Lilly Reports Second-Quarter 2014 Results
- Second-quarter 2014 revenue declined 17 percent driven by the impact of U.S. patent expirations for Cymbalta and Evista, partially offset by volume growth in several other products.
- Expense management initiatives resulted in 11 percent
OPEX reduction, partially offsetting revenue declines. - Second-quarter 2014 earnings per share were
$0.68 on both a reported and non-GAAP basis. - New oncology research collaboration with
Immunocore in third quarter causes 2014 reported EPS guidance range to be revised to$2.67 to$2.75 ; non-GAAP EPS guidance range confirmed at$2.72 to$2.80 .
$ in millions, except per share data |
Second Quarter |
% | ||||||
2014 |
2013 |
Change | ||||||
Total Revenue - Reported |
$ |
4,935.6 |
$ |
5,929.7 |
(17)% | |||
Net Income - Reported |
733.5 |
1,206.2 |
(39)% | |||||
EPS - Reported
|
0.68 |
1.11 |
(39)% | |||||
Net Income - non-GAAP |
733.5 |
1,254.9 |
(42)% | |||||
EPS - non-GAAP |
0.68 |
1.16 |
(41)% | |||||
Certain financial information for 2014 and 2013 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 second-quarter results reflect a substantial decline in revenue and earnings resulting from recent patent expirations. At the same time, new product approvals and impending launches give us great confidence that Lilly is poised for growth in the years ahead," said
Key Events Over the Last Three Months
- The company launched CyramzaTM in the U.S. as a single-agent treatment for patients with advanced or metastatic gastric cancer or gastroesophageal junction (GEJ) adenocarcinoma with disease progression on or after prior fluoropyrimidine- or platinum-containing chemotherapy.
- The company and its partner, Boehringer Ingelheim, announced that the
European Commission granted marketing authorization for Jardiance® (empagliflozin) tablets for the treatment of type 2 diabetes mellitus to improve glycemic control in adults. The companies anticipate launch of the product in European countries to begin in the third quarter of 2014. - The company and its partner, Boehringer Ingelheim, announced the Class 1 resubmission (two month review period) of a New Drug Application for empagliflozin for the treatment of adults with type 2 diabetes to the
U.S. Food and Drug Administration (FDA). - The
Committee for Medicinal Products for Human Use (CHMP) issued a positive opinion recommending approval for the investigational compound LY2963016, a new insulin glargine product from the company and its partner, Boehringer Ingelheim, for the treatment of type 1 and type 2 diabetes. - The company announced positive top-line results of three completed Phase III clinical trials in patients with type 2 diabetes for basal insulin peglispro (BIL), which is being studied as a once-daily treatment for both type 1 and type 2 diabetes.
- The company announced that the Phase III REACH trial of Cyramza in patients with hepatocellular carcinoma, also known as liver cancer, did not meet its primary endpoint; overall survival favored the Cyramza arm but was not statistically significant. Encouraging single-agent Cyramza activity was observed, with meaningful improvements in key secondary endpoints of progression-free survival, overall response rate and time to progression.
- The company submitted a Supplemental Biologics License Application to the
FDA based upon the Cyramza RAINBOW results for use of Cyramza in combination with paclitaxel in second-line gastric cancer. In theEuropean Union , the RAINBOW data was incorporated into the already-filed Cyramza regulatory submission that was initially based upon the results of REGARD, the monotherapy second-line gastric cancer trial. - The company completed the acquisition of
Lohmann Animal Health effectiveApril 30, 2014 . In addition, the company reached an agreement, subject to certain closing conditions, to sell Lohmann's feed additives business to a Lohmann management-led group. This feed additives business is considered to be non-strategic to Lilly's Elanco animal health unit. The English High Court determined that the vitamin dosage regimen patents for Alimta® (pemetrexed) in theU.K. ,France ,Italy andSpain would not be infringed by a generic competitor that has stated an intent to market certain alternative salt forms of pemetrexed in those countries upon expiry of the Alimta compound patents in 2015. Lilly has appealed the ruling to theCourt of Appeal .- A labor court in
Sao Paulo, Brazil , ruled against the company's local subsidiary,Eli Lilly do Brasil, in a case alleging some employees were exposed to hazardous materials in a manufacturing facility formerly operated by the company. However, the alleged contaminants - benzene and heavy metals - were never used in the facility. The judge estimated the financial impact of the court's order to be approximately$450 million plus interest. The company strongly disagrees with the court's ruling, believes the decision is entirely without merit and has appealed the decision. - In July, the company announced a co-discovery and co-development collaboration with
Immunocore Limited to research and potentially develop novel T cell-based cancer therapies. As a result of this transaction, the company expects to incur an in-process research and development charge of$45.0 million (pre-tax), or approximately$0.03 per share (after-tax) in the third quarter of 2014.
