Lilly Reports Q1 EPS of $.77, or 13% Growth
INDIANAPOLIS, April 20, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Eli Lilly and Company (NYSE: LLY) announced financial results for the first quarter of 2006.
PDF of Full News Release
To view a PDF (205 KB) of the full news release, please visit http://www.lilly.com/q106Lilly_earnings.pdf
First-Quarter Highlights
* Sales increased 6 percent, to $3.715 billion. The sales increase was driven primarily by the collective growth of Cymbalta® and the company's other newer products.
* Newer products -- Alimta®, Byetta®, Cialis®, Cymbalta, Forteo®, Strattera®, Symbyax®, Xigris® and Yentreve® -- collectively grew 59 percent, to $802.4 million, and accounted for 22 percent of total sales, up from 14 percent of total sales in the first quarter of 2005.
* Operating income increased 21 percent, to $1.025 billion.
* Net income and earnings per share grew 13 percent, to $834.8 million and $.77, respectively. The earnings growth was driven primarily by improved gross margins and sales growing at a faster rate than operating expenses, offset partially by decreased other income.
Pharmaceutical Product Sales Highlights
---------------------------------------
(Dollars in millions) % Change
First Quarter Over/(Under)
2006 2005 2005
--------- --------- ---------
Zyprexa(R) $1,007.4 $1,038.2 (3%)
Diabetes Care Products 763.4 724.6 5%
Gemzar(R) 338.8 304.6 11%
Evista(R) 241.6 248.9 (3%)
Cymbalta 233.3 106.8 118%
Strattera 152.2 119.8 27%
Alimta 130.1 93.9 39%
Forteo 127.1 66.8 90%
Significant Events Over the Last Three Months
* Lilly submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) for review of ruboxistaurin mesylate (proposed brand name Arxxant) for the treatment of diabetic retinopathy. The FDA subsequently informed Lilly that its Arxxant application is fileable and will be given a priority review.
* Lilly released preliminary data from the Raloxifene Use for the Heart (RUTH) trial. In addition, initial results from the Study of Tamoxifen and Raloxifene (STAR) were released by The National Surgical Adjuvant Breast and Bowel Project (NSABP). While the RUTH study did not meet its primary endpoint on cardiovascular benefit, it did meet its primary endpoint for the reduction of invasive breast cancer risk. In addition, the STAR study showed that Evista is as effective as tamoxifen in reducing the breast cancer risk of postmenopausal women who are at increased risk of the disease. Women who were assigned to take Evista had 36 percent fewer uterine cancers and 29 percent fewer blood clots than the women who were assigned to take tamoxifen. Using data from STAR and RUTH, along with previously released data from MORE and CORE trials, Lilly anticipates submitting a supplemental NDA for Evista's expanded use in breast cancer risk reduction at the end of 2006.
* At the Anxiety Disorders Association of America conference, Lilly announced the results of a Phase III study that showed Cymbalta significantly reduced core anxiety symptoms and associated painful physical symptoms in patients with generalized anxiety disorder.
* Lilly initiated a Phase III clinical trial of enzastaurin, a targeted oral agent for the treatment of relapsed glioblastoma multiforme, an aggressive and malignant form of brain cancer.
* Lilly, Amylin, and Alkermes initiated a clinical study of a long-acting release (LAR) formulation of Byetta in people with type 2 diabetes. This study could form the basis of an NDA and will assess whether once-weekly exenatide LAR is at least as effective in improving glucose control as twice-daily Byetta.
* Lilly launched in the U.S. Humalog® Mix50/50, a new pre-mixed insulin that is designed to provide blood sugar control between meals but also includes a higher percentage of rapid-acting insulin for people with diabetes who need more insulin control at mealtime.
"Our strong bottom-line results in the first quarter reflect the execution on our commitment to grow sales at a faster rate than our expenses," said Sidney Taurel, Lilly chairman and chief executive officer. "We also have been productive in advancing our pipeline, with one launch, one submission, three important data releases and the start of two potential registration trials. Our next submission to the FDA should occur by summer and is for the expanded use of Cymbalta in treating generalized anxiety disorder."
