In Zyprexa Settlement, Lilly Fritters Away 7.2 Percent of Revenues

Eli Lilly is close to settling criminal and civil charges related to its mismarketing of Zyprexa for $1.4 billion, the New York Times reports. The settlement will mean that Lilly will have disgorged $3.1 billion in charges, mostly for Zyprexa, since 2006. That’s about 7.2 percent of its revenues over the period.

The settlement will close charges that Lilly marketed the drug for unapproved uses in children and the elderly, and ignored side effects such as weight gain that resulted in diabetes.

Lilly records such legal settlements as “one-time” charges on its financial statements, and the company tells the SEC and investors that such charges are “not meaningful.” When you add up Lilly’s “not meaningful” charges from Q4 2006 through Q3 2008, the last period available, it comes to $3.1 billion. That’s about 8 percent of its total revenues over the period.

So how “not meaningful” will this current settlement be? Do the-back-of-the-envelope math: Add up all Lilly’s revenues since Q4 2006, and add up all Lilly’s “not meaningful” charges over the same period. Assume that Lilly will grow its revenues by about 3 percent in Q4 2008, which is the average growth rate per quarter for Lilly over the time period. The result is that despite the addition of another quarter of revenues, Lilly has still frittered away about 7.2 percent of its sales in “not meaningful” legal charges. Here’s the breakdown, in millions of dollars:

• Period “NM”         % of Revs
  
• 4q06    945.2         22%
• 1q07    123              3%
• 2q07    0.00             0%
• 3q07    81.3             2%
• 4q07    98.2             2%
• 1q08    145.7           3%
• 2q08    88.9            2%
• 3q08    1,659.40     32%
• TOTAL  3,141    7.2%*
  

(Note: these numbers factor out the acquisition of ImClone, which doubtless makes the calculation a lot more complicated.)

Last time BNET looked at the issue, we said that these expenses were the rough equivalent of not having Strattera on the books since Q3 2006. It’s also the equivalent of not having the entire sales of Actos and Byetta combined.

• BNET’s previous coverage of Lilly and Zyprexa:
• How Eli Lilly Waved Goodbye to $3.1 Billion
• FDA to Allow “Off-Label” Unapproved Drug Promotion
• FDA: J&J’s Risperdal and Lilly’s Zyprexa Are Over-Used in Kids

* This story has been corrected from its original version, which contained inaccurate numbers. The author apologizes for the error.