Eli Lilly and Co, in a move that appeared to ease investor concerns after the failure of its high-profile Alzheimer's drug, on Thursday provided a 2017 forecast above Wall Street estimates and expressed confidence in recently launched products and those in development.
The company issued the upbeat outlook following profound investor disappointment last month, when the Alzheimer's drug solanezumab failed to slow mental declines of patients with even mild symptoms, dashing most hopes for a treatment that, if successful, would have been a multibillion-dollar seller.
Lilly shares jumped 5.7 percent to $71.51.
"We are encouraged by Lilly's 2017 financial guidance," Leerink Partners analyst Seamus Fernandez said in a research note. "Additionally, management confirmed its commitment to achieve an operating expense-to-revenue ratio of 50 percent or less in 2018, along with annual dividend increases."
On an analyst call David Ricks, who is set to become chief executive on Jan. 1, said Lilly expects strong demand for newer products, such as lung cancer drug Cyramza, Taltz for psoriasis, and diabetes treatment Trulicity.
"As we move past the negative solanezumab data read-out, Lilly's innovation-based strategy is generating strong momentum in multiple therapeutic areas," Ricks said in a statement.
Jardiance, another Type 2 diabetes treatment, is expected to get a boost after U.S. regulators this month said Lilly could promote its ability to reduce the risk of death in patients with heart disease, as demonstrated in a large clinical trial.
The American Diabetes Association issued its 2017 treatment guidelines on Thursday, which included a recommendation to consider Jardiance or Novo Nordisk's Victoza "in patients with established cardiovascular disease to reduce the risk of mortality." (here)
Lilly sells its diabetes drugs in partnership with German drugmaker Boehringer Ingelheim. The companies on Thursday announced the U.S. launch of a long-acting insulin called Basaglar that is similar to Sanofi's big-selling Lantus.
Ricks said Lilly was undeterred in its efforts to develop an effective treatment for Alzheimer's, the devastating memory-robbing disease that affects millions of people. Lilly did say it would halt development of one candidate seen as similar to solanezumab.
The company said it could potentially launch at least 20 new drugs between 2014 and 2023, including baricitinib for rheumatoid arthritis.
Ricks also told analysts that Lilly was "very interested" in deals that would add to its developmental pipeline in core therapeutic areas.
Lilly forecast 2017 revenue of $21.8 billion to $22.3 billion and adjusted earnings of $4.05 to $4.15 per share. Analysts on average had estimated sales of $21.67 billion and earnings of $3.97 per share, according to Thomson Reuters I/B/E/S.
The company reaffirmed its forecast for annual revenue growth of at least 5 percent between 2015 and 2020.
In addition to increased sales, Lilly said it would achieve long-term targets through operating expense management.
Lilly maintained its adjusted 2016 earnings forecast of $3.50 to $3.60 per share, but lowered its net outlook to $2.57 to $2.67 from $2.66 to $2.76, in part due to a $150 million charge associated with the solanezumab failure to be taken in the fourth quarter.
(Reporting by Ankur Banerjee in Bengaluru; editing by Martina D'Couto and Meredith Mazzilli)