First-Quarter Results
Worldwide sales for the quarter increased 6 percent, to $3.715 billion, driven primarily by the collective growth of Cymbalta and the company's other newer products. Sales growth also benefited from $130 million of reductions in wholesaler inventory levels during the first quarter of 2005 as a result of Lilly restructuring arrangements with its U.S. wholesalers. Worldwide sales volume increased 6 percent, selling prices increased sales 3 percent and exchange rates decreased sales by 3 percent.
Gross margins as a percent of sales improved by 2.9 percentage points, to 78.3 percent. This increase was primarily due to increased production volume at the company's facilities ahead of scheduled shut downs, the favorable impact of foreign exchange rates, and favorable product mix, partially offset by higher manufacturing expenses.
Overall, marketing and administrative expenses increased 5 percent, to $1.143 billion. This increase was primarily due to increased marketing expenses in support of newer products and the diabetes care portfolio, offset partially by the favorable impact of foreign exchange rates. Research and development expenses were $740.8 million, or 20 percent of sales. Compared with the first quarter of 2005, research and development expenses increased 5 percent, primarily due to an increase in discovery research expenses and clinical trial expenses.
The Lilly ICOS joint-venture income increased $32.4 million, to $19.8 million, due to increased Cialis sales and decreased selling and marketing expenses. Net interest expense increased $26.7 million, to $5.3 million, as a result of increased interest rates and less capitalized interest due to the completion of certain manufacturing facilities under construction in late 2005. Net other income decreased $72.1 million, to $17.7 million, largely as a result of income from the restructuring of royalty arrangements during the first quarter of 2005 and the impact of less significant business development transactions.
Income tax expense increased 7 percent, to $221.9 million. The effective tax rate was 21 percent, down from 22 percent in the first quarter of 2005.
Net income and earnings per share increased 13 percent, to $834.8 million and $.77, respectively, driven primarily by improved gross margins and sales growing at a faster rate than operating expenses, offset partially by decreased other income.
Zyprexa
In the first quarter of 2006, Zyprexa sales totaled $1.007 billion, a 3 percent decrease. U.S. sales of Zyprexa decreased 5 percent, to $493.9 million, due to lower demand compared with first quarter of 2005, partially offset by higher prices. Zyprexa sales in international markets decreased 1 percent, to $513.5 million, driven by the unfavorable impact of foreign exchange rates. Excluding the impact of exchange rates, sales of Zyprexa outside the U.S. increased 5 percent in the first quarter.
Diabetes Care Products
Diabetes care revenue, composed primarily of Humalog, Humulin®, Actos® and recently launched Byetta, increased 5 percent, to $763.4 million, compared with the first quarter of 2005. Diabetes care revenue increased 11 percent in the U.S., to $475.5 million while diabetes care revenue outside the U.S. decreased 3 percent, to $287.9 million.
Worldwide Humalog sales increased 6 percent, to $304.5 million, driven primarily by reductions in U.S. wholesaler inventory levels during the first quarter of 2005 and increased demand in international markets. Worldwide Humulin sales decreased 15 percent, to $218.5 million, driven by decline in demand due to continued competitive pressures. Actos generated $189.0 million of revenue for Lilly, an increase of 12 percent. As previously disclosed, since Lilly's share of revenue from the agreement with Takeda will vary quarter-to-quarter based on contract terms, Actos revenue will not necessarily track with product sales. As a result, it is difficult to make quarterly comparisons for Actos revenue. Sales of Byetta, a first-in-class treatment for type 2 diabetes marketed by Lilly and Amylin Pharmaceuticals and launched in the U.S. in June 2005, were $68 million in the first quarter. Lilly reports as revenue its 50 percent share of Byetta's gross margins and its sales of Byetta pen delivery devices to Amylin; for the first quarter, this revenue totaled $35.8 million.
Gemzar
Gemzar had sales totaling $338.8 million for the quarter, an increase of 11 percent from the first quarter of 2005. Sales in the U.S. increased 18 percent, to $149.7 million, due primarily to an increase in demand and higher prices. Gemzar sales outside the U.S. increased 6 percent, to $189.1 million, due to strong demand, partially offset by the unfavorable impact of foreign exchange rates.
Evista
Evista sales were $241.6 million, a 3 percent decrease compared with the first quarter of 2005. U.S. sales of Evista decreased 6 percent, to $149.1 million, driven by a decline in demand due to continued competitive pressures, offset partially by higher prices. Evista sales outside the United States increased 2 percent, to $92.5 million, due to strong demand, partially offset by the unfavorable impact of foreign exchange rates.
