The flower seems to be wilting for Eli Lilly (LLY -2.63%). Shares for the big pharmaceutical company shot up nearly 29% for 2012 by mid-October. Since then, though, the stock has fallen almost 10%.

Can Lilly blossom again? The answer is yes, but the company's earnings results announced last week point to quite a few challenges.

Cliff diving
Lilly reported earnings that increased 6% in the third quarter compared to last year. Things weren't really that good, though.

The increase stemmed from a one-time payment from Bristol-Myers Squibb (BMY 1.30%) related to its acquisition of Amylin. Excluding this payment, Lilly's earnings actually decreased by 30% year-on-year.

Revenue dropped 11% from the same period in 2011. The main culprit is that the company lost patent exclusivity for Zyprexa in the U.S. and most international markets except for Japan. Sales for the anti-psychotic drug fell 68% compared to last year.

Zyprexa accounted for $4.62 billion in 2011 sales,19% of the company's total revenue. Replacing losses stemming from the expiration of patent protection for the drug won't be easy.

Climbing back
Lilly hopes to make up for Zyprexa's slide through other drugs currently on the market and in its pipeline.

Sales for a few existing drugs declined in the third quarter. Insulin drugs Humalog and Humulin sales fell 3% and 5%, respectively, primarily because large pharmacy benefits manager CVS Caremark (CVS 1.49%) removed the drugs from its formulary. 

Osteoporosis drug Evista saw revenue fall by 9% to $247 million. Sales for ADHD drug Strattera also dropped 5% compared to 2011.

There is some good news on with its currently marketed drugs, though. Three of Lilly's drugs achieved double-digit sales growth in the third quarter.

Effient led the way with a 31% increase year-on-year. However, that figure reflects a relatively low monetary difference of $26.2 million.

Lilly's osteoporosis drug Forteo had somewhat similar results. While sales increased by 20% compared to 2011, the total gain amounted to $48.4 million.

Cymbalta made a bigger impact. Sales for the drug increased 16% in the third quarter versus last year to $1.2 billion. This resulted in a revenue gain topping $167 million.

The last three months proved less favorable for some of the drugs in Lilly's pipeline. The company halted phase 3 studies for schizophrenia drug pomaglumetad methionil after findings that the drug was unlikely to prove efficacy. Other late-stage studies involving solanezumab, prasugrel, and Alimta had disappointing results.

On the other hand, positive results were found from phase 3 trials for dulaglutide, which is intended for treating patients with type 2 diabetes. Another late-stage study for use of ramucirumab in the treatment of metastatic gastric cancer also met primary and secondary endpoints. 

Seasons
Lilly, like several other big pharmaceutical companies, faces a season of change. If the loss of Zyprexa is the last patent expiration for a while, the company could probably recover to a large degree with its current crop of drugs and a pipeline that includes more than 60 drugs in clinical trials.

Unfortunately, more patent expirations are on the way. Cymbalta and Humalog go off-patent in 2013. Evista follows in 2014. Combined 2011 sales for these three drugs totaled $7.6 billion.

Things could have been worse. Lilly won a legal challenge from Teva Pharmaceuticals (TEVA 0.63%) over the patent status for lung cancer drug Alimta. Teva wanted to produce a generic version of the drug. With Lilly's legal victory, the patent for Alimta doesn't expire until 2017.

After achieving total returns over 70% during the past three years, Lilly appears to be headed into a winter season of little or no net growth. How long will this winter last? The answer rides heavily on what happens with those 60 or so drugs in Lilly's pipeline and the $6.9 billion in cash and equivalents.