that has completed Phase 2 studies; and a long-acting release formulation of Byetta for type 2 diabetes currently in Phase 2.
Other areas of investigation include the commencement of Phase 2 trials for pruvanserin in insomnia and exploring its potential in other central nervous system conditions.
Since 2001, Lilly have launched nine new products and nine new indications and line extensions. They have also expanded into new markets with their strongest therapies such as its recent submissions of Byetta in Europe for type 2 diabetes, Cialis in Japan for erectile dysfunction, and Cymbalta in key European markets.
"Our nine new products are accounting for an increasing portion of our sales - up from 11 per cent at the end of 2004 to 18 per cent this year, and they should grow to about 24 per cent of revenues next year," said Charles Golden, executive vice president and chief financial officer for Lilly.
"Our earnings growth next year depends in large part on our success with driving the growth of Cymbalta and our other new products, as well as by the performance of Zyprexa and our ability to manage costs and increase the productivity of our resources," he added.
Lilly estimated earnings excluding one-time items would increase 8 - 12 per cent next year to $3.10 - $3.20 per share, from $2.86 per share this year.
Sales next year are expected to increase 7-9 per cent to more than $15bn (€12.6 billion). Barriers to this growth are tough US trends in its important markets of antipsychotics and antidepressants.