News Release

INDIANAPOLIS, Jul 19, 2001 (BW HealthWire) -- Eli Lilly and Company (NYSE:LLY) today announced financial results for the second quarter of 2001.

Second-Quarter Highlights

• Sales increased 16 percent, to $3.033 billion.
• Net income increased 24 percent, to $827.7 million.
• Earnings per share on a diluted basis increased 25 percent, to $.76 per share.

Significant Operating Events Over the Last Three Months

• At the end of June, Lilly ICOS LLC filed requests for marketing authorization of Cialis^TM for the treatment of erectile dysfunction (ED) with the U.S. Food and Drug Administration (FDA) and European Agency for the Evaluation of Medicinal Products (EMEA). In clinical trials, Cialis, a PDE5 inhibitor, has demonstrated an extended period of responsiveness and prompt onset, which allows couples to regain spontaneity in their sexual relationship.
• The FDA extended the action date for the completion of its review of the biologics license application for Xigris^TM for the treatment of severe sepsis from July 27 to Oct. 27, 2001. The FDA's Center for Biologics Evaluation and Research determined that the extension is needed to complete the review of the initial application and recent supplemental analyses submitted by Lilly. The FDA assured Lilly that the application remains under priority review, and it will complete the application review process as soon as possible. Lilly is confident that this extension of the BLA action date does not signify approvability concerns regarding the data in the application.
• As previously mentioned in Lilly's first-quarter 2001 Form 10-Q filing, Catalytica Pharmaceuticals, Inc., which is manufacturing the finished product for Lilly, is subject to a warning letter from the FDA for issues unrelated to the Xigris production process. In June, the FDA confirmed that the preapproval inspection for Xigris at Catalytica will not take place until the Catalytica reinspection related to the warning letter is successfully completed. The FDA will conduct its reinspection of Catalytica beginning the week of July 23, 2001. Based upon current information, Lilly continues to target the second half of 2001 for the U.S. launch of Xigris.
• Lilly and bioMerieux-Pierre Fabre signed an agreement to collaborate on eflucimibe, an ACAT inhibitor in Phase I human clinical trials, which is being developed for the treatment of atherosclerosis.
• Lilly launched a separate e-business venture, InnoCentive LLC, a wholly owned enterprise that will use the Internet to create and enhance open-source scientific research and development, the first of its kind in the pharmaceutical industry. InnoCentive will post on its website unique, scientific problems or challenges with cash incentives for an innovative solution.

"As promised, we have delivered strong sales and earnings growth in the second quarter and first half of 2001. Notably, in the second quarter, our newer products - Zyprexa, Gemzar, Humalog^®, Actos^® and Evista - increased 42 percent compared with last year and represent 44 percent of total sales," said Sidney Taurel, Lilly chairman, president and chief executive officer. "In addition, over the past 18 months, we have hit nearly all our development and regulatory milestones related to the 10 potential products in our late-stage pipeline. We remain confident in our ability to weather the patent loss of Prozac and aggressively grow our underlying business."

Second-Quarter Results

Worldwide sales for the quarter were $3.033 billion, an increase of 16 percent compared with the second quarter of 2000. Zyprexa, Gemzar, Evista and diabetes care revenue led the growth. This growth was partially offset by lower sales of anti-infectives. Worldwide sales volume growth of 17 percent and an increase in global selling prices of 2 percent were partially offset by an unfavorable exchange rate effect of 3 percent. Gross margins as a percent of sales improved by 1.6 percentage points, to 82.8 percent, due to a favorable mix of product sales. During the quarter, higher margin products, such as Zyprexa, Gemzar, Evista and diabetes care products, experienced strong growth, while lower margin products, such as anti-infectives, declined. Overall, marketing and administrative expenses increased 13 percent, to $899.9 million. The underlying marketing expenses increased at a faster rate in support of the company's growth products and upcoming product launches and were offset partially by a decline in administrative expenses. Investment in research and development increased 11 percent, to $563.7 million, as the company continued to invest in its internal pipeline and external research collaborations. Operating expense growth was reduced by lower incentive compensation expense.

Operating income rose to $1.048 billion, a 27 percent increase over the second quarter of 2000, primarily as a result of strong sales growth, improved gross margins and operating expense growing at a slower rate than sales. Net income and diluted earnings per share for the second quarter were $827.7 million and $.76, representing increases of 24 percent and 25 percent, respectively. Earnings-per-share growth benefited slightly from a lower number of outstanding shares.

Zyprexa

In the second quarter of 2001, Zyprexa sales totaled $736.6 million, a 34 percent, or $185.9 million, increase over the second quarter of 2000. U.S. sales of Zyprexa increased 32 percent, to $523.2 million, while sales outside the United States increased 38 percent, to $213.4 million. During the quarter, Zyprexa was launched in Japan, the second largest antipsychotic market in terms of days of therapy.

Prozac and Sarafem

Overall, Prozac and Sarafem combined sales for the quarter increased 10 percent, to $692.4 million. In the U.S., Prozac and Sarafem combined sales increased 12 percent, to $605.7 million. Prozac sales outside the United States decreased 1 percent, to $86.7 million, primarily due to continued generic competition. On July 18, 2001, the Court of Appeals for the Federal Circuit in Washington, D.C., informed Lilly that the full court will not rehear the case of Eli Lilly and Company v. Barr Laboratories, et al. Lilly will now file a petition for a writ of certiorari with the Supreme Court to review the action of the Federal Circuit.

