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Eli Lilly and Company (LLY) Profiles Its Exceptional New Product Flow And Pipeline To Wall Street

10/19/2005 5:12:25 PM

NEW YORK, Dec. 9 /PRNewswire-FirstCall/ -- Eli Lilly and Company said today at its annual meeting with the investment community that the company expects to add to its industry-leading new product flow in 2005 with three product approvals in key markets -- Cymbalta(R) for depression in Europe followed by duloxetine for stress urinary incontinence and exenatide for type 2 diabetes in the U.S. In addition, the company said it remains on track for a 2005 U.S. submission of ruboxistaurin for symptoms related to nerve damage caused by diabetes.

The company also detailed an additional nine compounds and ten new indications that are expected to be in mid-to-late stage development in 2005. These represent potential breakthrough treatments for cardiovascular disorders, diabetes, brain and other cancers, fibromyalgia (pain disorder), urological disorders, osteoporosis, Alzheimer's disease, insomnia and other central nervous system disorders. In addition, select molecules from the company's early-stage pipeline, including potential treatments for cancer and obesity, were reviewed. A list of the pipeline compounds discussed today is available in the presentation slides on Lilly's website at .

"Our strategy of independence, innovation, partnering and productivity remains the best approach in the current business environment and positions Lilly well to deliver long-term value to patients and shareholders," said Sidney Taurel, chairman, president and chief executive officer for Lilly. "In the past three years, we have doubled our product line with the launch of eight innovative new medicines that address significant unmet medical needs. Also, within the past 18 months, we've added seven new indications or formulations for our existing and new products. And, our pipeline remains robust even after this recent surge of launches."

"The anticipated launches of Cymbalta in Europe and duloxetine and exenatide in the U.S. next year will further add to our newer product sales, which are expected to double as a percent of total sales in 2005, to 20 percent," said Taurel. "In addition, our sales growth next year, which will accelerate in the second half, is virtually all tied to new products, thereby minimizing our dependence on any single product. We expect these new products and several others from our pipeline to drive the company's growth throughout this decade."

Taurel added, "Our most recent U.S. launch -- Cymbalta -- is off to an excellent start, and the trends are encouraging. In fact, prescribers are already beginning to embrace our new product as a first-line therapy for depression, including addressing both its emotional and painful physical symptoms. We've expanded Cymbalta's therapeutic reach and potential with the recent approval for diabetic peripheral neuropathic pain, and we're pursuing development for its use in anxiety and fibromyalgia. Thus, we ultimately hope to strengthen Cymbalta's profile with two mood indications and two pain indications."

"We are also taking action to address the challenges facing Zyprexa(R) in the marketplace and are committed to ensuring physicians understand which patients would benefit from Zyprexa's profile," said Taurel. "While we expect U.S. Zyprexa sales to decline for full year 2005, we believe our interventions will enable us to slow the erosion sometime next year. In addition, we continue to expect double-digit growth of Zyprexa outside the U.S. As a result, we expect a slight decline in our 2005 worldwide Zyprexa sales."

2004 Financial Guidance

The company reconfirmed 2004 adjusted earnings per share for the fourth quarter of $.73 to $.75 and for the full year of $2.80 to $2.82. The full- year adjusted earnings guidance excludes the $.33 per share first-quarter charge for acquired in-process research and development (IPR&D) related to the acquisition of Applied Molecular Evolution and the $.08 per share second- quarter charge for asset impairments. In addition, the company's adjusted earnings guidance for the fourth quarter and full year excludes the estimated $.19 to $.24 per share fourth-quarter charge for restructuring and asset impairments and a $.02 per share fourth-quarter charge for acquired IPR&D related to the inlicense of an insomnia compound from Merck KGaA. Including all these charges, the Generally Accepted Accounting Principles (GAAP) earnings-per-share guidance for fourth quarter and full year 2004 is $.47 to $.54 per share and $2.13 to $2.20 per share, respectively.

The American Jobs Creation Act of 2004, which includes an incentive for companies to reinvest their foreign earnings in the United States, was recently signed by the President of the United States. Consequently, the company anticipates accruing in the fourth quarter of 2004 the tax on the eligible overseas earnings expected to be repatriated to the United States in 2005. Any such additional tax is not included in the above guidance. The tax impact of the American Jobs Creation Act on the company remains under consideration.

