10-QPeriod: Q2 FY2013

ELI LILLY & Co Quarterly Report for Q2 Ended Jun 30, 2013

Filed July 26, 2013For Securities:LLY

Summary

Eli Lilly and Company's second quarter 2013 report shows solid revenue and net income growth, driven by key products like Cymbalta and Cialis, as well as an increase in collaboration and other revenues. Despite the ongoing impact of patent expirations for products like Zyprexa, the company demonstrated resilience with a 6% increase in worldwide revenue for the quarter, reaching $5.93 billion, and a 31% surge in net income to $1.21 billion. The company's financial health remains robust, supported by strong operational cash flow and a significant reduction in marketing, selling, and administrative expenses. However, investors should note the upcoming patent expiries for Cymbalta in the U.S. (December 2013) and Evista (March 2014), which are expected to lead to substantial revenue declines due to generic competition. Lilly is actively managing these challenges by focusing on growth in emerging markets, Japan, and its animal health business, alongside its patent-protected products.

Financial Highlights

52 data points
Beta

Revenue

$5.93B

80.3% Gross Margin

Net Income

$1.21B

20.3% Net Margin

EPS (Diluted)

$1.11

Total Assets

$33.23B

Cash & Equivalents

$3.79B

Free Cash Flow

$1.64B

Financial Statements
Beta
Revenue$5.93B
Cost of Revenue$1.17B
Gross Profit$4.76B
R&D Expenses$1.33B
SG&A Expenses$1.87B
Operating Expenses$3.20B
Interest Expense$40.30M
Net Income$1.21B
EPS (Basic)$1.12
EPS (Diluted)$1.11
Shares Outstanding (Basic)1.08B
Shares Outstanding (Diluted)1.08B

Key Highlights

  • 1Total revenue increased 6% to $5.93 billion in Q2 2013, and 3% for the first six months to $11.53 billion.
  • 2Net income rose significantly by 31% to $1.21 billion in Q2 2013, and 42% for the first six months to $2.75 billion.
  • 3Diluted EPS increased to $1.11 in Q2 2013 from $0.83 in Q2 2012, and $2.53 for the first six months from $1.73 in the prior year.
  • 4Revenue growth was driven by key products like Cymbalta and Cialis, along with increased collaboration and other revenues.
  • 5The company reported $63.5 million in asset impairments, restructuring, and other special charges in Q2 2013, primarily related to facility closure and workforce reduction.
  • 6Lilly completed its $1.50 billion share repurchase program in Q1 2013, reducing the number of outstanding shares.
  • 7Upcoming patent expirations for Cymbalta (U.S., December 2013) and Evista (U.S., March 2014) are expected to cause significant revenue declines.

Frequently Asked Questions

Revenue growth was primarily driven by strong performance from key products such as Cymbalta and Cialis, along with an increase in collaboration and other revenues. Growth was also supported by higher prices and, to a lesser extent, increased volume for several products, partially offset by declines in Zyprexa due to patent exclusivity loss.

Eli Lilly anticipates significant revenue declines due to upcoming patent expirations, particularly for Cymbalta in the U.S. (December 2013) and Evista in the U.S. (March 2014). The company expects generic competition to lead to a rapid and severe decrease in sales for these products.

Lilly is actively managing expenses through ongoing cost-containment efforts. Marketing, selling, and administrative expenses decreased by 3% in the second quarter of 2013 compared to the prior year, benefiting from these efforts and favorable foreign exchange rates.

The company maintains a strong financial position with $3.79 billion in cash and cash equivalents at the end of Q2 2013. For the full year 2013, Lilly projects EPS to be in the range of $4.28 to $4.38 and total revenue between $22.6 billion and $23.4 billion, with growth expected from a diverse portfolio and emerging markets.