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INDIANAPOLIS, Oct. 22, 2015 /PRNewswire/ -- Eli Lilly and Company (NYSE: LLY) today announced financial results for the third quarter of 2015.
$ in millions, except per share data
Third Quarter
%20152014
ChangeRevenue – Reported
$
4,959.7$
4,875.62
%Net Income – Reported
799.7500.660
%EPS – Reported
0.750.4760
%Revenue – non-GAAP
4,959.75,151.0(4)
%Net Income – non-GAAP
949.6781.222
%EPS – non-GAAP
0.890.7322
%
Certain financial information for 2015 and 2014 is presented on both a reported and a non-GAAP basis. Some numbers in this press release may not add due to rounding. Reported results were prepared in accordance with generally accepted accounting principles (GAAP) and include all revenue and expenses recognized during the period. Non-GAAP measures exclude the items described in the reconciliation tables later in the release. Non-GAAP measures in 2014 include the results of Novartis Animal Health as if the acquisition and the financing for the acquisition had occurred as of January 1, 2014. Non-GAAP financial measures for all periods presented also exclude amortization of intangibles primarily associated with costs of marketed products acquired or licensed from third parties. The company's 2015 financial guidance is also being provided on both a reported and a non-GAAP basis. The non-GAAP measures are presented to provide additional insights into the underlying trends in the company's business.
"We are pleased with our strong third-quarter results, which reflect the ongoing actions we are taking to grow revenue and increase productivity while we are replenishing and advancing our pipeline with an array of new, innovative therapies," said John C. Lechleiter, Ph.D., Lilly's chairman, president and chief executive officer. "Despite headwinds from foreign exchange rates, we are benefiting from recent launches as well as our acquisition of Novartis Animal Health earlier this year."
"This quarter, we had higher sales volume for several key products, including recently launched Cyramza and Trulicity. We also launched several new products in various global markets, including Synjardy in the U.S. for type 2 diabetes. Promising pipeline momentum continued with encouraging news for baricitinib and abemaciclib, while Jardiance reported positive cardiovascular outcomes. Finally, we continued to create new collaborations and pursue smaller-scale acquisitions to bolster our pipeline and our product portfolio."
Looking forward, Lechleiter noted that Lilly could have a regulatory submission and/or decision for multiple potential new medicines in the next 18 months – reinforcing the company's confidence in its innovation-based strategy and in its ability to grow revenue and expand margins over the balance of this decade.
Key Events Over the Last Three Months
Commercial
Regulatory
Clinical
Business Development/Other
Third-Quarter Reported Results
In the third quarter of 2015, worldwide revenue was $4.960 billion, an increase of 2 percent compared with the third quarter of 2014. The revenue growth included an increase of 12 percent due to increased volume, largely offset by decreases of 8 percent due to the unfavorable impact of foreign exchange rates and 2 percent due to lower prices. The 12 percent increase in volume was primarily due to the inclusion of revenue from Novartis Animal Health and increased volume for several products, including the U.S. Evista authorized generic, Cyramza® and Trulicity. These worldwide volume increases were partially offset by lower demand for Cymbalta® due to the U.S. patent expiration in December 2013. Revenue in the U.S. increased 14 percent to $2.538 billion, due primarily to higher volume, partially offset by lower prices. The U.S. price decrease was driven by a lower price for the Evista authorized generic, which more than offset higher prices for other products. Revenue outside the U.S. decreased 9 percent to $2.422 billion, driven by the unfavorable impact of foreign exchange rates, partially offset by the inclusion of revenue from Novartis Animal Health and increased volumes for the majority of pharmaceutical products.
Gross margin increased 3 percent to $3.723 billion in the third quarter of 2015, as the favorable impact of foreign exchange rates on cost of sales, including the impact on international inventories sold, the inclusion of Novartis Animal Health and increased contribution from recently launched products were largely offset by the unfavorable impact of foreign exchange rates on revenue. Gross margin as a percent of revenue was 75.1 percent, an increase of 1.1 percentage points compared with the third quarter of 2014. The increase in gross margin percent was primarily due to the favorable impact of foreign exchange rates on international inventories sold, partially offset by the inclusion of Novartis Animal Health.
Operating expenses in the third quarter of 2015, defined as the sum of research and development and marketing, selling and administrative expenses, were $2.719 billion, a decline of 7 percent compared with the third quarter of 2014. Research and development expenses decreased 8 percent to $1.143 billion, or 23.1 percent of revenue, driven primarily by a 2014 charge associated with the termination of tabalumab development, and to a lesser extent foreign exchange rates, partially offset by the inclusion of Novartis Animal Health. Marketing, selling and administrative expenses decreased 6 percent to $1.576 billion, due to a 2014 charge associated with the Branded Prescription Drug Fee and foreign exchange rates, partially offset by the inclusion of Novartis Animal Health and expenses related to new product launches.
There were no acquired in-process research and development charges in the third quarter of 2015. In the third quarter of 2014, the company recognized acquired in-process research and development charges totaling $95.0 million related to collaboration agreements with Immunocore Limited and AstraZeneca.
In the third quarter of 2015, the company recognized asset impairment, restructuring and other special charges of $42.4 million. The charges primarily relate to integration costs for Novartis Animal Health and severance costs. In the third quarter of 2014, the company recognized asset impairment, restructuring and other special charges of $36.3 million, primarily severance, associated with cost-containment efforts and costs related to the then pending acquisition of Novartis Animal Health.
Operating income in the third quarter of 2015 was $961.3 million, an increase of 71 percent compared with the third quarter of 2014, driven by higher gross margin, lower operating expenses and lower acquired in-process research and development charges.
