Eli Lilly shares slump after Prozac court ruling

Eli Lilly suffered a huge blow when a US court stripped Prozac, by far its biggest-selling drug, of almost three years of patent protection.

Shares in the US pharmaceuticals company plunged over 30 percent in afternoon trading on Wednesday as the company issued a statement that said it would see earnings declines for 12 months from the middle of next year.

The anti-depressant Prozac, which became the lifestyle drug of choice for a whole generation, has been the biggest contributor to Lilly’s earnings for years but its sales have been slowly in decline. Last year it accounted for $2.6bn – 26 percent – of Lilly’s worldwide sales of $9.9bn. This year it has already garnered $1.2bn.

The Court of Appeals for the Federal Circuit invalidated Lilly’s patent on Prozac that protected the drug from generic competition until December 2003. Most pharmaceutical companies try to extend the life of patents on their most successful drugs through a variety of legal manoeuvres.

Barr Laboratories, a generic drugmaker anxious to compete in the anti-depressant market, had challenged one aspect of Lilly’s patent before but lost in a ruling in January last year. Wednesday’s overturning of that ruling paved the way, Barr said, for generic competition to Prozac as early as February 2001, potentially knocking off billion of dollars of sales from Lilly’s earnings from the middle of next year.

Charles Golden, the company’s chief financial officer, said: “While we’re clearly disappointed with today’s ruling and plan to appeal it, we nonetheless are thoroughly prepared to implement a comprehensive contingency plan.”

Mr Golden said if Lilly’s appeal was unsuccessful, the company would see earnings declines in the second half of next year and the first half of 2002. Until the ruling, Lilly had been surprising analysts and investors by successfully supplanting Prozac sales with those of the anti-psychotic Zyprexa.

Last month, it received a huge boost when it said it was close to a breakthrough in the treatment of sepsis, an often fatal condition that affects 1.5m people a year worldwide. The news of the potential first-ever treatment sent Lilly’s shares up 17 percent. Reuters