LILLY (ELI) & COMPANY - 4th Quarter Earnings

01/30/2014


Date: January 30, 2014

For Release: Immediately



Refer to: (317) 276-5795 - Mark Taylor (Media)



(317) 655-6874 - Philip Johnson (Investors)



           Lilly Reports Fourth-Quarter and Full-Year 2013 Results



- Fourth-quarter 2013 revenue declined 2 percent driven by Cymbalta U.S.

patent expiration, partially offset by growth in other products.



- Fourth-quarter 2013 earnings per share were $0.67 (reported), or $0.74

(non-GAAP).



- Full-year 2013 revenue increased 2 percent to $23.1 billion.



- Full-year 2013 earnings per share totaled $4.32 (reported), or $4.15

(non-GAAP).



- Approximately $3.8 billion in cash was returned to shareholders in 2013

through dividends and share repurchases.



- 2014 EPS guidance confirmed to be in the range of $2.77 to $2.85.



Eli Lilly and Company  today announced financial results for the

fourth quarter and full year of 2013.



$ in millions, except per share data  Fourth Quarter          %         Full Year   %

                                       2013     2012   Growth   2013      2012    Growth

Total Revenue - Reported             $5,808.8$5,957.3  (2)%  $23,113.1$22,603.4   2%

Net Income - Reported                 727.5    827.2   (12)%   4,684.8   4,088.6   15%

EPS - Reported                         0.67     0.74    (9)%    4.32      3.66     18%



Net Income - non-GAAP                 796.9    945.2   (16)%   4,502.6   3,784.0   19%

EPS - non-GAAP                         0.74     0.85   (13)%    4.15      3.39     22%





Certain financial information for 2013 and 2012 are presented on both a

reported and a non-GAAP basis. Some numbers in this press release may not add

due to rounding. Reported results were prepared in accordance with generally

accepted accounting principles (GAAP) and include all revenue and expenses

recognized during the period. Non-GAAP measures exclude the items described in

the reconciliation tables later in the release. The non-GAAP measures are

presented in order to provide additional insights into the underlying trends

in the company's business. The company's 2014 financial guidance is also being

provided on both a reported and a non-GAAP basis.



"Lilly's fourth-quarter 2013 results reflect the initial impact from the U.S.

patent expiration for Cymbalta. The loss of the Cymbalta patent, along with

the expiration of the U.S. patent for Evista in March of this year will result

in a substantial decline in revenue and earnings in 2014," said John C.

Lechleiter, Ph.D., Lilly's chairman, president and chief executive officer.

"Yet, far from seeing 2014 as a trough year for Lilly, we see it as a moment

of tremendous opportunity. We anticipate launching several new medicines this

year and returning our company to growth in 2015 and beyond."



Key Events Over the Last Three Months



- U.S. patent exclusivity for Cymbalta® expired on December 11, 2013,

resulting in the entry of several generic competitors.



- As part of its previously-announced share repurchase program, the company

repurchased approximately $500 million in company stock in the fourth quarter

of 2013. For the full-year 2013, the company returned approximately $3.8

billion in cash to shareholders through its dividend and share repurchase

program.



- The company and its alliance partner, Boehringer Ingelheim, announced that

the U.S. Food and Drug Administration accepted the filing of the New Drug

Application for LY2963016, an investigational basal (long-acting) insulin.

This new insulin glargine product was also submitted in Japan.



- The company acquired all development and commercial rights from Arteaus

Therapeutics for a calcitonin gene-related peptide (CGRP) antibody as a

potential treatment for the prevention of frequent, recurrent migraine

headaches, following a successful Phase II proof-of-concept study.



- The company entered into a collaboration with Pfizer Inc. to co-develop and

jointly commercialize tanezumab, a monoclonal antibody being investigated to

treat moderate-to-severe chronic osteoarthritis pain, chronic low back pain,

and cancer-related bone pain.



- The company announced that results from three Phase III studies of

edivoxetine did not achieve the primary study objective of superior efficacy

in depression after eight weeks of treatment. While the safety and

tolerability of edivoxetine were consistent with previous studies, the

efficacy results do not support a regulatory submission for adjunctive

treatment in patients with Major Depressive Disorder (MDD).



Fourth-Quarter Reported Results



In the fourth quarter of 2013, worldwide total revenue was $5.809 billion, a

decrease of 2 percent compared with the fourth quarter of 2012. Revenue

decline was comprised of 5 percent due to lower volume and 2 percent due to

the unfavorable impact of foreign exchange rates, partially offset by an

increase of 4 percent due to higher prices. The decrease in volume was driven

by the loss of U.S. patent exclusivity for Cymbalta in December 2013,

partially offset by volume gains for most other products. Total revenue in the

U.S. decreased 6 percent to $3.044 billion driven by lower volume for

Cymbalta, partially offset by higher prices. Total revenue outside the U.S.

increased 1 percent to $2.765 billion, as higher volume was partially offset

by the unfavorable impact of the continued weakening of the Japanese yen, and

to a lesser extent, lower prices.



