Pharmiweb ChannelsAll | PharmaCo | Clinical Research | R&D/BioTech | Sales/Mktg | Healthcare | Recruitment | Pharmacy | Medical Comms

Pharmiweb.com RSS Feed Pharmiweb.com RSS Feeds

Advertising

Press Release

Lilly Reports Strong Fourth-Quarter and Full-Year 2017 Revenue Growth, Increases 2018 EPS Guidance

Lilly
Posted on: 31 Jan 18

- Fourth-quarter 2017 revenue increased 7 percent, driven primarily by volume growth from new pharmaceutical products, while operating expenses remained flat.

- Fourth-quarter 2017 earnings per share (EPS) reflected a loss of $1.58 on a reported basis, primarily due to an estimated charge of $1.9 billion associated with recently enacted U.S. tax reform legislation and charges associated with reducing the company's cost structure. Fourth-quarter 2017 EPS were $1.14 on a non-GAAP basis.

- Full-year 2017 revenue increased 8 percent to $22.9 billion. Full-year 2017 EPS totaled a loss of $0.19 on a reported basis. Full-year 2017 EPS totaled $4.28 on a non-GAAP basis.

- Pharmaceutical revenue in the fourth quarter of 2017 grew 9 percent. New product revenue, composed of Trulicity, Cyramza, Taltz, Basaglar, Jardiance, Lartruvo, Olumiant, Verzenio and Portrazza, drove 12 percent volume growth and represented 23 percent of total revenue.

- Pipeline milestones included the approval of Taltz in the U.S. and European Union for active psoriatic arthritis and early-stage pipeline progress, including the initiation of a clinical trial for Lilly's automated insulin delivery system.

- The company has increased 2018 EPS to be in the range of $4.39 to $4.49 on a reported basis and $4.81 to $4.91 on a non-GAAP basis. This change reflects the estimated benefit from recently enacted U.S. tax reform legislation.

INDIANAPOLIS, Jan. 31, 2018 /PRNewswire/ -- Eli Lilly and Company (NYSE: LLY) today announced financial results for the fourth quarter and full year of 2017.

$ in millions, except

per share data

Fourth Quarter

%

Full Year

%

2017

2016

Change

2017

2016

Change

Revenue

$

6,160.7

$

5,760.5

7%

$

22,871.3

$

21,222.1

8%

Net Income (Loss) – Reported

(1,656.9)

771.8

NM

(204.1)

2,737.6

NM

Earnings (Loss) Per Share – Reported

(1.58)

0.73

NM

(0.19)

2.58

NM

Net Income – Non-GAAP

1,206.7

1,013.4

19%

4,530.4

3,735.6

21%

EPS – Non-GAAP

1.14

0.95

20%

4.28

3.52

22%

Certain financial information for 2017 and 2016 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 periods. Non-GAAP measures exclude the items described in the reconciliation tables later in the release. The company's 2018 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.

"Lilly's new products, including Trulicity, Taltz and Jardiance, continued to drive solid revenue growth in the fourth quarter of 2017, while we maintained flat operating expenses," said David A. Ricks, Lilly's chairman and CEO. "Momentum continues for our innovation-based strategy. We recently received approval for Taltz in the U.S. and European Union for active psoriatic arthritis, are encouraged by early use of Verzenio for breast cancer and expect further pipeline progress in 2018 in areas of significant patient need, including cancer, immunologic disorders, diabetes, neurodegeneration and pain."

Key Events Over the Last Three Months

Regulatory

Regarding Taltz® (ixekizumab), for the treatment of adults with active psoriatic arthritis:

The U.S. Food and Drug Administration (FDA) issued its approval and the company launched in the U.S.

The European Commission issued its approval.

Clinical

The company announced top-line results from its Phase 3 study of Cyramza® (ramucirumab) in combination with cisplatin and capecitabine or 5-FU (5-fluorouracil) in the first-line treatment of patients with HER2-negative metastatic gastric or gastroesophageal junction adenocarcinoma. The trial met its primary endpoint of progression-free survival but did not improve overall survival, a secondary endpoint. The company does not intend to seek regulatory approval based on the results of this study.

