Lilly Reports Solid First-Quart...(ions and wind-down costsassociated with ...)

Date:4/21/2008

ions and wind-down costs associated with the termination of clinical trials and certain development activities, and costs associated with the patient program to transition patients from AIR Insulin. This amount includes an estimate of Alkermes' wind-down costs for which the company is contractually obligated. The wind-down activities and patient programs should be substantially complete by the end of 2008. The remaining component of this charge, $13.1 million, is related to exit costs incurred in this quarter related to strategic decisions made in prior periods.

Other income decreased by $18.0 million, to $20.3 million, primarily due to the acquisition of ICOS. Prior to the acquisition of ICOS, the results of the Lilly ICOS joint venture were presented in other income. Subsequent to the acquisition, all sales and expenses associated with Cialis are included in their respective lines on Lilly's income statement.

In the first quarter of 2008, the company reported an income tax benefit of $8.0 million. This income tax benefit includes a discrete benefit of $210.3 million in the first quarter of 2008 that was a result of the conclusion of a substantial portion of the IRS audit of the company's federal income tax returns for years 2001 through 2004. The reported effective tax rate for the first quarter of 2007 was 29.3 percent, because the in-process research and development charge associated with the acquisition of ICOS was not deductible.

Reported net income and earnings per share increased to $1.064 billion and $.97, respectively, compared with first-quarter 2007 net income of $508.7 million and earnings per share of $.47 due primarily to the in-process research and development charge associated with the ICOS acquisition in the first quarter of 2007 and the resolution of the IRS tax audit in the first quarter of 2008. First-quarter 2008 reported results also include an $87.0 million charge (pre-tax) related to acquired in-process research and deve
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