Lilly Shares Reach Record After Drugmaker Moves Fast on Virus
(Bloomberg) -- Eli Lilly & Co. saw a tsunami coming, but instead of being crushed by the brute force of the novel coronavirus, the pharmaceutical giant found a way to ride the wave.
The challenge facing executives now will be to maintain the company’s momentum as the effects of the pandemic wash through a radically altered U.S. economy.
The Indianapolis-based drugmaker’s stock hit a record Thursday after Lilly boosted its outlook and reported first-quarter sales that outpaced Wall Street estimates. At 2:54 p.m. in New York, the shares were trading up 2.2% at $160.22 after earlier gaining as much as 3.7%.
While most blue-chip companies have been roiled by Covid-19, Lilly saw an added benefit of about $250 million in the quarter from the virus as patients stockpiled prescriptions, leading revenue to top $4.86 billion. Sales of its top-selling drugs, including diabetes treatment Trulicity and the autoimmune therapy Taltz, surged.
Normally, satisfying such a spike in demand would strain the company’s manufacturing capacity, but Lilly’s management had recognized early on that the new coronavirus would put great stress on its operations, and took steps to protect production outposts and make sure that workers could producing its drugs.
Senior executives watched closely as the virus began to break out in China in December, jeopardizing a key drugmaking facility. In February, the company rushed to secure travel documentation for Italian employees at a Tuscan manufacturing site that makes insulin for diabetes patients in the U.S.
Still, Chief Executive Officer Dave Ricks sought to temper investors’ expectations during a conference call on Thursday. He said the pandemic is expected to have a long-term negative impact on the company, potentially leading to a drop in new prescriptions, de-stocking of medicines and pricing pressures.
It was clear early on that the potent virus would cross oceans, transcend borders and even pass through the hands of executives at health-care industry conferences, said Chief Financial Officer Joshua Smiley in an interview.
Smiley, alongside an internal task force that included Ricks and Chief Scientific Officer Daniel Skovronsky, acted quickly. On March 9, before many S&P 500 companies, Lilly told its 33,000-plus global staff of administrators, sales representatives, researchers and accountants to stop traveling and start working from home.
“We’d never tried anything of this magnitude,” Smiley said. “But if you look at our major facilities--one near Shanghai, one near Florence, one in Madrid, one in France--we’re in all the places that are affected by Covid-19.”
Lilly needed to get nonessential employees off premises to ensure that 3,000 to 5,000 manufacturing operators around the world could safely remain in place, working flat-out to get the 40 million patients it serves their medicines. In China, Italy and the U.S., Lilly didn’t have to close a single manufacturing facility or curb production.
Smiley, who is working from home -- at times in his pajamas -- said he’s more frequently in contact with employees abroad than ever.
“We closed first quarter books at one-hundred-plus locations with nobody in the office,” he said. Smiley is holding daily video calls with lieutenants in major markets to ensure that drug orders are fulfilled. He said employees have been asking for assurances, but the future remains hard to predict.
“The thing everyone wants, that we can’t provide, is certainty,” he said. “When are we going to go back to the office? When are things changing? Our answer is we don’t know yet, we don’t think it’s anytime soon.”
Lilly said it is looking to rapidly develop potential new therapies for coronavirus. It’s already working with closely held biotechnology company AbCellera Biologics Inc., to develop a treatment based on antibodies present in the blood of patients who’ve recovered from Covid-19.
Skovronsky said Thursday that Lilly intends to approach U.S. regulators before the end of May for permission to move into human trials. Lilly is also working with the National Institutes of Health to evaluate an existing rheumatoid arthritis medication in hospitalized Covid-19 patients.
“We have to prepare now to make millions of doses,” said Smiley, the chief financial officer, noting that there will be an increase in R&D and manufacturing expenses related to Covid-19 effortsfor the foreseeable future. “It’s a challenge for us. We haven’t done it before.”
Should Lilly and other pharmaceutical companies be successful in developing Covid-19 drugs, it could improve the industry’s standing with policy makers and the public after fierce battles over rising drug costs and other issues.
“We have an opportunity to reset the reputation of the industry,” Ricks said.
©2020 Bloomberg L.P.