01—Abstract
Summary
Summary of the 10-K filed February 20, 2018. Cited figures are marked; the original filing is the authoritative source.
Eli Lilly & Company's 2017 10-K filing reveals a year marked by significant revenue growth, primarily driven by strong performance in its human pharmaceutical segment, particularly with key products like Trulicity and Jardiance.
However, the company also faced substantial charges in 2017, including a large provision for income taxes due to the Tax Cuts and Jobs Act of 2017, and significant asset impairment, restructuring, and other special charges, primarily related to cost-reduction efforts and early retirement programs. These factors resulted in a net loss for the year.
Despite the net loss, the company continued its commitment to shareholders through dividends and share repurchases, and is actively managing its late-stage pipeline with new molecular entities under development. Investors should note the company's ongoing efforts to address patent expirations and generic competition for several key products, alongside the strategic review of its Elanco Animal Health segment, which could lead to significant corporate changes.
02—Key points
Key Highlights
- Revenue increased by 8% to $22.87 billion in 2017, driven by strong growth in human pharmaceuticals, particularly Trulicity (+119%) and Jardiance (+122%).
- The company reported a net loss of $204.1 million ($0.19 per share) in 2017, a significant reversal from a net income of $2.74 billion in 2016, primarily due to a $1.91 billion provisional tax charge related to the 2017 Tax Act.
- Significant restructuring and special charges of $1.67 billion were incurred in 2017, including costs related to a U.S. voluntary early retirement program and asset impairments.
- Patent expirations and generic competition are noted as significant challenges, particularly for Cialis, Alimta, and Strattera, leading to revenue declines in these products.
- Eli Lilly is actively managing its product pipeline with approximately 40 potential new drugs in human testing or under regulatory review, including promising candidates for Alzheimer's disease, cancer, and diabetes.
- The company is reviewing strategic alternatives for its Elanco Animal Health segment, with an update expected by mid-2018.
- Despite the net loss, the company maintained its commitment to shareholders by increasing its quarterly dividend and continuing its share repurchase program.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 20, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $19.97B$21.22B | −5.9% |
| Cost of Revenue | $4.45B$5.65B | −21.3% |
| Gross Profit | $15.53B$15.57B | −0.3% |
| R&D Expenses | $5.10B$5.31B | −4.0% |
| SG&A Expenses | $5.98B$6.53B | −8.4% |
| Interest Expense | $225.00M$185.20M | +21.5% |
| Net Income | -$204.10M$2.74B | −107.5% |
| EPS (Basic) | $-0.19$2.59 | −107.3% |
| EPS (Diluted) | $-0.19$2.58 | −107.4% |
| Shares Outstanding (Basic) | 1.05B1.06B | −0.6% |
| Shares Outstanding (Diluted) | 1.05B1.06B | −0.9% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in 2017?
Revenue growth in 2017 was primarily driven by new pharmaceutical products, notably Trulicity, Taltz, Basaglar, Jardiance, Lartruvo, and Verzenio, which experienced significant volume increases. Higher realized prices for established products like Forteo and Cialis, along with increased companion animal product sales from the BIVIVP acquisition, also contributed to the overall revenue increase.
What caused the net loss in 2017 despite revenue growth?
The company reported a net loss in 2017 primarily due to a substantial provisional tax charge of $1.91 billion related to the Tax Cuts and Jobs Act of 2017. Additionally, significant charges for asset impairment, restructuring, and other special items, totaling $1.67 billion, impacted profitability. These factors more than offset the growth in revenue and gross margin.
What is the company's outlook for 2018 regarding revenue and earnings?
For the full year 2018, Eli Lilly projected EPS in the range of $4.39 to $4.49, reflecting the estimated impact of the 2017 Tax Act. Total revenue was anticipated to be between $23.0 billion and $23.5 billion, with growth expected to be driven by new products such as Trulicity, Taltz, Basaglar, Jardiance, Verzenio, Cyramza, Olumiant, and Lartruvo.
What are the key risks facing the company?
Key risks identified include the high cost and uncertainty of pharmaceutical research and development, with many new drug candidates failing to reach the market. The company also faces significant challenges from patent expirations and the subsequent entry of generic and biosimilar competition, which can lead to rapid revenue declines for affected products. Additionally, increasing government price controls, reimbursement restrictions, and intense competition from other pharmaceutical and biotechnology companies pose ongoing risks.
06—Continue