10-KPeriod: FY2007

ELI LILLY & Co Annual Report, Year Ended Dec 31, 2007

Filed February 29, 2008For Securities:LLY

Summary

Eli Lilly and Company's 2008 10-K filing for the fiscal year ended December 30, 2007, highlights a year of substantial growth, with worldwide sales increasing by 19% to $18.63 billion. This growth was largely fueled by the acquisition of ICOS and strong performance from key products like Cymbalta, Zyprexa, Alimta, Gemzar, and Humalog. The company demonstrated a continued commitment to research and development, investing 19% of its sales in R&D activities, signaling a focus on future innovation. Despite robust sales growth, the company faced increased operating expenses, partly due to the ICOS acquisition and increased marketing efforts. Net income and earnings per share saw a 11% increase, reaching $2.95 billion and $2.71 per share, respectively. However, the company also reported significant special charges and in-process R&D expenses related to acquisitions and strategic decisions. Investors should note the ongoing legal and regulatory matters, particularly those concerning Zyprexa, which have led to substantial settlement charges, and the potential impact of patent expirations in the coming years.

Financial Highlights

22 data points
Beta

Revenue

$18.63B

77.2% Gross Margin

Net Income

$2.95B

15.8% Net Margin

Cash & Equivalents

$3.22B

Free Cash Flow

$5.15B

Financial Statements
Beta
Revenue$18.63B
Cost of Revenue$4.25B
Gross Profit$14.38B
R&D Expenses$3.49B
SG&A Expenses$6.10B
Net Income$2.95B

Key Highlights

  • 1Worldwide sales grew by 19% to $18.63 billion in 2007, driven by strong performance of key products and the acquisition of ICOS.
  • 2Research and Development (R&D) investment remained a significant priority, with the company investing 19% of its sales, totaling $3.49 billion in 2007.
  • 3Net income increased by 11% to $2.95 billion, and diluted earnings per share rose to $2.71.
  • 4The acquisition of ICOS in January 2007 for approximately $2.3 billion significantly contributed to the growth and brought the full value of Cialis under Lilly's control.
  • 5The company faced substantial legal and regulatory challenges, including ongoing investigations and product liability litigation, particularly related to Zyprexa, resulting in significant settlement charges.
  • 6Major product sales included Zyprexa ($4.76 billion), Cymbalta ($2.10 billion), Gemzar ($1.59 billion), Humalog ($1.47 billion), and Cialis ($1.14 billion), with Cymbalta showing particularly strong growth.
  • 7The company increased its quarterly dividend by 10.6% and has a history of consistent dividend increases, marking its 40th consecutive year of increases.

Frequently Asked Questions

Eli Lilly's sales growth in 2007 was primarily driven by the acquisition of ICOS Corporation, which brought the Cialis product line fully into Lilly's portfolio, and strong volume increases from key products such as Cymbalta, Zyprexa, Alimta, Gemzar, and Humalog. The company also benefited from favorable foreign exchange rates.

The company is involved in several significant legal and regulatory matters. These include ongoing investigations into its U.S. sales and marketing practices, particularly concerning Zyprexa, Prozac, and Evista. Additionally, there is substantial product liability litigation related to Zyprexa, alleging side effects like diabetes and high blood-glucose levels, which has led to significant settlement charges. The company is also facing patent challenges in various countries for its key products, including Zyprexa.

Eli Lilly continued to make significant investments in Research and Development, spending $3.49 billion in 2007, which represented 19% of its sales. This reflects a consistent commitment to innovation, with R&D expenses increasing from $3.13 billion in 2006 and $3.03 billion in 2005. The company expects R&D expenses to grow in the high-single to low-double digits in 2008.

As of December 31, 2007, Eli Lilly had $4.83 billion in cash, cash equivalents, and short-term investments. The company expects earnings per share for 2008 to be in the range of $3.80 to $3.95 and anticipates sales to grow in the mid-to high-single digits, driven by key products. The company stated that cash generated from operations, along with available cash, should be sufficient to fund its needs, and its debt ratings remain strong.