10-QPeriod: Q2 FY2009

ELI LILLY & Co Quarterly Report for Q2 Ended Jun 30, 2009

Filed July 31, 2009For Securities:LLY

Summary

Eli Lilly and Company (LLY) reported solid financial performance for the second quarter and first six months of 2009, demonstrating revenue growth and increased net income. Total revenue saw a 3% increase to $5.29 billion for the quarter and a 4% increase to $10.34 billion for the six-month period, driven by strong sales of key products like Alimta, Cymbalta, and Humalog, as well as the inclusion of Erbitux revenue following the ImClone acquisition. Net income rose significantly by 21% and 22% respectively, leading to diluted earnings per share of $1.06 for the quarter and $2.25 for the six months. Despite positive financial trends, the company continues to navigate significant legal challenges, most notably related to Zyprexa, which resulted in a $105.0 million charge in the quarter for probable and estimable exposures related to state claims. The company also highlighted ongoing patent litigation for several key drugs, including Cymbalta, Gemzar, and Alimta. Management expects continued pricing pressures and regulatory scrutiny to impact future results, but believes existing operational cash flow and credit facilities are sufficient to meet obligations.

Financial Highlights

45 data points
Beta

Revenue

$5.29B

82.1% Gross Margin

Net Income

$1.16B

21.9% Net Margin

Total Assets

$26.93B

Cash & Equivalents

$3.32B

Free Cash Flow

$923.30M

Financial Statements
Beta
Revenue$5.29B
Cost of Revenue$947.40M
Gross Profit$4.35B
R&D Expenses$1.04B
SG&A Expenses$1.71B
Interest Expense$64.30M
Net Income$1.16B

Key Highlights

  • 1Total revenue increased by 3% to $5.29 billion in Q2 2009 and 4% to $10.34 billion for the first six months of 2009, year-over-year.
  • 2Net income grew by 21% to $1.16 billion in Q2 2009 and 22% to $2.47 billion for the first six months of 2009, year-over-year.
  • 3Diluted earnings per share (EPS) were $1.06 for Q2 2009 and $2.25 for the first six months of 2009, an increase of 20% and 22% respectively.
  • 4Key products driving growth include Alimta, Cymbalta, and Humalog, along with revenue from the acquired ImClone business (Erbitux).
  • 5The company incurred a $105.0 million pretax charge related to ongoing Zyprexa-related state claims.
  • 6Research and development expenses increased by 9% in both periods, primarily due to the ImClone acquisition and late-stage clinical trial costs.
  • 7Cash and cash equivalents decreased to $3.32 billion from $5.50 billion at year-end 2008, primarily due to debt repayment and dividend payments.

Frequently Asked Questions

Revenue growth was primarily driven by the collective performance of Alimta, Cymbalta, and Humalog, as well as the inclusion of Erbitux revenue following the ImClone acquisition. Increased demand and favorable net effective selling prices for several key products also contributed.

Eli Lilly is facing ongoing patent litigation for several key products, including Cymbalta, Gemzar, and Alimta, related to generic competition. The company also incurred a substantial charge related to Zyprexa claims and is involved in ongoing investigations and litigation concerning its marketing and promotional practices for Zyprexa.

The acquisition of ImClone Systems Inc. in November 2008 contributed to revenue growth through Erbitux sales and also increased research and development expenses due to the integration of ImClone's operations and pipeline. It also impacted marketing, selling, and administrative expenses.

Management expects continued pricing pressures at both federal and state levels due to economic challenges faced by healthcare payers. The company is also preparing for potential generic competition for several of its products and is actively defending its patents.