The company initiated a clinical trial to evaluate the functionality and safety of its automated insulin delivery system in Type 1 diabetes, which is a hybrid closed-loop platform that uses connected devices -- an insulin pump with a dedicated controller, dosing algorithm and continuous glucose monitor -- to automate insulin dosing. This system is part of the Connected Diabetes Ecosystem, which is being designed to make diabetes management easier by enabling people to use insulin more effectively.

Fourth-Quarter Reported Results In the fourth quarter of 2017, worldwide revenue was $6.161 billion, an increase of 7 percent compared with the fourth quarter of 2016. The revenue increase was driven by a 4 percent increase due to volume, a 2 percent increase due to higher realized prices, and a 1 percent increase due to the favorable impact of foreign exchange rates.

Revenue in the U.S. increased 6 percent, to $3.423 billion, due to increased volume for new pharmaceutical products, including Trulicity®, Basaglar®, Taltz, Jardiance®, Lartruvo™ and Verzenio™, as well as higher realized prices for several pharmaceutical products, primarily Forteo® and Humulin®. The increase in revenue was partially offset by decreased volume due to loss of exclusivity for Strattera® and Effient®, as well as decreased demand for Cialis® and food animal products, and lower realized prices for Humalog®. Realized prices reflect increased revenue related to changes in estimates for rebates and discounts of a similar magnitude in the fourth quarter of both 2017 and 2016.

Revenue outside the U.S. increased 8 percent, to $2.738 billion, largely due to increased volume for several new pharmaceutical products, including Trulicity, Taltz, Cyramza, Jardiance and Olumiant® and, to a lesser extent, the favorable impact of foreign exchange rates.

Gross margin increased 6 percent, to $4.536 billion, in the fourth quarter of 2017 compared with the fourth quarter of 2016. Gross margin as a percent of revenue was 73.6 percent, a decrease of 1.0 percentage point compared with the fourth quarter of 2016. The decrease in gross margin percent was primarily due to the effect of foreign exchange rates on international inventories sold and product mix, partially offset by manufacturing efficiencies and higher realized prices.

Operating expenses in the fourth quarter of 2017, defined as the sum of research and development and marketing, selling and administrative expenses, remained flat at $3.254 billion. Research and development expenses increased 2 percent, to $1.473 billion, or 23.9 percent of revenue. Marketing, selling and administrative expenses decreased 1 percent, to $1.780 billion, due to decreased expenses related to late life-cycle products, partially offset by increased expenses related to new pharmaceutical products. Operating expenses were 52.8 percent of revenue in the fourth quarter of 2017, a reduction of 3.4 percentage points compared with the fourth quarter of 2016.

In the fourth quarter of 2017, the company recognized an acquired in-process research and development charge of $50.0 million associated with a strategic collaboration with CureVac. In the fourth quarter of 2016, the company recognized an acquired in-process research and development charge of $30.0 million associated with an agreement with AstraZeneca to co-develop MEDI1814, a potential disease-modifying treatment for Alzheimer's disease.

In the fourth quarter of 2017, the company recognized asset impairment, restructuring and other special charges of $1.003 billion. The charges are primarily associated with efforts to reduce the company's cost structure, including the U.S. voluntary early retirement program. In the fourth quarter of 2016, the company recognized asset impairment, restructuring and other special charges of $147.6 million, primarily associated with global severance costs and integration costs related to the acquisition of Novartis Animal Health.

Operating income in the fourth quarter of 2017 was $229.0 million, a decrease of $647.2 million compared with the fourth quarter of 2016, primarily driven by higher asset impairment, restructuring and other special charges, partially offset by higher gross margin.

Other income (expense) was income of $55.1 million in the fourth quarter of 2017, compared with income of $15.8 million in the fourth quarter of 2016. The increase in other income was driven primarily by higher net gains on sales of investments in the fourth quarter of 2017 as compared with 2016.