Second-Quarter Reported Results
In the second quarter of 2014, worldwide total revenue was
Gross margin decreased 21 percent to
Total operating expense in the second quarter of 2014, defined as the sum of research and development, marketing, selling and administrative expenses, was
In the second quarter of 2013, the company recognized asset impairment, restructuring and other special charges of
Operating income in the second quarter of 2014 was
Other income (expense) was income of
The effective tax rate was 22.0 percent in the second quarter of 2014, compared with 20.4 percent in the second quarter of 2013. The effective tax rate for the second quarter of 2014 includes the negative impact of the expiration of the R&D tax credit in the U.S. at the end of 2013.
In the second quarter of 2014, net income and earnings per share decreased 39 percent to
Second-Quarter 2014 non-GAAP Measures
There were no non-GAAP adjustments in the second quarter of 2014; however, comparisons are affected by non-GAAP adjustments in the second quarter of 2013. Second-quarter 2014 operating income decreased
Non-GAAP measures exclude items totaling
Second Quarter |
||||||||
2014 |
2013 |
% Change | ||||||
Earnings per share (reported) |
$ |
0.68 |
$ |
1.11 |
(39)% | |||
Asset impairment, restructuring and other special charges |
- |
.04 |
||||||
Earnings per share (non-GAAP) |
$ |
0.68 |
$ |
1.16 |
(41)% |
Numbers do not add due to rounding
Year-to-Date Results
For the first six months of 2014, worldwide total revenue was
Non-GAAP measures exclude items totaling
Year-to-date |
||||||||
2014 |
2013 |
% Change | ||||||
Earnings per share (reported) |
$ |
1.36 |
$ |
2.53 |
(46)% | |||
Asset impairment, restructuring and other special charges |
.02 |
.06 |
||||||
Income related to the termination of the exenatide collaboration with Amylin |
- |
(.29) |
||||||
Earnings per share (non-GAAP) |
$ |
1.38 |
$ |
2.30 |
(40)% |
Revenue Highlights | |||||||||||
(Dollars in millions) |
Second Quarter |
% Change Over/(Under) |
Year-to-Date |
% Change Over/(Under) | |||||||
2014 |
2013 |
2013 |
2014 |
2013 |
2013 | ||||||
Alimta |
|
|
6% |
|
|
4% | |||||
Humalog® |
700.1 |
628.6 |
11% |
1,350.1 |
1,261.3 |
7% | |||||
Cialis® |
567.8 |
529.4 |
7% |
1,100.2 |
1,044.4 |
5% | |||||
Cymbalta |
401.3 |
1,497.2 |
(73)% |
879.5 |
2,825.4 |
(69)% | |||||
Humulin® |
352.4 |
327.5 |
8% |
668.6 |
639.4 |
5% | |||||
Forteo® |
308.6 |
296.9 |
4% |
608.9 |
578.4 |
5% | |||||
Zyprexa® |
243.8 |
283.2 |
(14)% |
526.9 |
568.0 |
(7)% | |||||
Strattera® |
197.4 |
168.3 |
17% |
351.8 |
335.0 |
5% | |||||
Effient® |
133.6 |
137.4 |
(3)% |
252.9 |
253.2 |
(0)% | |||||
Evista |
108.3 |
278.7 |
(61)% |
258.3 |
519.2 |
(50)% | |||||
|
601.2 |
543.5 |
11% |
1,128.6 |
1,042.4 |
8% | |||||
Total Revenue |
|
|
(17)% |
|
|
(17)% |
Alimta
For the second quarter of 2014, Alimta generated sales of
Humalog
For the second quarter of 2014, worldwide Humalog sales increased 11 percent, to
Cialis
Cialis sales for the second quarter of 2014 increased 7 percent to
Cymbalta
For the second quarter of 2014, Cymbalta generated
Humulin
Worldwide Humulin sales increased 8 percent in the second quarter of 2014, to
Forteo
Second-quarter 2014 sales of Forteo were
Zyprexa
In the second quarter of 2014, Zyprexa sales totaled
Strattera
During the second quarter of 2014, Strattera generated
Effient
Effient sales were
Evista
Evista sales for the second quarter of 2014 decreased 61 percent to
In the second quarter of 2014, worldwide animal health sales totaled
2014 Financial Guidance
The company has revised certain elements of its 2014 financial guidance. Full-year 2014 earnings per share are now expected to be in the range of
2014 Expectations |
2013 Results |
% Change | |||
Earnings per share (reported) |
|
|
(38)% to (36)% | ||
Asset impairment, restructuring and other special charges |
.02 |
.08 |
|||
Income related to termination of the exenatide collaboration with Amylin |
- |
(.29) |
|||
Acquired in-process research and development charge associated with |
.03 |
.03 |
|||
Earnings per share (non-GAAP) |
|
|
(34)% to (33)% |
The company still anticipates 2014 revenue of between
The company still anticipates that gross margin as a percent of revenue will be approximately 73 percent in 2014.