Gross margin decreased 6 percent to $4.422 billion in the fourth quarter of

2013, driven by the unfavorable impact of foreign exchange rates on

international inventories sold and lower sales of Cymbalta due to the loss of

U.S. patent exclusivity, partially offset by higher prices. Gross margin as a

percent of total revenue was 76.1 percent, a decrease of 2.9 percentage points

compared with the fourth quarter of 2012.



Total operating expenses in the fourth quarter of 2013, defined as the sum of

research and development, marketing, selling and administrative expenses was

$3.429 billion, which was essentially flat compared with the fourth quarter of

2012. Marketing, selling and administrative expenses decreased 1 percent to

$1.954 billion, due to ongoing cost containment efforts, including the

previously-announced reduction in U.S. sales and marketing activities in

anticipation of the losses of patent exclusivity for Cymbalta and Evista®, and

the impact of foreign exchange rates, partially offset by increased marketing

spend for other products. Research and development expenses increased 1

percent to $1.475 billion, or 25.4 percent of total revenue, driven by higher

research and clinical development expenses, partially offset by lower

milestone payments.



In the fourth quarter of 2013, the company recognized a charge of $57.1

million related to acquired in-process research and development associated

with the acquisition of a CGRP antibody from Arteaus Therapeutics.



In the fourth quarter of 2013, the company recognized asset impairment,

restructuring and other special charges of $35.4 million, primarily related to

charges associated with restructuring to reduce the company's cost structure

and global workforce. In the fourth quarter of 2012, the company recognized a

$204.0 million charge for asset impairment, restructuring and other special

charges, comprised primarily of $122.6 million related to an intangible asset

impairment for liprotamase and $64.7 million related to restructuring to

reduce the company's cost structure and global workforce.



Operating income in the fourth quarter of 2013 was $900.8 million, a decrease

of 15 percent, compared to the fourth quarter of 2012, due to lower gross

margin, partially offset by lower asset impairment, restructuring and other

special charges compared with the fourth quarter of 2012.



Other income (expense) was income of $9.1 million in the fourth quarter of

2013, compared with expense of $52.0 million in the fourth quarter of 2012.

This difference was due primarily to $40.0 million of milestones received from

Boehringer Ingelheim for the regulatory submissions of the companies' new

insulin glargine product in the United States and Japan.



The effective tax rate was 20.0 percent in the fourth quarter of 2013,

reflecting the reinstatement of the R&D tax credit in the U.S. effective

January 1, 2013. In the fourth quarter of 2012, the effective tax rate was

18.3 percent, reflecting a tax benefit related to the intangible asset

impairment for liprotamase.



In the fourth quarter of 2013, net income decreased 12 percent and earnings

per share decreased 9 percent to $727.5 million and $0.67, respectively,

compared with fourth-quarter 2012 net income of $827.2 million and earnings

per share of $0.74. The decreases in net income and earnings per share were

driven by lower operating income and a higher effective tax rate in the fourth

quarter of 2013, partially offset by increased other income. Earnings per

share benefited from a lower number of shares outstanding in the fourth

quarter of 2013 compared to the fourth quarter of 2012.



Fourth-Quarter 2013 non-GAAP Measures



On a non-GAAP basis, fourth-quarter 2013 operating income decreased $275.1

million, or 22 percent, to $993.3 million, driven by lower gross margin. The

effective tax rate decreased to 20.5 percent, compared with 22.3 percent in

the fourth quarter of 2012, primarily driven by the reinstatement of the R&D

tax credit. Net income decreased 16 percent and earnings per share decreased

13 percent to $796.9 million and $0.74, respectively, compared with $945.2

million and $0.85 during the fourth quarter of 2012.



The decreases in net income and earnings per share were driven by lower

operating income, partially offset by higher other income and a lower

effective tax rate. Earnings per share benefited from a lower number of shares

outstanding in the fourth quarter of 2013 compared to the fourth quarter of

2012.



Non-GAAP measures exclude items totaling $0.07 and $0.11 per share of expense

in the fourth quarters of 2013 and 2012, respectively. For further detail, see

the reconciliation below as well as the Reconciliation of GAAP Reported to

Selected Non-GAAP Adjusted Information table later in this press release.



                                         Fourth Quarter

                                         2013       2012  % Change

Earnings per share (reported)           $0.67$0.74    (9)%

Asset impairment, restructuring and

other                                     .03        .11

special charges

Acquired in-process research and          .03          -

development charge associated with CGRP

antibody

Earnings per share (non-GAAP)           $0.74$0.85    (13)%

Numbers do not add due to rounding.



Full-Year 2013 Reported Results



For the full-year 2013, worldwide total revenue increased 2 percent to $23.113

billion. This increase was comprised of a 5 percent increase due to higher

prices, partially offset by a 2 percent decrease due to the unfavorable impact

of foreign exchange rates, and a 1 percent decrease due to lower volume. Total

revenue in the U.S. increased 5 percent to $12.890 billion due to higher

prices, partially offset by volume declines for Cymbalta and Zyprexa® due to

the loss of patent exclusivity. Total revenue outside the U.S. decreased 1

percent to $10.223 billion, due primarily to the unfavorable impact of the

continued weakening of the Japanese yen, and, to a lesser extent, lower

prices, partially offset by increased volume.