Cymbalta
Cymbalta, launched in the third quarter of 2004 for the treatment of major depressive disorder and diabetic peripheral neuropathic pain, generated $233.3 million in sales, up 118 percent, compared with the first quarter of 2005. U.S. sales of Cymbalta were $205.8 million, an increase of 101 percent. Sales outside the U.S. were $27.4 million, reflecting recent international launches.
Strattera
Strattera, the only nonstimulant medicine approved for the treatment of attention-deficit hyperactivity disorder in children, adolescents and adults, generated sales of $152.2 million, a 27 percent increase compared with the first quarter of 2005. The sales increase was due to reductions in U.S. wholesaler inventory levels during the first quarter of 2005 and higher prices, offset partially by a decline in demand.
Alimta
Alimta, a treatment for malignant pleural mesothelioma and second-line treatment of non-small-cell lung cancer, generated sales of $130.1 million, up 39 percent compared with the first quarter of 2005. U.S. sales of Alimta increased 22 percent, to $77.9 million, while sales outside the U.S. increased 72 percent, to $52.2 million.
Forteo
Sales of Forteo, a treatment for severe osteoporosis, were $127.1 million, a 90 percent increase compared with the first quarter of 2005. U.S. sales of Forteo increased 106 percent, to $87.2 million, while sales outside the U.S. grew 62 percent, to $39.9 million.
Cialis
Total worldwide first-quarter sales of Cialis, a treatment for erectile dysfunction marketed by Lilly ICOS LLC, were $222.7 million, a 48 percent increase compared with first-quarter 2005 worldwide sales. Worldwide Cialis sales are composed of $55.4 million of sales in Lilly territories and $167.3 million of sales in the joint-venture territories. Within the joint-venture territories, the U.S. sales of Cialis were $82.5 million, a 93 percent increase compared with first-quarter 2005 U.S. sales. The U.S. sales increase was primarily due to reductions in U.S. wholesaler inventory levels during the first quarter of 2005. Cialis sales in Lilly territories are reported in Lilly's revenue, while Lilly's 50 percent share of the joint-venture territory sales, net of expenses, is reported in Lilly's other income.
Animal Health
Worldwide sales of animal health products in the first quarter were $198.3 million, an increase of 1 percent, compared with the first quarter of 2005.
2006 Financial Guidance
The company expects 2006 earnings per share of $.74 to $.76 for the second quarter and $3.10 to $3.20 for the full year. See reconciliation below for further detail.
Earnings per Share Reconciliation Q2 2006 Q2 2005
---------------------------------
Expectations Results % Growth
------------ ------------ ----------
Earnings (loss) per share-reported $.74 to $.76 ($.23)
Eliminate product liability charge - .90
------------ ------------
E.P.S. - adjusted $.74 to $.76 $.67 10% to 13%
============ ============
Earnings per Share Reconciliation 2006 2005
---------------------------------
Expectations Results % Growth
------------ ------------ ----------
E.P.S. (reported) $3.10 to $3.20 $1.81
Eliminate product liability charge - .90
Eliminate asset impairment charge - .14
Eliminate cumulative effect of an
accounting change due to adoption
of new accounting rule (FIN 47)
for conditional asset retirement
obligations - .02
------------ ------------
E.P.S. (adjusted) $3.10 to $3.20 $2.87 8% to 11%
============ ============
For full-year 2006, the company expects sales to grow 7 percent to 9 percent and gross margins as a percent of sales to improve modestly compared with 2005. In addition, the company expects operating expenses to grow in the mid-single digits in the aggregate, with marketing and administrative expenses accelerating while research and development expense growth moderates somewhat. However, Lilly will continue to be among the industry leaders in terms of research and development investment as a percent of sales. The company also expects other income to contribute approximately $175 million to $275 million; this ongoing net contribution is driven primarily by net interest income, Lilly ICOS joint venture after-tax profit and partnering and out-licensing of molecules. The company also anticipates the effective tax rate to be approximately 21 percent. In terms of cash flow, the company expects capital expenditures to be flat at about $1.4 billion in 2006.
Webcast of Conference Call
As previously announced, investors and the general public can access a live webcast of the first-quarter 2006 financial results conference call through a link on Lilly's website at www.lilly.com. The conference call will be held today from 10:00 a.m. to 11:00 a.m. Eastern Daylight Saving Time and will be available for replay via the website through May 20, 2006.