Total operating expenses in 2014 are still expected to decrease substantially compared to 2013. Marketing, selling and administrative expenses are still expected in the range of
Other income (expense) is still expected to be in a range between
The 2014 tax rate is still expected to be approximately 19 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 still expects 2014 net income to be at least
The company's 2014 financial guidance assumes that the acquisition of
Webcast of Conference Call
As previously announced, investors and the general public can access a live webcast of the second-quarter 2014 financial results conference call through a link on Lilly's website at www.lilly.com. The conference call will be held today from
Lilly is a global healthcare leader that unites caring with discovery to make life better for people around the world. We were founded more than a century ago by a man committed to creating high-quality medicines that meet real needs, and today we remain true to that mission in all our work. Across the globe, Lilly employees work to discover and bring life-changing medicines to those who need them, improve the understanding and management of disease, and give back to communities through philanthropy and voluntarism. To learn more about Lilly, please visit us at www.lilly.com and http://newsroom.lilly.com/social-channels. 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 the timing of anticipated regulatory approvals and launches of new products; market uptake of recently launched products; competitive developments affecting current products; the expiration of intellectual property protection for certain of the company's products; the company's ability to protect and enforce patents and other intellectual property; the impact of governmental actions regarding pricing, importation, and reimbursement for pharmaceuticals, including U.S. health care reform; regulatory compliance problems or government investigations; regulatory actions regarding currently marketed products; unexpected safety or efficacy concerns associated with the company's products; issues with product supply stemming from manufacturing difficulties or disruptions; regulatory changes or other developments; changes in patent law or regulations related to data-package exclusivity;
litigation involving current or future products; the extent to which third party indemnification obligations relating to product liability litigation and similar matters will be performed; unauthorized theft, destruction or disclosure of trade secrets or other confidential data stored in the company's information systems and networks; changes in tax law; changes in inflation, interest rates, and foreign currency exchange rates; asset impairments and restructuring charges; changes in accounting standards promulgated by the
Alimta® (pemetrexed, Lilly)
Cialis® (tadalafil, Lilly)
Cymbalta® (duloxetine hydrochloride, Lilly)
CyramzaTM (ramucirumab, 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)
Jardiance® (empagliflozin, Boehringer Ingelheim)
Strattera® (atomoxetine hydrochloride, Lilly)
Trajenta® (linagliptin, Boehringer Ingelheim)
Zyprexa® (olanzapine, Lilly)
| ||
|
| |
Worldwide Employees |
39,235* |
37,925 |
*Employment totals as of |
|
Operating Results (Unaudited) - REPORTED |
(Dollars in millions, except per share data) |
Three Months Ended |
Six Months Ended | |||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
2014 |
2013 |
% Chg. |
2014 |
2013 |
% Chg. | |||||||||||||||||||||||||||
Total revenue |
$ |
4,935.6 |
$ |
5,929.7 |
(17)% |
$ |
9,618.7 |
$ |
11,531.7 |
(17)% | ||||||||||||||||||||||
Cost of sales |
1,189.7 |
1,165.2 |
2% |
2,412.4 |
2,323.5 |
4% | ||||||||||||||||||||||||||
Research and development |
1,195.4 |
1,330.4 |
(10)% |
2,304.7 |
2,678.5 |
(14)% | ||||||||||||||||||||||||||
Marketing, selling and administrative |
1,663.9 |
1,867.6 |
(11)% |
3,148.8 |
3,519.6 |
(11)% | ||||||||||||||||||||||||||
