Lilly Reports Solid First-Quart...(quarter. First-Quarter Reported Resu...)

First-Quarter Reported Results

Worldwide reported sales for the quarter were $4.808 billion, an increase of 14 percent compared with the first quarter of 2007. Worldwide sales volume increased 8 percent, while exchange rates and selling prices contributed 5 percent and 1 percent of sales growth, respectively.

Gross margin as a percent of sales decreased by 1.3 percentage points, to 76.9 percent. This decrease was primarily due to the impact of foreign exchange rates, offset in part by manufacturing expenses growing at a slower rate than sales.

Overall, marketing, selling and administrative expenses rose 16 percent, to $1.551 billion. This increase was due to the impact of the ICOS acquisition, increased marketing expenses in support of key products (primarily Cymbalta, Cialis and Humalog), the impact of foreign exchange rates, and increased legal costs, including a $15.0 million settlement related to Zyprexa litigation with the state of Alaska. Research and development expenses were $877.1 million, or 18 percent of sales. Compared with the first quarter of 2007, research and development expenses grew 5 percent. This increase was primarily due to increased discovery research and late-stage clinical trial costs, offset by lower prasugrel clinical trial costs and the first-quarter-2007 costs associated with the consequences of the FDA's rejection of Lilly's appeal of the approvable letter for Arxxant(TM) and the withdrawal of the Arxxant application in Europe.

The company recognized asset impairment, restructuring (exit costs), and other special charges of $145.7 million in the first quarter of 2008. The charge is primarily related to the decision to terminate the development of AIR Insulin. Components of this charge include non-cash charges of $40.9 million for the write-down of impaired manufacturing assets that had no use beyond the AIR Insulin program, as well as charges of $91.7 million for estimated contractual obligat
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