During the fourth quarter of 2017, the company recorded income tax expense of $1.941 billion, which included an estimated tax charge of $1.914 billion, despite earning $284.1 million of income before income taxes. The estimated tax charge is based on recently enacted U.S. tax reform legislation, including a one-time repatriation transition tax, also known as the "toll tax," of approximately $3.6 billion. The estimated tax charge is subject to change based upon additional analysis and subsequent regulations, interpretations and guidance. As a result of new rules related to repatriation, Lilly may utilize more than $9 billion in cash held across the company's global affiliates.

In the fourth quarter of 2017, net income (loss) and earnings (loss) per share were $(1.657) billion and $(1.58), respectively, compared with $771.8 million and $0.73, respectively, in the fourth quarter of 2016. The decreases in net income (loss) and earnings (loss) per share were primarily driven by the impact of recently enacted U.S. tax reform legislation, as well as higher asset impairment, restructuring and other special charges.

Fourth-Quarter Non-GAAP Measures On a non-GAAP basis, fourth-quarter 2017 gross margin increased 6 percent, to $4.710 billion. Gross margin as a percent of revenue was 76.5 percent, a decrease of 0.9 percentage points compared with the fourth quarter of 2016. The decrease in gross margin percent was primarily due to the effect of foreign exchange rates on international inventories sold and product mix, partially offset by manufacturing efficiencies and higher realized prices.

Operating expenses were 52.8 percent of revenue in the fourth quarter of 2017, a reduction of 3.4 percentage points compared with the fourth quarter of 2016.

Operating income increased $239.4 million, or 20 percent, to $1.458 billion in the fourth quarter of 2017, due to higher gross margin.

The effective tax rate was 20.2 percent in the fourth quarter of 2017, compared with 17.9 percent in the fourth quarter of 2016. The higher effective tax rate for the fourth quarter of 2017 was primarily due to a lower net discrete tax benefit compared with the fourth quarter of 2016.

In the fourth quarter of 2017, net income increased 19 percent, to $1.207 billion, and earnings per share increased 20 percent, to $1.14, compared with $1.013 billion and $0.95, respectively, in the fourth quarter of 2016. The increases in net income and earnings per share were primarily driven by higher operating income.

For further detail of non-GAAP measures, see the reconciliation below as well as the Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information table later in this press release.

Fourth Quarter

2017

2016

% Change

Earnings (loss) per share (reported)

$

(1.58)

$

0.73

NM

U.S. tax reform legislation

1.81

Asset impairment, restructuring and other special charges

.75

.10

Amortization of intangible assets

.11

.11

Acquired in-process research and development

.03

.02

Inventory step-up costs associated with the acquisition of Boehringer Ingelheim Vetmedica's U.S. feline, canine and rabies vaccine portfolio

.01

Earnings per share (non-GAAP)

$

1.14

$

0.95

20%

Numbers may not add due to rounding.

Full-Year Reported Results For the full year 2017, worldwide revenue increased 8 percent compared with 2016 to $22.871 billion. The revenue increase was driven by a 6 percent increase due to volume and a 2 percent increase due to higher realized prices.

Revenue in the U.S. increased 11 percent to $12.785 billion, driven by increased volume for new pharmaceutical products, including Trulicity, Taltz, Basaglar, Lartruvo and Jardiance, and higher realized prices for several pharmaceutical products, primarily Forteo and Cialis, as well as increased volume for companion animal products from the acquisition of Boehringer Ingelheim Vetmedica's U.S. feline, canine and rabies vaccine portfolio. The increase in revenue was partially offset by decreased volume due to loss of exclusivity for Strattera and Effient, as well as decreased demand for Cialis and food animal products. Cymbalta revenue declined $154 million, primarily driven by an increase in revenue due to a reduction to the return reserve in 2016.

Revenue outside the U.S. increased 4 percent to $10.086 billion, due to increased volume for several new pharmaceutical products, primarily driven by Trulicity and Cyramza. The increase in revenue was partially offset by competitive pressure and the loss of exclusivity for Alimta in several countries and lower volume from the loss of exclusivity for Zyprexa in Japan.