Lilly, a leading innovation-driven corporation, is developing a growing portfolio of first-in-class and 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. F-LLY
This press release contains forward-looking statements that are based on management's current expectations, but 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. The company's results may also be affected by such factors as competitive developments affecting current products; rate of sales growth of recently launched products; the timing of anticipated regulatory approvals and launches of new products; other regulatory developments and government investigations; patent disputes and other litigation involving current and future products; the impact of governmental actions regarding pricing, importation, and reimbursement for pharmaceuticals; changes in tax law; asset impairments and restructuring charges; and the impact of exchange rates. For additional information about the factors that affect the company's business, please see the company's latest Form 10-K filed March 1, 2006. The company undertakes no duty to update forward-looking statements.
Actos(R) (pioglitazone hydrochloride, Takeda), Takeda
Alimta(R) (pemetrexed, Lilly)
Arxxant(TM) (ruboxistaurin mesylate, Lilly)
Byetta(R) (exenatide injection, Amylin Pharmaceuticals)
Cialis(R) (tadalafil, ICOS), Lilly ICOS LLC
Cymbalta(R) (duloxetine hydrochloride, Lilly)
Evista(R) (raloxifene hydrochloride, Lilly)
Forteo(R) (teriparatide of recombinant DNA origin injection, Lilly)
Gemzar(R) (gemcitabine hydrochloride, Lilly)
Humalog(R) (insulin lispro injection of recombinant DNA origin, Lilly)
Humalog® Mix 50/50 (50% insulin lispro protamine suspension, 50% insulin lispro injection (rDNA origin, Lilly)
Humatrope(R) (somatropin of recombinant DNA origin, Lilly)
Humulin(R) (human insulin of recombinant DNA origin, Lilly)
Prozac(R) (fluoxetine hydrochloride, Dista)
Strattera(R) (atomoxetine hydrochloride, Lilly)
Symbyax(R) (olanzapine fluoxetine combination, or OFC, Lilly)
Xigris(R) (drotrecogin alfa (activated), Lilly)
Yentreve(R) (duloxetine hydrochloride, Lilly)
Zyprexa(R) (olanzapine, Lilly)
Eli Lilly and Company
Operating Results (Unaudited)
(Dollars in millions, except per share data)
Three Months Ended
March 31
2006 2005 % Chg.
------------------------------
Net sales $3,714.7 $3,497.4 6%
Cost of sales 806.5 859.0 (6%)
Research and development 740.8 702.2 5%
Marketing and administrative 1,142.9 1,090.4 5%
---------- ----------
Operating income 1,024.5 845.8 21%
Net interest (expense) income (5.3) 21.4
Joint venture income (loss) 19.8 (12.6)
Net other income 17.7 89.8
---------- ----------
Total other income 32.2 98.6
Income before income taxes 1,056.7 944.4 12%
Income taxes 221.9 207.8 7%
---------- ----------
Net income $834.8 $736.6 13%
========== ==========
Earnings per share - basic $0.77 $0.68 13%
========== ==========
Earnings per share - diluted $0.77 $0.68 13%
========== ==========
Dividends paid per share $0.40 $0.38 5%
Weighted-average shares outstanding
(thousands) - basic 1,086,035 1,086,841
Weighted-average shares outstanding
(thousands) - diluted 1,086,994 1,089,201
Eli Lilly and Company
Major Pharmaceutical Product Sales and Revenues (Unaudited)
(Dollars in millions)
Three Months Ended % Change
March 31 Over/(Under)
2006 2005 2005
-------- -------- --------
Zyprexa $1,007.4 $1,038.2 (3%)
Gemzar 338.8 304.6 11%
Humalog 304.5 286.2 6%
Evista 241.6 248.9 (3%)
Cymbalta 233.3 106.8 118%
Humulin 218.5 256.9 (15%)
Actos 189.0 168.7 12%
Strattera 152.2 119.8 27%
Alimta 130.1 93.9 39%
Forteo 127.1 66.8 90%
Eli Lilly and Company Employment Information
March 31, 2006 December 31, 2005
-------------- -----------------
Worldwide Employees 42,200 42,600
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SOURCE Eli Lilly and Company
Terra Fox of Eli Lilly and Company, +1-317-276-5795http://www.prnewswire.com
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