Lilly Reports Solid First-Quart...(lopment associated with the BioMS Medica...)

First-Quarter Pro Forma Results

Worldwide pro forma sales for the first quarter of 2008 were $4.808 billion, an increase of 12 percent compared with the first quarter of 2007. Worldwide pro forma sales volume increased 6 percent, while exchange rates and selling prices contributed 5 and 1 percentage points of the sales growth, respectively. Gross margin as a percent of sales decreased by 1.3 percentage points, to 76.9 percent. Marketing, selling and administrative expenses and research and development expenses increased 13 percent and 4 percent, respectively. Total operating expenses, defined as the sum of research and development, marketing, selling and administrative expenses, grew 9 percent. Other income increased $3.5 million. The effective tax rate was 22 percent.

Significant Items Affecting Net Income

Net income for the first quarter of 2008 and the first quarter of 2007 were affected by the following significant items that are reflected in our financial results.

First Quarter % Growth

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2008 2007

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E.P.S. (reported) $.97 $.47 106 %

Benefit from resolution of IRS audit (.19) -

Asset impairments and restructuring

charges .09 .08

In-process research and development

charges associated with BioMS Medical

in-licensing (2008) and ICOS acquisition

and OSI in-licensing (2007) .05 .29

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