Gross margin increased 8 percent to $16.801 billion in 2017. Gross margin as a percent of revenue was 73.5 percent, an increase of 0.1 percentage points compared with 2016. The increase in gross margin percent was primarily due to manufacturing efficiencies and higher realized prices, offset by the impact of foreign exchange rates on international inventories sold and product mix.

Total operating expenses increased 1 percent to $11.870 billion in 2017. Research and development expenses increased 1 percent to $5.282 billion, or 23.1 percent of revenue. Marketing, selling and administrative expenses increased 2 percent to $6.588 billion, driven by increased marketing expenses for new products that were partially offset by decreased expenses related to late life-cycle products. Operating expenses were 51.9 percent of revenue in 2017, a reduction of 3.2 percentage points compared with 2016.

In 2017, the company recognized acquired in-process research and development charges of $1.113 billion resulting from business development activity, primarily related to the acquisition of CoLucid Pharmaceuticals. In 2016, the company recognized acquired in-process research and development charges of $30.0 million associated with the agreement with AstraZeneca to co-develop MEDI1814, a potential disease-modifying treatment for Alzheimer's disease.

In 2017, the company recognized asset impairment, restructuring and other special charges of $1.674 billion. The charges are primarily associated with efforts to reduce the company's cost structure, including the U.S. voluntary early retirement program. In 2016, the company recognized asset impairment, restructuring, and other special charges of $382.5 million associated with integration and severance costs related to the acquisition of Novartis Animal Health, other global severance costs, and asset impairments related to the closure of an animal health manufacturing facility in Ireland.

Operating income in 2017 decreased 38 percent compared with 2016 to $2.145 billion, as higher operating expenses driven by asset impairment, restructuring, and other special charges, as well as acquired in-process research and development, were partially offset by higher gross margin.

Other income (expense) was income of $52.4 million in 2017. Other income (expense) in 2016 was expense of $84.8 million driven by a $203.9 million charge related to the impact of the Venezuelan financial crisis, including the significant deterioration of the bolívar, partially offset by higher net gains on investments.

During 2017, the company recorded income tax expense of $2.402 billion, which included an estimated tax charge of $1.914 billion, despite earning $2.197 billion of income before income taxes. The estimated tax charge is based on recently enacted U.S. tax reform legislation, including the toll tax of approximately $3.6 billion. The estimated tax charge is subject to change based upon additional analysis and subsequent regulations, interpretations and guidance. As a result of new rules related to repatriation, Lilly may utilize more than $9 billion in cash held across the company's global affiliates. The company's effective tax rate in 2016 was 18.9 percent.

For the full year 2017, net income (loss) and earnings (loss) per share were $(204.1) million and $(0.19), respectively, compared with $2.738 billion, and $2.58, respectively, in 2016. The decreases in net income (loss) and earnings (loss) per share were driven by the impact of recently enacted U.S. tax reform legislation, as well as higher asset impairment, restructuring and other special charges and acquired in-process research and development charges, partially offset by higher gross margin.

Full-Year Non-GAAP Measures On a non-GAAP basis for the full year 2017, operating income increased $1.094 billion, or 24 percent, to $5.649 billion driven by higher gross margin. The effective tax rate was 20.5 percent in 2017, compared with 20.1 percent in 2016. Net income increased 21 percent and earnings per share increased 22 percent to $4.530 billion, and $4.28, respectively.

For further detail of non-GAAP measures, see the reconciliation below as well as the Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information table later in this press release.

Editor's Details

Mike Wood
PharmiWeb.com
www.pharmiweb.com
editor@pharmiweb.com

Last updated on: 31/01/2018

Advertising
Site Map | Privacy & Security | Cookies | Terms and Conditions

PharmiWeb.com is Europe's leading industry-sponsored portal for the Pharmaceutical sector, providing the latest jobs, news, features and events listings.
The information provided on PharmiWeb.com is designed to support, not replace, the relationship that exists between a patient/site visitor and his/her physician.