Gross margin increased 2 percent to $18.205 billion in 2013. Gross margin as a

percent of total revenue remained flat with the prior year at 78.8 percent,

driven by higher prices, offset by the impact of foreign exchange rates on

international inventories sold which significantly decreased cost of sales in

2012.



Total operating expenses decreased 1 percent in 2013. Marketing, selling and

administrative expenses decreased 5 percent to $7.126 billion, driven

primarily by lower selling and marketing expenses resulting from the company's

cost containment efforts, including the previously-announced reduction in U.S.

sales and marketing activities in anticipation of the losses of patent

exclusivity for Cymbalta and Evista, as well as the impact of foreign exchange

rates. Research and development expenses increased 5 percent to $5.531

billion, or 23.9 percent of total revenue, due to higher research and clinical

development expenses, including approximately $100 million of milestone

payments made to Boehringer Ingelheim following the regulatory submissions for

empagliflozin.



In 2013, the company recognized an acquired in-process research and

development charge of $57.1 million related to the CGRP antibody.



Additionally, in 2013 the company recognized asset impairment, restructuring,

and other special charges of $120.6 million. These charges were comprised of

$58.5 million associated with the anticipated closure of a production facility

outside the United States, and $62.1 million for restructuring to reduce the

company's cost structure and global workforce. In 2012, the company recognized

charges of $281.1 million for asset impairment, restructuring and other

special charges. These charges were comprised of $122.6 million related to an

intangible asset impairment for liprotamase, $74.5 million related to

restructuring to reduce the company's cost structure and global workforce,

$64.0 million related to the asset impairment of a delivery device platform,

and $20.0 million related to the withdrawal of Xigris.



Operating income in 2013 increased 13 percent compared to 2012 to $5.370

billion, due to higher gross margin and lower marketing, selling and

administrative expenses, partially offset by higher research and development

expenses.



Other income (expense) in 2013 was income of $518.9 million, compared to

income of $674.0 million in 2012. The difference was driven primarily by lower

income related to the termination of the exenatide collaboration with Amylin

Pharmaceuticals ($495.4 million in 2013 compared to $787.8 million in 2012),

partially offset by milestones received from Boehringer Ingelheim for

regulatory submissions in the United States, Europe and Japan.



The effective tax rate was 20.5 percent in 2013, compared with 24.4 percent in

2012. The 2012 effective tax rate reflects the expiration of the R&D tax

credit and the tax impact of the payment received from Amylin, partially

offset by the tax benefit related to the intangible asset impairment for

liprotamase. The decrease in the 2013 effective tax rate reflects the

reinstatement of the R&D tax credit in the U.S. effective January 1, 2013 as

well as the one-time impact of the R&D tax credit for 2012 that was recorded

in the first quarter of 2013.



For the full-year 2013, net income increased 15 percent and earnings per share

increased 18 percent to $4.685 billion and $4.32, respectively, compared to

full-year 2012 net income of $4.089 billion and earnings per share of $3.66.

The increases in net income and earnings per share were due to higher

operating income and, to a lesser extent, a lower effective tax rate,

partially offset by lower other income. Earnings per share benefited from a

lower number of shares outstanding in 2013 compared to 2012.



Full-Year 2013 non-GAAP Measures



Operating income increased 11 percent to $5.548 billion due to higher gross

margin and lower marketing, selling and administrative expenses, partially

offset by higher research and development expenses. The effective tax rate for

2013 was 19.2 percent, compared to 22.8 percent in 2012. The decrease in the

2013 effective tax rate reflects the reinstatement of the R&D tax credit in

the U.S. in 2013 as well as the one-time impact of the R&D tax credit for 2012

that was recorded in the first quarter of 2013. Net income increased 19

percent and earnings per share increased 22 percent, to $4.503 billion and

$4.15, respectively. Earnings per share benefited from a lower number of

shares outstanding in 2013 compared to 2012.



Non-GAAP measures exclude items totaling $0.17 and $0.27 per share of income

for 2013 and 2012, respectively. For further detail, see the reconciliation

below as well as the Reconciliation of GAAP Reported to Selected Non-GAAP

Adjusted Information table later in this press release.



                                          Full-Year

                                          2013   2012  % Change

Earnings per share (reported)            $4.32$3.66     18%

Asset impairment, restructuring and

other special charges                      .08    .16

Income related to termination of the

exenatide                                (.29)  (.43)

collaboration with Amylin

Acquired in-process research and           .03      -

development charge associated with CGRP

antibody

Earnings per share (non-GAAP)            $4.15$3.39     22%

Numbers do not add due to rounding.



