Summary
Eli Lilly and Company (LLY) reported a mixed financial performance for the third quarter and the first nine months of 2017. Revenue saw a notable increase of 9% year-over-year for the quarter, reaching $5.66 billion, and an 8% increase for the nine-month period to $16.71 billion. This growth was primarily driven by strong volume increases in key new pharmaceutical products like Trulicity, Taltz, and Basaglar. However, net income declined significantly, by 29% for the quarter to $555.6 million and by 26% for the nine months to $1.45 billion. This decline was largely attributable to substantial charges related to acquired in-process research and development (IPR&D) and asset impairment, restructuring, and other special charges, which notably increased in 2017 compared to the prior year. These charges, particularly the non-tax deductible IPR&D acquisition of CoLucid, significantly impacted profitability. Despite the decrease in net income, the company's financial condition remains solid. Cash and cash equivalents stood at $3.72 billion at the end of September 2017, though this was a decrease from year-end 2016, likely due to significant investments in acquisitions and debt management. Total debt increased due to new note issuances. Management expects full-year 2017 EPS to be between $1.73 and $1.83, reflecting the impact of these charges. Investors should monitor the ongoing patent challenges for key products like Alimta and Effient, as well as upcoming patent expirations for Cialis, which could materially affect future revenue.
Financial Highlights
53 data points| Revenue | $5.66B |
| Cost of Revenue | $1.57B |
| Gross Profit | $4.09B |
| R&D Expenses | $1.34B |
| SG&A Expenses | $1.58B |
| Operating Expenses | $2.92B |
| Interest Expense | $61.90M |
| Net Income | $555.60M |
| EPS (Basic) | $0.53 |
| EPS (Diluted) | $0.53 |
| Shares Outstanding (Basic) | 1.05B |
| Shares Outstanding (Diluted) | 1.06B |
Key Highlights
- 1Revenue increased by 9% year-over-year in Q3 2017 to $5.66 billion, driven by strong performance in new pharmaceutical products like Trulicity and Taltz.
- 2Net income decreased by 29% in Q3 2017 to $555.6 million, primarily due to significant charges from acquired in-process R&D and restructuring costs.
- 3Acquired in-process R&D (IPR&D) charges were $205 million in Q3 2017 and $1.06 billion for the nine months, significantly impacting profitability.
- 4Asset impairment, restructuring, and other special charges rose substantially, reaching $406.5 million in Q3 2017 compared to $45.5 million in the prior year.
- 5The company is undertaking cost-reduction initiatives, including workforce reductions expected to impact approximately 3,500 positions and incur charges of approximately $1.2 billion.
- 6Significant patent expirations are on the horizon, particularly for Cialis in late 2017/2018, which is expected to lead to a rapid decline in revenue.
- 7The company is reviewing strategic alternatives for its Elanco Animal Health segment, with an update expected by mid-2018.