10-QPeriod: Q3 FY2019

ELI LILLY & Co Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 25, 2019For Securities:LLY

Summary

Eli Lilly and Company (LLY) reported strong financial performance for the third quarter and first nine months of 2019. Revenue saw a modest increase of 3% for the quarter and 2% for the nine-month period, reaching $5.48 billion and $16.21 billion, respectively. Net income from continuing operations grew significantly by 15% for the quarter and 55% for the nine months, primarily driven by a substantial gain from the disposition of Elanco Animal Health, which significantly boosted overall net income to $1.25 billion for the quarter and $6.82 billion for the nine months. Earnings per share also reflected this growth, with diluted EPS from continuing operations at $1.37 for the quarter and $3.33 for the nine months. Key strategic moves during the period included the acquisition of Loxo Oncology for $6.92 billion, aimed at bolstering the company's pipeline in oncology. The company continued to experience robust growth in key products such as Trulicity, Taltz, Basaglar, Jardiance, and Verzenio, which offset declines in legacy products like Cialis due to patent expirations. Despite ongoing patent challenges, particularly for Alimta, and increased pricing pressures in the U.S. pharmaceutical market, Lilly maintained its financial momentum.

Financial Highlights

51 data points
Beta

Revenue

$5.48B

78.5% Gross Margin

Net Income

$1.25B

22.9% Net Margin

EPS (Diluted)

$1.37

Total Assets

$37.89B

Free Cash Flow

$1.51B

Financial Statements
Beta
Revenue$5.48B
Cost of Revenue$1.18B
Gross Profit$4.30B
R&D Expenses$1.38B
SG&A Expenses$1.41B
Operating Expenses$2.79B
Interest Expense$107.40M
Net Income$1.25B
EPS (Basic)$1.37
EPS (Diluted)$1.37
Shares Outstanding (Basic)913.90M
Shares Outstanding (Diluted)918.50M

Key Highlights

  • 1Revenue for the three months ended September 30, 2019, increased by 3% to $5,476.6 million compared to $5,306.9 million in the prior year period.
  • 2Net income from continuing operations for the three months ended September 30, 2019, rose by 15% to $1,253.9 million from $1,093.6 million.
  • 3Diluted EPS from continuing operations for the three months ended September 30, 2019, was $1.37, an increase from $1.07 in the prior year period.
  • 4The company completed the acquisition of Loxo Oncology for $6.92 billion in February 2019, significantly expanding its oncology pipeline.
  • 5Key products like Trulicity, Taltz, Basaglar, Jardiance, and Verzenio demonstrated strong revenue growth, driving overall sales.
  • 6The disposition of Elanco Animal Health resulted in a significant gain, boosting overall net income for the nine-month period to $6,822.7 million.
  • 7The company reaffirmed its full-year 2019 EPS guidance range of $8.59 to $8.69, indicating confidence in continued performance.

Frequently Asked Questions

Eli Lilly reported revenue of $5,476.6 million for the third quarter ended September 30, 2019, an increase of 3% compared to $5,306.9 million in the same period of 2018. This growth was primarily driven by increased volume, partially offset by lower realized prices and unfavorable foreign exchange rates.

Eli Lilly acquired Loxo Oncology in February 2019 for $6.92 billion. This acquisition, accounted for as a business combination, involved significant upfront costs, including $400.7 million for the accelerated vesting of Loxo employee equity awards recognized as asset impairment, restructuring, and other special charges in the nine months ended September 30, 2019. The acquisition significantly enhances Lilly's oncology pipeline with promising investigational medicines.

Eli Lilly reaffirmed its full-year 2019 financial expectations. The company anticipates full-year EPS to be in the range of $8.59 to $8.69 and revenue between $22.0 billion and $22.5 billion. This outlook is supported by expected volume growth from key products and new launches, partially offset by the impact of patent expirations, pricing pressures, and foreign exchange rates.

The company faces several risks and uncertainties, including uncertainties in the pharmaceutical R&D process, market uptake of new products, competitive developments, patent expirations, regulatory actions, product safety concerns, litigation, and the impact of pricing and reimbursement pressures from payers and governments. Specifically, patent expirations for products like Alimta and Forteo are expected to cause a rapid and severe decline in revenue.