10-QPeriod: Q2 FY2012

ELI LILLY & Co Quarterly Report for Q2 Ended Jun 30, 2012

Filed July 27, 2012For Securities:LLY

Summary

Eli Lilly and Company reported a decrease in revenue and net income for the second quarter and first six months of 2012 compared to the same periods in 2011. This decline was primarily driven by the loss of patent exclusivity for Zyprexa, which significantly impacted sales. Despite this, several key products like Cymbalta, Alimta, and the animal health portfolio showed growth, partially offsetting the overall revenue decline. Key financial metrics indicate a challenging period, with net income and EPS both decreasing. However, the company raised its full-year earnings per share guidance, signaling confidence in future performance. Lilly's R&D pipeline remains robust with numerous compounds in late-stage development, crucial for mitigating the impact of upcoming patent expirations. The company also continues to manage its financial position, with total debt decreasing and sufficient operating cash flow expected to cover operational needs, dividends, and share repurchases.

Financial Highlights

49 data points
Beta

Revenue

$5.60B

79.5% Gross Margin

Net Income

$923.60M

16.5% Net Margin

EPS (Diluted)

$0.83

Total Assets

$31.81B

Cash & Equivalents

$4.35B

Free Cash Flow

$1.31B

Financial Statements
Beta
Revenue$5.60B
Cost of Revenue$1.15B
Gross Profit$4.45B
R&D Expenses$1.32B
SG&A Expenses$1.93B
Operating Expenses$3.25B
Interest Expense$43.00M
Net Income$923.60M
EPS (Basic)$0.83
EPS (Diluted)$0.83

Key Highlights

  • 1Revenue for Q2 2012 decreased by 10% to $5.6 billion, and for the first six months by 7% to $11.2 billion, largely due to the loss of patent exclusivity for Zyprexa.
  • 2Net income for Q2 2012 decreased by 23% to $923.6 million, and for the first six months by 14% to $1.93 billion.
  • 3Earnings per share (EPS) followed suit, decreasing by 22% to $0.83 for Q2 and 14% to $1.73 for the first six months.
  • 4Despite the declines, Eli Lilly raised its full-year 2012 EPS guidance to a range of $3.29 to $3.39.
  • 5Key products like Cymbalta, Alimta, and the animal health business showed strong growth, partially offsetting declines from Zyprexa.
  • 6Research and development expenses increased slightly, reflecting ongoing investment in a pipeline of approximately 65 potential new drugs in human testing or under regulatory review.
  • 7The company's cash, cash equivalents, and short-term investments decreased to $5.26 billion, impacted by debt repayment, dividends, and investment in longer-term securities.

Frequently Asked Questions

The primary driver of the decline in revenue and profit for Eli Lilly in the second quarter and first six months of 2012 was the loss of patent exclusivity for Zyprexa in most major markets outside of Japan, leading to a significant drop in its sales.

Eli Lilly raised its full-year 2012 earnings per share (EPS) guidance to a range of $3.29 to $3.39. The company anticipates total revenue to be between $21.8 billion and $22.8 billion, with continued growth expected from key franchises and the animal health business, despite the significant anticipated decline in Zyprexa sales.

Eli Lilly is focused on mitigating the impact of patent expirations through growth in its patent-protected products that do not face imminent exclusivity loss, expansion in emerging markets and Japan, and growth in its animal health business. The company also maintains a robust R&D pipeline with numerous late-stage development compounds, which are critical for future revenue generation.

The company is involved in several significant legal proceedings, including patent litigation for Alimta and product liability lawsuits related to Zyprexa, Byetta, and Diethylstilbestrol. While the company believes most claims are without merit, an unfavorable outcome in the Alimta patent litigation could materially impact its financial position and results of operations.