10-QPeriod: Q3 FY2018

ELI LILLY & Co Quarterly Report for Q3 Ended Sep 30, 2018

Filed November 6, 2018For Securities:LLY

Summary

Eli Lilly and Company reported a solid third quarter of 2018, with revenue increasing by 7% year-over-year to $6,061.9 million, driven primarily by volume growth in key pharmaceutical products. Diluted Earnings Per Share (EPS) also saw a significant increase, more than doubling to $1.12 compared to $0.53 in the prior year period. This performance was supported by strong demand for newer products like Trulicity, Taltz, and Basaglar, alongside continued contributions from established products. The company also made significant strategic moves during the quarter, including the initial public offering (IPO) of its Elanco Animal Health business, which is expected to drive future shareholder value. While facing ongoing challenges from patent expirations and generic competition for some older products, Lilly's robust pipeline and focus on innovative therapies appear to be yielding positive results, as reflected in the overall financial growth. Management expressed confidence in the company's ability to fund ongoing operations, dividends, and share repurchases through operational cash flow.

Financial Highlights

53 data points
Beta

Revenue

$5.31B

78.3% Gross Margin

Net Income

$1.15B

21.7% Net Margin

EPS (Diluted)

$1.12

Total Assets

$44.63B

Cash & Equivalents

$8.96B

Free Cash Flow

$2.12B

Financial Statements
Beta
Revenue$5.31B
Cost of Revenue$1.15B
Gross Profit$4.15B
R&D Expenses$1.28B
SG&A Expenses$1.46B
Operating Expenses$2.74B
Interest Expense$60.80M
Net Income$1.15B
EPS (Basic)$1.13
EPS (Diluted)$1.12
Shares Outstanding (Basic)1.02B
Shares Outstanding (Diluted)1.03B

Key Highlights

  • 1Revenue increased 7% to $6.06 billion, driven by volume growth in key pharmaceutical products.
  • 2Diluted EPS more than doubled to $1.12 from $0.53 in the prior year period.
  • 3Successful initial public offering (IPO) of Elanco Animal Health business completed.
  • 4Strong performance from Trulicity, Taltz, and Basaglar contributed significantly to revenue growth.
  • 5Acquired IPR&D charges decreased significantly compared to the prior year, positively impacting net income.
  • 6Asset impairment, restructuring, and other special charges were also substantially lower year-over-year.
  • 7Company repurchased $3.05 billion of shares during the nine months ended September 30, 2018, under a new $8 billion repurchase program.

Frequently Asked Questions

Revenue growth was primarily driven by increased volume for key pharmaceutical products, notably Trulicity, Taltz, and Basaglar. New product launches and continued demand for existing innovative therapies were key contributors.

The IPO of Elanco Animal Health represents a strategic move to unlock value for shareholders. The company completed an initial public offering and retains control over Elanco, with the net proceeds intended for debt repayment, dividends, and/or share repurchases. This separation allows Lilly to focus more on its human pharmaceutical business.

Eli Lilly faces significant challenges from patent expirations for several key products, including Cialis, Forteo, and Alimta. The company anticipates a decline in revenue from these products due to generic competition, which is expected to have a material adverse effect on future results of operations and cash flows.

Research and development (R&D) expenses remained relatively flat, impacted by increased late-stage development expenditures but offset by lower milestone payments. Marketing, selling, and administrative (SG&A) expenses increased slightly year-over-year for the quarter, mainly due to increased expenses related to new product launches, partially offset by reductions on late-life-cycle products.