Eli Lilly shares on Goldman analyst downgrades

Shares of Eli Lilly & Co. fell Monday after a Goldman Sachs analyst cut his rating on the drug developer to "Sell," citing the outlook for dwindling revenue and more spending to rebuild the product pipeline.

The stock shed $1.07, or 3.1 percent, to reach $33.82 in midday trading. Shares have traded between $27.21 and $49.78 over the last 52 weeks.

Goldman Sachs analyst Jami Rubin cut the stock to "Sell" from "Neutral," citing the company's patent cliff as a key factor. The term refers to a period when lucrative drugs lose patent protection, opening the market up to generic competition. When several of these drugs fall off a "patent cliff," the company faces the prospect of shrinking revenue because of tougher competition.

"With a patent cliff now the largest in the industry and recent setbacks to its pipeline, we see significant downside risk to long-term estimates for which there is little offset," Rubin said, in a note to investors.

He said the Indianapolis-based company stands to lose almost $10 billion in sales between 2010 and 2015 as patents expire on the anti-psychotic Zyprexa, antidepressant Cymbalta, the insulin Humalog, and others.

He also lowered his 12-month price target to $30 from $38.

The company has to reduce costs, but also invest in its pipeline to rebuild revenue, he said.

"The source of our concern is that the company may not be able to cut back operational spending enough to make up for the significant revenue shortfall, given the need to fund the early stage pipeline and support new product introductions beyond 2015," he said.