01—Abstract
Summary
Summary of the 10-K filed February 19, 2016. Cited figures are marked; the original filing is the authoritative source.
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%a, 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.
02—Key points
Key Highlights
- Revenue increased by 2% to $19.96 billion, largely boosted by the $5.28 billion acquisition of Novartis Animal Health.
- Gross margin remained strong at 74.8%, indicating efficient cost of goods sold management.
- Significant revenue declines were seen in Cymbalta (-36%) and Evista (-43%) due to loss of patent exclusivity and subsequent generic competition.
- Research and development expenses remained high at $4.80 billion, reflecting continued investment in the pipeline.
- The company repurchased $749.5 million of its shares under its $5.00 billion repurchase program.
- Long-term debt increased to $7.97 billion, primarily due to new debt issuance to finance acquisitions and operations.
- The company faces ongoing risks from patent expirations, generic and biosimilar competition, and pricing pressures from governments and private payers.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 19, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $19.96B$19.62B | +1.7% |
| Cost of Revenue | $5.04B$4.93B | +2.1% |
| Gross Profit | $14.92B$14.68B | +1.6% |
| R&D Expenses | $4.80B$4.73B | +1.3% |
| SG&A Expenses | $6.53B$6.62B | −1.3% |
| Interest Expense | $161.20M$148.80M | +8.3% |
| Net Income | $2.41B$2.39B | +0.7% |
| EPS (Basic) | $2.27$2.23 | +1.8% |
| EPS (Diluted) | $2.26$2.23 | +1.3% |
| Shares Outstanding (Basic) | 1.06B1.07B | −0.7% |
| Shares Outstanding (Diluted) | 1.07B1.07B | −0.8% |
05—Questions
Frequently Asked Questions
What was the impact of the Novartis Animal Health acquisition on Lilly's business?
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.
Which key products experienced significant revenue changes in 2015, and why?
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.
What are the major risks and challenges highlighted in the report?
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.
How is Lilly managing its pipeline and future growth?
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.
06—Continue