Revenue Highlights

                                      % Change                         % Change

(Dollars in        Fourth Quarter   Over/(Under)      Full-Year      Over/(Under)

millions)

                    2013     2012       2012       2013      2012        2012

Cymbalta            $883.2$1,420.4    (38)%      $5,084.4$4,994.1      2%

Alimta®              726.2    684.3      6%        2,703.0   2,594.3      4%

Humalog®             733.9    616.0     19%        2,611.2   2,395.5      9%

Cialis®              588.3    513.4     15%        2,159.4   1,926.8     12%

Humulin®             369.5    343.0      8%        1,315.8   1,239.1      6%

Forteo®              359.8    314.6     14%        1,244.9   1,151.0      8%

Zyprexa              348.2    384.8    (10)%       1,194.8   1,701.4    (30)%

Evista               275.9    241.0     14%        1,050.4   1,010.1      4%

Strattera®           201.1    163.9     23%          709.2     621.4     14%

Effient®             130.6    120.6      8%          508.7     457.2     11%

Animal Health        578.4    554.1      4%        2,151.5   2,036.5      6%

Total Revenue     $5,808.8$5,957.3     (2)%     $23,113.1$22,603.4      2%



Cymbalta



For the fourth quarter of 2013, Cymbalta generated $883.2 million in revenue,

a decrease of 38 percent compared with the fourth quarter of 2012. U.S. sales

of Cymbalta decreased 49 percent, to $577.3 million, due to lower demand

related to the loss of U.S. patent exclusivity for Cymbalta on December 11,

2013. Sales of Cymbalta outside the U.S. were $305.9 million, an increase of 9

percent, driven primarily by higher volume, partially offset by lower prices

and the unfavorable impact of foreign exchange rates.



For the full year of 2013, worldwide Cymbalta sales increased 2 percent to

$5.084 billion. U.S. Cymbalta sales for 2013 were $3.961 billion, a 1 percent

increase driven by higher prices, largely offset by lower demand due to the

loss of U.S. patent exclusivity in December 2013. Cymbalta sales outside the

U.S. were $1.124 billion, a 4 percent increase driven by higher volume,

partially offset by lower prices and the unfavorable impact of foreign

exchange rates.



Alimta



For the fourth quarter of 2013, Alimta generated sales of $726.2 million, an

increase of 6 percent compared with the fourth quarter of 2012. U.S. sales of

Alimta increased 12 percent, to $332.0 million, driven by higher prices and

increased demand. Sales outside the U.S. increased 2 percent, to $394.2

million, driven by increased volume, partially offset by the unfavorable

impact of foreign exchange rates.



For the full year of 2013, worldwide Alimta sales increased 4 percent to

$2.703 billion. U.S. Alimta sales for 2013 were $1.209 billion, an 8 percent

increase driven by higher prices and increased demand. Alimta sales outside

the U.S. were $1.494 billion, a 1 percent increase driven by higher volume,

partially offset by the unfavorable impact of foreign exchange rates and lower

prices.



Humalog



For the fourth quarter of 2013, worldwide Humalog sales increased 19 percent,

to $733.9 million. Sales in the U.S. increased 31 percent to $433.5 million,

driven by higher prices and increased volume. Sales outside the U.S. increased

6 percent to $300.4 million, driven by increased volume, partially offset by

the unfavorable impact of foreign exchange rates.



For the full year of 2013, worldwide Humalog sales increased 9 percent to

$2.611 billion. U.S. Humalog sales for 2013 were $1.521 billion, an 11 percent

increase driven by higher prices, wholesaler buying patterns and increased

demand. Humalog sales outside the U.S. were $1.090 billion, a 6 percent

increase driven by higher volume, partially offset by the unfavorable impact

of foreign exchange rates.



Cialis



Cialis sales for the fourth quarter of 2013 increased 15 percent to $588.3

million. U.S. sales of Cialis were $279.8 million in the fourth quarter, a 33

percent increase compared with the fourth quarter of 2012, driven by higher

prices and, to a lesser extent, wholesaler buying patterns. Sales of Cialis

outside the U.S. increased 2 percent, to $308.5 million, driven by higher

prices, partially offset by the unfavorable impact of foreign exchange rates.



For the full year of 2013, worldwide Cialis sales increased 12 percent to

$2.159 billion. U.S. Cialis sales for 2013 were $942.8 million, a 21 percent

increase driven by higher prices. Cialis sales outside the U.S. were $1.217

billion, a 6 percent increase driven by higher prices and higher volume,

partially offset by the unfavorable impact of foreign exchange rates.



Humulin



Worldwide Humulin sales increased 8 percent in the fourth quarter of 2013, to

$369.5 million. U.S. sales increased 19 percent to $194.2 million, driven by

higher prices and wholesaler buying patterns, partially offset by decreased

demand. Sales outside the U.S. decreased 3 percent, to $175.3 million, driven

by the unfavorable impact of foreign exchange rates and lower prices,

partially offset by increased volume.



For the full year of 2013, worldwide Humulin sales increased 6 percent to

$1.316 billion. U.S. Humulin sales for 2013 were $677.2 million, a 14 percent

increase, driven by higher prices, partially offset by decreased demand.

