8-KFinancial Events

ELI LILLY & Co 8-K Report, Exit or Disposal Costs (Mar 13, 2008)

Filed March 13, 2008For Securities:LLY

Summary

Eli Lilly & Company (LLY) has announced the termination of its AIR® Insulin program, a Phase III development candidate for diabetes, in partnership with Alkermes, Inc. The decision was driven by increasing uncertainties in the regulatory environment and a re-evaluation of the product's commercial and clinical potential against existing therapies, rather than safety concerns. This discontinuation will result in a first-quarter 2008 charge to earnings estimated between $90 million and $120 million, or $0.05 to $0.07 per share, with approximately half requiring cash outlay. This charge, combined with a previously announced one related to BioMS in-licensing, impacts Lilly's 2008 earnings per share outlook, which is now projected to be in the range of $3.73 to $3.90. The company is managing the wind-down of clinical trials and will offer a patient assistance program in the U.S. to support current trial participants with medication costs through the end of 2008.

Key Highlights

  • 1Termination of AIR® Insulin program (Phase III diabetes drug) in partnership with Alkermes, Inc.
  • 2Decision driven by regulatory uncertainties and commercial/clinical re-evaluation, not safety issues.
  • 3Expected first-quarter 2008 charge of $90 million to $120 million ($0.05-$0.07 per share) for asset impairment, wind-down, and patient assistance.
  • 4Approximately 50% of the charge will be a cash expense.
  • 5Revised 2008 EPS guidance to $3.73-$3.90, reflecting this charge and prior BioMS in-licensing charge.
  • 6Clinical trials will be halted, and enrolled patients will be transitioned to other therapies.
  • 7U.S. patient assistance program to cover medication costs for current trial participants through 2008.

Frequently Asked Questions

The AIR® Insulin program was a Phase III clinical development candidate for type 1 and type 2 diabetes, developed in partnership with Alkermes, Inc. Eli Lilly terminated the program due to increasing uncertainties in the regulatory environment and a reassessment of its commercial and clinical potential compared to existing treatments. The company emphasized that the decision was not based on safety concerns observed in clinical trials.

Eli Lilly expects to recognize a first-quarter 2008 charge to earnings estimated between $90 million and $120 million, or $0.05 to $0.07 per share. This charge covers manufacturing asset impairment, clinical trial wind-down costs, and a patient assistance program. Approximately 50% of this charge will require a cash payment. This, along with a previously announced charge, leads to a revised 2008 earnings per share guidance of $3.73 to $3.90.

Eli Lilly is in the process of contacting clinical investigators to halt the trials. Patients currently enrolled will be transitioned to other insulin therapies under their physicians' supervision. In the U.S., Lilly will implement a patient assistance program to provide financial support for medications and diagnostic supplies for these patients through the end of 2008.

This specific termination was attributed to regulatory and commercial re-evaluation for the AIR® Insulin program and was not related to safety observations from its trials. The company's filing does not suggest systemic issues within its broader diabetes pipeline, but investors should monitor future pipeline updates and regulatory communications for any potential developments.