Diabetes Care Products

Diabetes care revenue, composed primarily of Humulin^®, Humalog, Actos, and Iletin^®, increased 28 percent, to $561.9 million, compared with the second quarter of 2000. Worldwide Humulin sales of $264.7 million were flat compared with last year primarily due to the continued shift by patients to Humalog and Humalog mix products as well as increased competition. Worldwide Humalog sales for the second quarter were $145.6 million, an increase of 90 percent compared with a year ago. Actos generated $134.7 million of revenue for Lilly in the second quarter, which represents an increase of 79 percent. The increase was driven by strong underlying Actos sales as well as U.S. wholesaler stocking of Actos, which is sold by Takeda Pharmaceuticals North America, Inc. During the quarter, Actos surpassed the seven-million-prescription mark in the United States since it was introduced less than two years ago.

Gemzar

Gemzar had sales totaling $160.9 million for the quarter, an increase of 49 percent from the second quarter of 2000. Gemzar sales in the U.S. of $88.9 million increased 81 percent. This growth rate benefited in part from wholesaler buying patterns in the second quarter of 2001 and 2000. Gemzar sales outside the United States increased 22 percent, to $72.0 million. Gemzar is one of the most highly sought after combination agents in clinical research across a variety of tumor types. Data on Gemzar was featured in 221 scientific papers at the annual meeting of the American Society of Clinical Oncology during the quarter.

Evista

Evista had sales totaling $167.0 million, a 25 percent increase, compared with the second quarter of 2000. U.S. sales of Evista increased 19 percent, to $133.0 million, while sales outside the United States increased 56 percent, to $34.0 million.

Animal Health

Worldwide sales of animal health products in the second quarter were $156.2 million, an increase of 3 percent compared with the second quarter of 2000. Excluding the effect of exchange rates, sales grew by 8 percent for the quarter.

Year-to-Date Results

For the first six months of the year, worldwide sales increased 15 percent, to $5.839 billion, compared with reported sales for the same period in 2000. Adjusting for prior-year Y2K-related sales, worldwide sales increased 13 percent. Net income and diluted earnings per share for the first six months, as reported, were $1.635 billion and $1.50, representing increases of 8 percent and 9 percent, respectively, compared with reported results for the first six months in 2000. Adjusting for prior-year Y2K-related sales and a one-time gain realized from the sale of Kinetra in 2000, net income and earnings per share for the first six months increased 20 percent and 21 percent, respectively.

Financial Expectations

Excluding any unusual items, the company expects full-year 2001 earnings per share to be in the range of $2.76 to $2.84, resulting in single-digit earnings growth for 2001. The company expects earnings per share to be in the range of $.63 to $.67 for the third quarter and $.63 to $.67 for the fourth quarter of 2001. The company continues to anticipate single-digit sales and earnings-per-share growth for full-year 2002.

These forward-looking statements are based on management's current expectations but actual results may differ materially due to various factors. In particular, the company's expectations for the year 2001 and 2002 will be affected by the entry of generic fluoxetine in the U.S. The company's forecasts are based on the assumption that generic fluoxetine will be launched in early August 2001; however, the actual timing of that launch is uncertain. The impact on the company of the launch of generic fluoxetine may also depend on other factors, such as the number of different dosage forms introduced into the market and the pricing of the generic products. The company's 2001 and 2002 results may also be affected by competitive developments affecting its current growth products, by the timing of regulatory approvals and launches of new products such as Xigris and Forteo^TM, and by the impact of exchange rates. For additional information about the factors that affect the company's business, please see Exhibit 99 to the company's latest Form 10-Q filed May 2001. The company undertakes no duty to update forward-looking statements.

Webcast of Conference Call

As previously announced, investors can access a live Webcast of the second-quarter earnings conference call through a link that will be posted on Lilly's website at www.lilly.com. The conference call begins today at 10:30 a.m. Eastern Daylight Savings Time (9:30 a.m. local Indianapolis time) and will be available for replay through July 26, 2001.

Lilly, a leading innovation-driven corporation, is developing a growing portfolio of best-in-class pharmaceutical products by applying the latest research from its own worldwide laboratories and from collaborations with eminent scientific organizations. Headquartered in Indianapolis, Ind., Lilly provides answers - through medicines and information - for some of the world's most urgent medical needs. Additional information about Lilly is available at www.lilly.com.

Actos(R)(pioglitazone hydrochloride, Takeda)
Axid(R) (nizatidine, Lilly), Reliant Pharmaceuticals LLC
Cialis(TM) (IC351), Lilly-ICOS LLC
Evista(R)(raloxifene hydrochloride, Lilly)
Forteo(TM)(teriparatide injection of rDNA origin, Lilly)
Gemzar(R)(gemcitabine hydrochloride, Lilly)
Humalog(R)(insulin lispro injection of recombinant DNA origin, Lilly)
Humulin(R)(human insulin of recombinant DNA origin, Lilly)
Humatrope(R)(somatropin of recombinant DNA origin, Lilly)
Iletin(R)(insulin, Lilly)
Prozac(R)(fluoxetine hydrochloride, Dista)
ReoPro(R) (abciximab, Centocor), Lilly
Sarafem(TM)(fluoxetine hydrochloride, Lilly)
Xigris(TM)(drotrecogin alfa (activated), Lilly)
Zyprexa(R)(olanzapine, Lilly)