Humulin sales outside the U.S. were $638.6 million, a 1 percent decrease,

driven by the unfavorable impact of foreign exchange rates, partially offset

by increased volume.



Forteo



Fourth-quarter 2013 sales of Forteo were $359.8 million, a 14 percent increase

compared with the fourth quarter of 2012. U.S. sales of Forteo increased 29

percent to $156.2 million, due to higher prices, wholesaler buying patterns

and, to a lesser extent, increased demand. Sales outside the U.S. increased 5

percent, to $203.6 million, due to increased volume, primarily in Japan,

partially offset by the unfavorable impact of foreign exchange rates.



For the full year of 2013, worldwide Forteo sales increased 8 percent to

$1.245 billion. U.S. Forteo sales for 2013 were $511.4 million, a 5 percent

increase driven primarily by higher prices. Forteo sales outside the U.S. were

$733.5 million, an 11 percent increase driven by higher volume, primarily in

Japan, partially offset by the unfavorable impact of foreign exchange rates.



Zyprexa



In the fourth quarter of 2013, Zyprexa sales totaled $348.2 million, a

decrease of 10 percent compared with the fourth quarter of 2012 due to the

continued erosion following patent expiration in the U.S. and most major

international markets outside of Japan. U.S. sales of Zyprexa decreased 35

percent to $39.2 million. Zyprexa sales outside the U.S. decreased 5 percent,

to $309.0 million. Zyprexa sales in Japan were approximately $145 million and

were negatively impacted by the continued weakening of the Japanese yen.



For the full year of 2013, worldwide Zyprexa sales decreased 30 percent to

$1.195 billion, due to the continued erosion following patent expiration in

the U.S. and most major international markets outside of Japan. U.S. Zyprexa

sales for 2013 decreased 66 percent to $123.6 million. Zyprexa sales outside

the U.S. were $1.071 billion, a 20 percent decrease driven by the unfavorable

impact of foreign exchange rates, lower volume in markets outside of Japan,

and lower prices. Zyprexa sales in Japan for the full year were approximately

$510 million and were negatively impacted by the continued weakening of the

Japanese yen.



Evista



Evista sales for the fourth quarter of 2013 increased 14 percent to $275.9

million. U.S. sales of Evista increased 18 percent to $209.3 million, driven

by higher prices. Sales outside the U.S. increased 4 percent to $66.6 million,

driven by higher volume in Japan, partially offset by lower prices and the

unfavorable impact of foreign exchange rates. The company will lose U.S.

patent exclusivity for Evista in March 2014.



For the full year of 2013, worldwide Evista sales increased 4 percent to

$1.050 billion. U.S. Evista sales for 2013 were $772.0 million, a 10 percent

increase driven by higher prices, partially offset by decreased demand. Evista

sales outside the U.S. were $278.4 million, a 10 percent decrease driven by

the unfavorable impact of foreign exchange rates and lower prices, partially

offset by increased volume in Japan.



Strattera



During the fourth quarter of 2013, Strattera generated $201.1 million of

sales, an increase of 23 percent compared with the fourth quarter of 2012.

U.S. sales increased 33 percent to $127.0 million, driven primarily by higher

prices and, to a lesser extent, wholesaler buying patterns. Sales outside the

U.S. increased 9 percent to $74.1 million, driven primarily by increased

volume in Japan, partially offset by lower prices and the unfavorable impact

of foreign exchange rates.



For the full year of 2013, worldwide Strattera sales increased 14 percent to

$709.2 million. U.S. Strattera sales for 2013 were $446.3 million, a 16

percent increase driven primarily by higher prices. Strattera sales outside

the U.S. were $262.9 million, an 11 percent increase driven primarily by

higher volume in Japan, partially offset by lower prices and the unfavorable

impact of foreign exchange rates.



Effient



Effient sales were $130.6 million in the fourth quarter of 2013, an increase

of 8 percent compared with the fourth quarter of 2012. U.S. Effient sales

increased 10 percent to $96.8 million, driven by higher prices and wholesaler

buying patterns, partially offset by decreased demand. Sales outside the U.S.

increased 3 percent to $33.8 million.



For the full year of 2013, worldwide Effient sales increased 11 percent to

$508.7 million. U.S. Effient sales for 2013 were $376.9 million, an 11 percent

increase driven primarily by higher prices. Effient sales outside the U.S.

were $131.8 million, a 12 percent increase driven primarily by higher volume.



Animal Health



In the fourth quarter of 2013, worldwide animal health sales totaled $578.4

million, an increase of 4 percent compared with the fourth quarter of 2012

driven by higher prices and volume growth for food animal products, partially

offset by volume decline for companion animal products. U.S. animal health

sales decreased 2 percent, to $305.5 million, driven by lower volume,

partially offset by increased prices. Animal health sales outside the U.S.

were $272.9 million, a 13 percent increase, driven by increased volume and, to

a lesser extent, higher prices, partially offset by the unfavorable impact of

foreign exchange rates.



