10-QPeriod: Q1 FY2016

ELI LILLY & Co Quarterly Report for Q1 Ended Mar 31, 2016

Filed April 29, 2016For Securities:LLY

Summary

Eli Lilly and Company (LLY) reported Q1 2016 revenue of $4.87 billion, a 5% increase year-over-year, primarily driven by volume growth in the U.S. and internationally. Despite revenue growth, net income decreased by 17% to $440.1 million ($0.41 diluted EPS) compared to $529.5 million ($0.50 diluted EPS) in Q1 2015. This decline was significantly impacted by a $203.9 million charge related to the Venezuelan financial crisis and deterioration of the bolívar, along with higher research and development expenses and asset impairment charges. Key product drivers included strong performance from Trulicity and Erbitux (especially in the U.S. post-acquisition of commercialization rights), along with established products like Cialis and Humulin showing growth. However, the company faces significant headwinds from upcoming patent expirations for major drugs such as Alimta, Strattera, and Cialis, which are expected to lead to substantial revenue declines. Lilly is actively managing its pipeline with several new molecular entities (NMEs) in late-stage development, including baricitinib for rheumatoid arthritis which was submitted for regulatory review.

Financial Highlights

53 data points
Beta

Revenue

$4.87B

72.8% Gross Margin

Net Income

$440.10M

9.0% Net Margin

EPS (Diluted)

$0.41

Total Assets

$34.69B

Cash & Equivalents

$2.31B

Free Cash Flow

-$219.10M

Financial Statements
Beta
Revenue$4.87B
Cost of Revenue$1.32B
Gross Profit$3.54B
R&D Expenses$1.22B
SG&A Expenses$1.47B
Operating Expenses$2.69B
Interest Expense$43.40M
Net Income$440.10M
EPS (Basic)$0.42
EPS (Diluted)$0.41
Shares Outstanding (Basic)1.06B
Shares Outstanding (Diluted)1.06B

Key Highlights

  • 1Revenue increased by 5% to $4.87 billion, driven by strong U.S. performance and international volume growth.
  • 2Net income decreased by 17% to $440.1 million, largely due to a significant charge related to the Venezuelan financial crisis and increased R&D expenses.
  • 3Diluted EPS fell to $0.41 from $0.50 in the prior year's quarter.
  • 4The company recognized a $203.9 million charge related to the Venezuelan bolívar's deterioration.
  • 5Research and development expenses increased by 17% to $1.22 billion, driven by late-stage clinical trial costs, including milestone payments for baricitinib.
  • 6Several key products face upcoming patent expirations (Alimta, Strattera, Cialis), posing a significant future revenue risk.
  • 7New drug approvals and submissions include Taltz (ixekizumab) for psoriasis and baricitinib for rheumatoid arthritis.

Frequently Asked Questions

The primary driver for the decrease in net income was a significant charge of $203.9 million related to the Venezuelan financial crisis and the deterioration of the bolívar, compounded by increased research and development expenses and asset impairment charges.

The company highlighted upcoming patent expirations for Alimta (U.S., Europe, Japan), Strattera (U.S.), and Cialis (U.S. and Europe) as key risks that are expected to cause rapid and severe declines in revenue for these products.

Lilly has a robust late-stage pipeline with approximately 45 potential new drugs in human testing or under regulatory review. Notable advancements include the submission for regulatory review of baricitinib for rheumatoid arthritis and the approval and launch of Taltz (ixekizumab) for psoriasis.

Cash and cash equivalents decreased to $2.31 billion. Total debt increased slightly to $8.13 billion. The company repurchased $300.1 million in shares during the quarter under its $5.00 billion repurchase program and believes its operating cash flow, existing cash, and credit facilities are sufficient for its needs.