Asset impairment, restructuring and other special charges |
— |
63.5 |
NM |
31.4 |
85.2 |
(63)% | ||||||||||||||||||||||||||
Operating income |
886.6 |
1,503.0 |
(41)% |
1,721.4 |
2,924.9 |
(41)% | ||||||||||||||||||||||||||
Net interest income (expense)
|
(1.9) |
(10.6) |
(5.3) |
(27.3) |
||||||||||||||||||||||||||||
Other income - Special |
— |
— |
— |
495.4 |
||||||||||||||||||||||||||||
Net other income (expense)
|
55.7 |
22.5 |
115.1 |
73.0 |
||||||||||||||||||||||||||||
Other income (expense) |
53.8 |
11.9 |
NM |
109.8 |
541.1 |
(80)% | ||||||||||||||||||||||||||
Income before income taxes |
940.4 |
1,514.9 |
(38)% |
1,831.2 |
3,466.0 |
(47)% | ||||||||||||||||||||||||||
Income taxes |
206.9 |
308.7 |
(33)% |
369.8 |
711.8 |
(48)% | ||||||||||||||||||||||||||
Net income |
$ |
733.5 |
$ |
1,206.2 |
(39)% |
$ |
1,461.4 |
$ |
2,754.2 |
(47)% | ||||||||||||||||||||||
Earnings per share - diluted |
$ |
0.68 |
$ |
1.11 |
(39)% |
$ |
1.36 |
$ |
2.53 |
(46)% | ||||||||||||||||||||||
Dividends paid per share |
$ |
0.49 |
$ |
0.49 |
0% |
$ |
0.98 |
$ |
0.98 |
0% | ||||||||||||||||||||||
Weighted-average shares outstanding (thousands) - diluted |
1,076,418 |
1,084,037 |
1,076,387 |
1,087,907 |
NM - not meaningful
|
|||||||||||||||||||
Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information (Unaudited) |
|||||||||||||||||||
(Dollars in millions, except per share data) |
|||||||||||||||||||
Three Months Ended |
Three Months Ended | ||||||||||||||||||
GAAP Reported |
Adjustments |
Non-GAAP Adjusted(a) |
GAAP Reported |
Adjustments |
Non-GAAP Adjusted(a) | ||||||||||||||
Total revenue |
$ |
4,935.6 |
$ |
— |
$ |
4,935.6 |
$ |
5,929.7 |
$ |
— |
$ |
5,929.7 |
|||||||
Cost of sales |
1,189.7 |
— |
1,189.7 |
1,165.2 |
— |
1,165.2 |
|||||||||||||
Operating expenses(b) |
2,859.3 |
— |
2,859.3 |
3,198.0 |
— |
3,198.0 |
|||||||||||||
Asset impairment, restructuring and other special charges(c) |
— |
— |
— |
63.5 |
(63.5) |
— |
|||||||||||||
Other income (expense) |
53.8 |
— |
53.8 |
11.9 |
— |
11.9 |
|||||||||||||
Income taxes |
206.9 |
— |
206.9 |
308.7 |
14.8 |
323.5 |
|||||||||||||
Net income |
$ |
733.5 |
— |
$ |
733.5 |
$ |
1,206.2 |
$ |
48.7 |
$ |
1,254.9 |
||||||||
Earnings per share - diluted |
$ |
0.68 |
— |
$ |
0.68 |
$ |
1.11 |
$ |
0.04 |
$ |
1.16 |
||||||||
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 asset impairment, restructuring and other special charges. During the three months ended
|
||||||||||||||||||||
Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information (Unaudited) |
||||||||||||||||||||
(Dollars in millions, except per share data) |
||||||||||||||||||||
Six Months Ended |
Six Months Ended | |||||||||||||||||||
GAAP Reported |
Adjustments |
Non-GAAP Adjusted(a) |
GAAP Reported |
Adjustments |
Non-GAAP Adjusted(a) | |||||||||||||||
Total revenue |
$ |
9,618.7 |
$ |
— |
$ |
9,618.7 |
$ |
11,531.7 |
$ |
— |
$ |
11,531.7 |
||||||||
Cost of sales |
2,412.4 |
— |
2,412.4 |
2,323.5 |
— |
2,323.5 |
||||||||||||||
Operating expenses(b) |
5,453.5 |
— |
5,453.5 |
6,198.1 |
— |
6,198.1 |
||||||||||||||
Asset impairment, restructuring and other special charges(c) |
31.4 |
(31.4) |
— |
85.2 |
(85.2) |
— |
||||||||||||||
Other income (expense) (d) |
109.8 |
— |
109.8 |
541.1 |
(495.4) |
45.7 |
||||||||||||||
Income taxes |
369.8 |
9.4 |
379.2 |
711.8 |
(158.6) |
553.2 |
||||||||||||||
Net income |
$ |
1,461.4 |
22.0 |
$ |
1,483.4 |
$ |
2,754.2 |
$ |
(251.6) |
$ |
2,502.6 |
|||||||||
Earnings per share - diluted |
$ |
1.36 |
.02 |
$ |
1.38 |
$ |
2.53 |
$ |
(.23) |
$ |
2.30 |
|||||||||
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 asset impairment, restructuring and other special charges. During the six months ended
(d) Certain GAAP reported measures have been adjusted to eliminate a portion of other income (expense). During the six months ended
Refer to: |
(317) 276-5795 - |
(317) 655-6874 - |
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