For the full year of 2013, worldwide animal health sales increased 6 percent

to $2.151 billion, driven primarily by the growth of companion animal

products. Animal health sales in the U.S. increased 6 percent to $1.227

billion, driven primarily by higher volume for Trifexis® and, to a lesser

extent, higher prices. Animal health sales outside the U.S. increased 6

percent to $924.9 million, driven by higher volume and, to a lesser extent,

higher prices, partially offset by the unfavorable impact of foreign exchange

rates.



2014 Financial Guidance



The company has confirmed its 2014 financial guidance. The company still

expects full-year 2014 earnings per share to be in the range of $2.77 to $2.85

on both a reported and non-GAAP basis.



                                            2014         2013

                                        Expectations    Results      % Change

Earnings per share (reported)           $2.77 to         $4.32    (36)% to (34)%

                                        $2.85

Asset impairment, restructuring and

other                                         -           .08

special charges

Income related to termination of the

exenatide                                     -          (.29)

collaboration with Amylin

Acquired in-process research and

development                                   -           .03

charge associated with CGRP antibody

Earnings per share (non-GAAP)           $2.77 to $2.85$4.15    (33)% to (31)%









The company anticipates 2014 revenue of between $19.2 billion and $19.8

billion. Patent expirations are expected to drive a rapid and severe decline

in U.S. Cymbalta and U.S. Evista sales. These revenue declines are expected to

be partially offset by growth from a portfolio of other products including

Humalog, Trajenta®, Cialis, Forteo and Alimta, as well as the animal health

business. In addition, strong revenue growth is expected in China, while a

weaker Japanese yen will dampen revenue growth in Japan.



The company anticipates that gross margin as a percent of revenue will be

approximately 74 percent in 2014.



Total operating expenses in 2014 are expected to decrease substantially

compared to 2013. Marketing, selling and administrative expenses are expected

in the range of $6.2 billion to $6.5 billion. Research and development

expenses are expected to be in the range of $4.4 billion to $4.7 billion.



Other income (expense) is expected to be in a range between $100 million and

$200 million of income in 2014, benefited by gains of $150 million to $200

million on the sale of equity investments acquired as part of past business

development transactions.



The 2014 tax rate is expected to be approximately 20 percent, assuming a

full-year 2014 benefit of the R&D tax credit and other tax provisions up for

extension. If these items are not extended, the 2014 tax rate would be

approximately 2 percentage points higher.



The company expects to meet its 2014 net income and operating cash flow goals

of $3.0 billion and $4.0 billion, respectively. Operating cash flows are

expected to be sufficient to pay the company's dividend of approximately $2.1

billion, allow for capital expenditures of approximately $1.3 billion, and

fund potential business development activity and share repurchases.



The company's 2014 financial guidance does not include a potential charge

related to the collaboration with Pfizer to develop and commercialize

tanezumab. As previously communicated, if the partial clinical hold for the

molecule is removed and Lilly and Pfizer move forward with development, Lilly

will pay a $200 million upfront fee to Pfizer. This charge would cause Lilly's

GAAP tax rate to be roughly 1 percentage point lower than its non-GAAP tax

rate and would reduce GAAP EPS by approximately $0.12.



Webcast of Conference Call



As previously announced, investors and the general public can access a live

webcast of the fourth-quarter and full-year 2013 financial results conference

call through a link on Lilly's website at www.lilly.com. The conference call

will be held today from 9:00 a.m. to 10:00 a.m. Eastern Daylight Time (EST)

and will be available for replay via the website.



Lilly, a leading innovation-driven corporation, is developing a growing

portfolio of 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.



F-LLY



This press release contains management's current intentions and expectations

for the future, all of which are forward-looking statements within the meaning

of Section 27A of the Securities Act of 1933 and Section 21E of the Securities

Exchange Act of 1934. The words "estimate", "project", "intend", "expect",

"believe", "target" and similar expressions are intended to identify

forward-looking statements. Actual results may differ materially due to

various factors. There are significant risks and uncertainties in

pharmaceutical research and development. There can be no guarantees with

respect to pipeline products that the products will receive the necessary

clinical and manufacturing regulatory approvals or that they will prove to be

commercially successful. Pharmaceutical products can develop unexpected safety

or efficacy concerns. The company's results may also be affected by such

factors as competitive developments affecting current products; market uptake

of recently launched products; the timing of anticipated regulatory approvals

and launches of new products; regulatory actions regarding currently marketed

products; issues with product supply; regulatory changes or other

developments; regulatory compliance problems or government investigations;

patent disputes; changes in patent law or regulations related to data-package

exclusivity; other litigation involving current or future products; the impact

of governmental actions regarding pricing, importation, and reimbursement for

pharmaceuticals, including U.S. health care reform and deficit-reduction

measures; changes in tax laws, including the American Taxpayer Relief Act of

2013; asset impairment and restructuring charges; acquisitions and business

development transactions; and the impact of exchange rates and global

macroeconomic conditions. For additional information about the factors that

could cause actual results to differ materially from forward-looking

statements, please see the company's latest Form 10-Q and Form 10-K filed with

the U.S. Securities and Exchange Commission. You should not place undue

reliance on forward-looking statements, which speak only as of the date of

this release. Except as is required by law, the company expressly disclaims

any obligation to publicly release any revisions to forward-looking statements

to reflect events after the date of this release.