Other income (expense) was income of $86.5 million in the third quarter of 2015, compared with income of $93.5 million in the third quarter of 2014. Other income during the third quarter of 2015 was driven by net gains on investments. Other income during the third quarter of 2014 was driven primarily by net gains on investments and income from milestones earned.
The effective tax rate was 23.7 percent in the third quarter of 2015, compared with 23.6 percent in the third quarter of 2014. The 2015 effective tax rate reflects the impact of an increased percentage of forecasted earnings in higher taxed jurisdictions. The 2014 effective tax rate reflects the impact of a $119.0 million nondeductible charge associated with the U.S. Branded Prescription Drug Fee. Neither period includes the benefit of certain expired U.S. tax provisions, including the R&D tax credit.
In the third quarter of 2015, net income and earnings per share both increased 60 percent to $799.7 million, and $0.75, respectively, compared with $500.6 million and $0.47, respectively, in the third quarter of 2014. The increases in net income and earnings per share were driven by higher operating income.
Third-Quarter 2015 Non-GAAP Measures
On a non-GAAP basis, worldwide revenue was $4.960 billion in the third quarter of 2015, a decline of 4 percent compared with the third quarter of 2014. The revenue decline included decreases of 8 percent due to the unfavorable impact of foreign exchange rates and 2 percent due to lower prices, largely offset by an increase of 7 percent due to increased volume. The increase in volume was primarily due to the U.S. Evista authorized generic, as well as Cyramza and Trulicity, partially offset by lower demand for Cymbalta. U.S. revenue increased 11 percent to $2.538 billion, due primarily to higher volume, partially offset by lower prices. The U.S. price decrease was driven by a lower price for the Evista authorized generic, which more than offset higher prices for other products. Revenue outside the U.S. decreased 15 percent to $2.422 billion, driven by the unfavorable impact of foreign exchange rates, partially offset by increased volumes for the majority of pharmaceutical products.
Gross margin remained relatively flat at $3.861 billion in the third quarter of 2015, as the favorable impact of foreign exchange rates on cost of sales, including the impact on international inventories sold, and increased contribution from recently launched products were offset by the unfavorable impact of foreign exchange rates on revenue. Gross margin as a percent of revenue was 77.8 percent, an increase of 3.0 percentage points compared with the third quarter of 2014. The increase in gross margin percent was due to the favorable impact of foreign exchange rates on international inventories sold.
Operating expenses in the third quarter of 2015 were $2.683 billion, a decline of 7 percent compared with the third quarter of 2014. Research and development expenses decreased 10 percent to $1.143 billion, or 23.0 percent of revenue, driven primarily by a 2014 charge associated with the termination of tabalumab development, and to a lesser extent the favorable impact of foreign exchange rates. Marketing, selling and administrative expenses decreased 5 percent to $1.540 billion, due to the favorable impact of foreign exchange rates, partially offset by expenses related to new product launches.
Other income (expense) was income of $86.5 million in the third quarter of 2015, compared with income of $59.3 million in the third quarter of 2014.
The effective tax rate increased 1.6 percentage points compared to the third quarter of 2014 to 24.9 percent, due to an increased percentage of forecasted earnings in higher taxed jurisdictions.
Net income and earnings per share both increased 22 percent to $949.6 million and $0.89 respectively, compared with $781.2 million and $0.73, respectively, in the third quarter of 2014. The increases in net income and earnings per share were driven by higher operating income.
For further detail, see the reconciliation below as well as the Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information table later in this release.
Third Quarter20152014
% ChangeEarnings per share (reported)$
0.75$
0.4760%Novartis Animal Health 2014 results
—(.01)Novartis Animal Health inventory step-up
.01—Amortization of intangible assets
.10.08Branded Prescription Drug Fee
—.11Acquired in-process research and development
—.06Asset impairment, restructuring and other special charges
.03.02Earnings per share (non-GAAP)$
0.89$
0.7322%Numbers may not add due to rounding.
Year-to-Date Results
For the first nine months of 2015, worldwide revenue increased 1 percent compared to the same period in 2014 to $14.583 billion. Reported net income and earnings per share were $1.930 billion and $1.81, respectively. Net income and earnings per share, on a non-GAAP basis, were $2.828 billion and $2.65, respectively.
For further detail, see the reconciliation below as well as the Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information table later in this release.
Year-to-date20152014
% ChangeEarnings per share (reported)$
1.81$
1.82(1)%Novartis Animal Health 2014 results
—(.06)Novartis Animal Health inventory step-up
.10—Amortization of intangible assets
.29.24Branded Prescription Drug Fee
—.11Acquired in-process research and development
.20.06Asset impairment, restructuring and other special charges
.15.04Net charge related to repurchase of debt
.09—Earnings per share (non-GAAP)$
2.65$
2.2120%Numbers may not add due to rounding.
Select Revenue Highlights(Dollars in millions)
Third QuarterYear-to-Date20152014% Change20152014% ChangeHumalog®
$
705.0$
706.10%$
2,043.3$
2,056.1(1)%Alimta
628.5723.4(13)%1,865.82,067.0(10)%Cialis®
566.1568.40%1,672.31,668.60%Forteo®
348.9332.25%970.4941.23%Humulin®
316.7335.9(6)%948.81,004.5(6)%Cymbalta
242.9368.0(34)%804.01,247.5(36)%Zyprexa®
237.9257.4(8)%711.2784.2(9)%Strattera®
196.9191.93%562.4543.7
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