Drug maker Eli Lilly & Co. is crying over spilled milk.
Due to U.S. competition for Posilac, a supplement to help cows produce more milk, along with another product for cattle, Optaflexx, the company’s
fourth-quarter financial results included a decline for its animal-health segment sales.
Behind the declines, “there appears to have been an oversupply of milk in the market and that has depressed milk prices,” EvercoreISI analyst Umer Raffat said, adding that “milk production has continued to remain strong. In this backdrop, many customers are choosing to forgo a product like Posilac.”
Eli Lilly has owned Posilac since acquiring it in 2008, and the company’s animal health revenue has grown steadily since then, faltering only relatively recently.
Those pressures didn’t stop Eli Lilly from reporting fourth-quarter profit and revenue beats early Wednesday, along with an upbeat 2018 outlook.
Read more: Eli Lilly shares rise after Q4 profit, revenue beats, upbeat outlook
But the future of its animal health business may be grimmer, with the company saying last fall that it may spin off or sell the unit because of competitive pressures, including in the U.S. cattle industry.
See: Eli Lilly exploring spinoff of Elanco
There’s another factor too, one that has also been around for a while: the clean food movement. In response to changing consumer attitudes, companies as varied as Panera Bread Co. and Yum Brands Inc.
chicken chain KFC have made various changes to their food.
Jeffrey Simmons, president of Eli Lilly’s Elanco animal health unit, said back in late October that the movement was an industry-wide issue. It specifically affected Eli Lilly’s “all-around market access” for antibiotics and productivity products, he said.
The company also expects the trend to continue, causing negative growth in the first half of the year, with new product launches projected to help growth in the second half of the year.
Eli Lilly shares declined 4.3% in Wednesday trade after President Donald Trump brought up the high prices of U.S. drug prices in his State of the Union address, sending pharmaceutical and biotech companies’ shares down.
Company shares have lifted 0.6% over the last three months to $82.41, compared with a 9.8% rise in the S&P 500
and a 12.1% rise in the Dow Jones Industrial Average
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