# # #



Alimta® (pemetrexed, Lilly)



Cialis® (tadalafil, Lilly)



Cymbalta® (duloxetine hydrochloride, Lilly)



Effient® (prasugrel, Lilly)



Evista® (raloxifene hydrochloride, Lilly)



Forteo® (teriparatide of recombinant DNA origin injection, Lilly)



Humalog® (insulin lispro injection of recombinant DNA origin, Lilly)



Humulin® (human insulin of recombinant DNA origin, Lilly)



Strattera® (atomoxetine hydrochloride, Lilly)



Trajenta® (linagliptin, Boehringer Ingelheim)



Trifexis® (spinosad + milbemycin oxime, Lilly)



Zyprexa® (olanzapine, Lilly)



Eli Lilly and Company Employment Information



December 31, 2013December 31, 2012



Worldwide Employees 37,925 38,350



Eli Lilly and Company

Operating Results (Unaudited) - REPORTED

(Dollars in millions, except per share data)





                                   Three Months Ended                 Twelve Months Ended

                                      December 31,                       December 31,

                                  2013       2012    % Chg.        2013            2012    % Chg.



Total revenue               $  5,808.8$   5,957.3   (2)%       $  23,113.1$  22,603.4    2%



Cost of sales                  1,386.5      1,248.3   11%            4,908.1      4,796.5    2%

Research and development       1,475.4      1,463.1    1%            5,531.3      5,278.1    5%

Marketing, selling and         1,953.6      1,977.5   (1)%           7,125.6      7,513.5   (5)%

administrative

Acquired in-process

research and                    57.1           -       NM             57.1           -       NM

development

Asset impairment,

restructuring and               35.4         204.0   (83)%            120.6        281.1   (57)%

other special charges



Operating income                900.8       1,064.4  (15)%           5,370.4      4,734.2   13%



Net interest income             (5.5)       (16.5)                   (40.4)       (72.8)

(expense)                         -            -                      495.4        787.8

Other income - special

Net other income (expense)      14.6        (35.5)                    63.9        (41.0)

Other income (expense)           9.1        (52.0)     NM             518.9        674.0   (23)%



Income before income taxes      909.9       1,012.4  (10)%           5,889.3      5,408.2    9%

Income taxes                    182.4        185.2    (2)%           1,204.5      1,319.6   (9)%



Net income                  $   727.5$    827.2   (12)%       $   4,684.8$   4,088.6   15%



Earnings per share -        $   0.67$    0.74     (9)%       $    4.32$    3.66     18%

diluted



Dividends paid per share    $   0.49$    0.49      0%        $    1.96$    1.96      0%



Weighted-average shares

outstanding (thousands) -     1,078,976    1,113,880                1,084,766    1,117,294

diluted



NM - not meaningful



Eli Lilly and Company

Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information

(Unaudited)

(Dollars in millions, except per share data)



                                      Three Months Ended                     Three Months Ended

                                       December 31, 2013                     December 31, 2012



                               GAAP                    Non-GAAP      GAAP                     Non-GAAP

                             Reported  Adjustments   Adjusted(a)   Reported  Adjustments    Adjusted(a)



Total revenue       $        5,808.8    $      -      $    5,808.8 5,957.3    $       -      $    5,957.3



Cost of sales                1,386.5           -           1,386.5 1,248.3            -           1,248.3



Operating                    3,429.0           -           3,429.0 3,440.6            -           3,440.6

expenses(b)



Acquired in-process

research                       57.1          (57.1)           -       -               -              -

and development(c)



Asset impairment,

restructuring and

other

special charges(d)             35.4          (35.4)           -     204.0          (204.0)           -



Other income                   9.1             -             9.1    (52.0)            -           (52.0)

(expense)



Income taxes                  182.4           23.2          205.5   185.2           86.1           271.2



Net income                    727.5           69.3          796.9   827.2           117.9          945.2



Earnings per share -           0.67           0.07          0.74     0.74           0.11           0.85

diluted

Numbers do not add due to rounding.



(a) The company uses non-GAAP financial measures that differ from financial

statements reported in conformity with U.S. generally accepted accounting

principles (GAAP). The items that are excluded when non-GAAP measures or

expectations provided are typically highly variable, difficult to predict, and

of a size that could have a substantial impact on the company's reported

operations for a period. The company believes that these non-GAAP measures

provide useful information to investors. Among other things, they may help

investors evaluate the company's ongoing operations. They can assist in making

meaningful period-over-period comparisons and in identifying operating trends

that would otherwise be masked or distorted by the items subject to the

adjustments. Management uses these non-GAAP measures internally to evaluate

the performance of the business, including to allocate resources and to

evaluate results relative to incentive compensation targets. Investors should

consider these non-GAAP measures in addition to, not as a substitute for or

superior to, measures of financial performance prepared in accordance with

GAAP.



