10-KPeriod: FY2015

ELI LILLY & Co Annual Report, Year Ended Dec 31, 2015

Filed February 19, 2016For Securities:LLY

Summary

Eli Lilly and Company's 2015 10-K report highlights a year of modest revenue growth, primarily driven by the acquisition of Novartis Animal Health. While overall revenue increased by 2%, the company faced headwinds from foreign currency exchange rates impacting international sales. Key human pharmaceutical products like Humalog and Cialis showed growth, but significant revenue declines were observed for Cymbalta and Evista due to patent expirations. The company continues to invest heavily in research and development, with a substantial pipeline of potential new drugs across various therapeutic areas. The acquisition of Novartis Animal Health significantly bolstered Elanco's offerings and global presence. However, investors should note the ongoing challenges related to patent expirations, generic competition, pricing pressures from payers, and potential regulatory changes, all of which pose risks to future revenue and profitability. Lilly is actively managing its debt and returning capital to shareholders through dividends and share repurchases.

Financial Highlights

52 data points
Beta

Revenue

$19.96B

74.8% Gross Margin

Net Income

$2.41B

12.1% Net Margin

EPS (Diluted)

$2.26

Total Assets

$35.57B

Cash & Equivalents

$3.67B

Free Cash Flow

$2.96B

Financial Statements
Beta
Revenue$19.96B
Cost of Revenue$5.04B
Gross Profit$14.92B
R&D Expenses$4.80B
SG&A Expenses$6.53B
Interest Expense$161.20M
Net Income$2.41B
EPS (Basic)$2.27
EPS (Diluted)$2.26
Shares Outstanding (Basic)1.06B
Shares Outstanding (Diluted)1.07B

Key Highlights

  • 1Revenue increased by 2% to $19.96 billion, largely boosted by the $5.28 billion acquisition of Novartis Animal Health.
  • 2Gross margin remained strong at 74.8%, indicating efficient cost of goods sold management.
  • 3Significant revenue declines were seen in Cymbalta (-36%) and Evista (-43%) due to loss of patent exclusivity and subsequent generic competition.
  • 4Research and development expenses remained high at $4.80 billion, reflecting continued investment in the pipeline.
  • 5The company repurchased $749.5 million of its shares under its $5.00 billion repurchase program.
  • 6Long-term debt increased to $7.97 billion, primarily due to new debt issuance to finance acquisitions and operations.
  • 7The company faces ongoing risks from patent expirations, generic and biosimilar competition, and pricing pressures from governments and private payers.

Frequently Asked Questions

The acquisition of Novartis Animal Health for $5.28 billion on January 1, 2015, significantly expanded Elanco's product portfolio and global reach, contributing approximately $1.02 billion in revenue for 2015. This acquisition played a key role in the company's overall revenue growth for the year.

Humalog revenue increased by 2% globally, driven by higher prices and volume in the U.S. Cialis also saw a 1% increase globally, mainly due to higher U.S. prices. Conversely, Cymbalta experienced a substantial global revenue decline of 36% due to the loss of U.S. patent exclusivity in late 2013 and European exclusivity in 2014. Evista also saw a significant 43% global revenue decrease due to the loss of U.S. patent exclusivity in March 2014.

Key risks include the high cost and uncertainty of pharmaceutical R&D, the loss of intellectual property protection for major products leading to severe revenue declines, intense competition from generics and biosimilars, increasing government price controls and reimbursement restrictions, and potential regulatory non-compliance. The company also noted the impact of foreign currency exchange rate fluctuations on its international operations.

Lilly is heavily investing in R&D, with approximately 50 potential new drugs in human testing or under regulatory review across key therapeutic areas like oncology, diabetes, and neuroscience. The company also actively pursues collaborations and licensing agreements to complement its internal efforts and acquire promising drug candidates, such as the recent acquisition of intranasal glucagon rights and the collaboration for baricitinib.