(b) Operating expenses include research and development, marketing, selling

and administrative expenses.



(c) Certain GAAP reported measures have been adjusted to eliminate acquired

in-process research and development charges. During the three months ended

December 31, 2013, amounts totaling $57.1 million (pretax), or $0.03 per share

(after-tax), of expense were eliminated related to the acquired in-process

research and development for the CGRP antibody. There were no similar charges

during the fourth quarter of 2012.



(d) Certain GAAP reported measures have been adjusted to eliminate asset

impairment, restructuring and other special charges. During the three months

ended December 31, 2013, amounts totaling $35.4 million (pretax), or $0.03 per

share (after-tax), of expense were eliminated primarily related to costs

associated with restructuring to reduce the company's cost structure and

global workforce. During the three months ended December 31, 2012, amounts

totaling $204.0 million (pretax), or $0.11 per share (after-tax), of expense

were eliminated primarily related to an intangible asset impairment for

liprotamase and restructuring to reduce the company's cost structure and

global workforce.



Eli Lilly and Company

Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information

(Unaudited)

(Dollars in millions, except per share data)



                                       Twelve Months Ended                     Twelve Months Ended

                                        December 31, 2013                       December 31, 2012



                               GAAP                     Non-GAAP       GAAP                     Non-GAAP

                             Reported  Adjustments     Adjusted(a)   Reported  Adjustments     Adjusted(a)



Total revenue       $        23,113.1           -      $    23,113.1 22,603.4   $       -      $    22,603.4



Cost of sales                4,908.1            -           4,908.1  4,796.5            -           4,796.5



Operating                    12,656.9           -           12,656.9 12,791.6           -           12,791.6

expenses(b)



Acquired in-process

research and

development(c)                 57.1          (57.1)            -        -               -              -



Asset impairment,

restructuring and

other

special charges(d)            120.6          (120.6)           -      281.1          (281.1)           -



Other income                  518.9          (495.4)          23.5    674.0          (787.8)        (113.8)

(expense)(e)



Income taxes                 1,204.5         (135.4)        1,069.0  1,319.6         (202.2)        1,117.5



Net income                   4,684.8         (182.3)        4,502.6  4,088.6         (304.5)        3,784.0



Earnings per share -           4.32           0.17            4.15     3.66           0.27            3.39

diluted



Numbers do not add due to rounding.



(a) The company uses non-GAAP financial measures that differ from financial

statements reported in conformity with U.S. generally accepted accounting

principles (GAAP). The items that are excluded when non-GAAP measures or

expectations provided are typically highly variable, difficult to predict, and

of a size that could have a substantial impact on the company's reported

operations for a period. The company believes that these non-GAAP measures

provide useful information to investors. Among other things, they may help

investors evaluate the company's ongoing operations. They can assist in making

meaningful period-over-period comparisons and in identifying operating trends

that would otherwise be masked or distorted by the items subject to the

adjustments. Management uses these non-GAAP measures internally to evaluate

the performance of the business, including to allocate resources and to

evaluate results relative to incentive compensation targets. Investors should

consider these non-GAAP measures in addition to, not as a substitute for or

superior to, measures of financial performance prepared in accordance with

GAAP.



(b) Operating expenses include research and development, marketing, selling

and administrative expenses



(c) Certain GAAP reported measures have been adjusted to eliminate acquired

in-process research and development charges. During the twelve months ended

December 31, 2013, amounts totaling $57.1 million (pretax), or $0.03 per share

(after-tax), of expense were eliminated related to the acquired in-process

research and development for the CGRP antibody. There were no similar charges

in 2012.



(d) Certain GAAP reported measures have been adjusted to eliminate asset

impairment, restructuring and other special charges. During the twelve months

ended December 31, 2013, amounts totaling $120.6 million (pretax), or $0.08

per share (after-tax), of expense were eliminated primarily related to the

anticipated closure of a production facility outside the U.S., and

restructuring to reduce the company's cost structure and global workforce.

During the twelve months ended December 31, 2012, amounts totaling $281.1

million (pretax), or $0.16 per share (after-tax), of expense were eliminated

primarily related to an intangible asset impairment for liprotamase,

restructuring to reduce the company's cost structure and global workforce, the

withdrawal of Xigris, and an asset impairment associated with a delivery

device platform.



(e) Certain GAAP reported measures have been adjusted to eliminate a portion

of other income (expense). During the twelve months ended December 31, 2013,

amounts totaling $495.4 million (pretax), or $0.29 per share (after-tax), of

income were eliminated related to the termination of the exenatide

collaboration with Amylin. During the twelve months ended December 31, 2012,

amounts totaling $787.8 million (pretax), or $0.43 per share (after-tax), of

income were eliminated related to the to the termination of the exenatide

collaboration with Amylin.

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