2005 Financial Guidance

The company plans to adopt stock option expensing, effective January 1, 2005, instead of the mandatory July 1, 2005, adoption under the Financial Accounting Standards Board's proposed accounting standard on share-based payments. Lilly is taking this step because it will provide comparable accounting treatment for the full year and facilitates a change the company is making beginning in 2005 in its incentive compensation structure. Specifically, to align with market-based compensation trends while maintaining a strong pay-for-performance philosophy, the company will adjust its incentives for management by decreasing the use of stock options in favor of an increase in incentive stock grants that are contingent on achieving specified earnings goals. Overall this change will not increase the value of the equity compensation program for company management. The company estimates its incremental equity compensation expense due to these accounting and compensation changes will reduce diluted earnings per share by approximately $.25 in 2005. For comparison purposes, the company estimates that 2004 diluted earnings per share would be reduced by approximately $.24 if stock options had been expensed.

In order to facilitate year-to-year comparisons, the company is providing 2005 earnings per share guidance, both including as well as excluding the impact of the incremental equity compensation expense. For 2004, the GAAP and adjusted earnings-per-share guidance are disclosed above. In addition, in order to facilitate year-to-year comparisons, the company is providing 2004 adjusted earnings-per-share proforma as if stock options had been expensed in 2004.

Excluding the 2005 incremental equity compensation expense, the company expects 2005 earnings per share of $3.05 to $3.15, representing 8 percent to 12 percent growth compared with 2004 adjusted earnings per share of $2.80 to $2.82. Including the 2005 incremental equity compensation expense, the company expects 2005 earnings per share of $2.80 to $2.90, representing 9 percent to 13 percent growth compared with 2004 adjusted proforma earnings per share of $2.56 to $2.58. On a GAAP basis, the company's 2005 earnings-per- share guidance of $2.80 to $2.90 compares with 2004 earnings-per-share guidance of $2.13 to $2.20, representing growth of 27 percent to 36 percent. A more complete reconciliation follows:

% Change Full Year Expectations Over/(Under) 2005 2004 2004 -------------- -------------- -------------- E.P.S. (GAAP) $2.80 to $2.90 $2.13 to $2.20 27% to 36% Eliminate unusual charges: Acquired in-process R&D - .35 Asset impairments, restructuring and other special charges - .27 to .32 Eliminate incremental equity compensation expense .25 - -------------- -------------- E.P.S. (adjusted) $3.05 to $3.15 $2.80 to $2.82 8% to 12% -------------- -------------- Include incremental equity compensation expense for 2005 and proforma stock option expense for 2004 (.25) (.24) -------------- -------------- E.P.S. (with options expensed) $2.80 to $2.90 $2.56 to $2.58 9% to 13% ============== ==============

For 2005, the company expects sales to grow 8 percent to 10 percent, gross margins as a percent of sales to decline by roughly 50 basis points to 75 basis points, marketing and administrative expenses to grow in the low-single digits, research and development expense to grow in the mid-single digits, other income to contribute approximately $175 million to $225 million and the effective tax rate to be about 22 percent.

Webcast of Investment Community Meeting

A live webcast of the Lilly Investment Community meeting, along with presentation slides, is available through a link on Lilly's website at . The meeting will start today at 8:30 a.m. Eastern Time and last until approximately 12:30 p.m. The webcast will be available for replay through January 7, 2005.

Lilly, a leading innovation-driven corporation, is developing a growing portfolio of first-in-class and best-in-class pharmaceutical products by applying the latest research from its own worldwide laboratories and from collaborations with eminent scientific organizations. Headquartered in Indianapolis, Ind., Lilly provides answers -- through medicines and information -- for some of the world's most urgent medical needs. More information about Lilly is available at . F-LLY

This press release contains forward-looking statements that are based on management's current expectations, but actual results may differ materially due to various factors. There are significant risks and uncertainties in pharmaceutical research and development. There can be no guarantees with respect to pipeline products that the products will receive the necessary clinical and manufacturing regulatory approvals or that they will prove to be commercially successful. The company's results may also be affected by such factors as competitive developments affecting current growth products; rate of sales growth of recently launched products; the timing of anticipated regulatory approvals and launches of new products; other regulatory developments and government investigations; patent disputes and other litigation involving current and future products (including the outcome of the Zyprexa patent litigation that was tried in front of the federal district court in Indianapolis in January and February 2004); the impact of governmental actions regarding pricing, importation, and reimbursement for pharmaceuticals; changes in tax law; and the impact of exchange rates. For additional information about the factors that affect the company's business, please see Exhibit 99 to the company's latest Form 10-Q filed November 2004. The company undertakes no duty to update forward-looking statements.

Cymbalta(R) (duloxetine hydrochloride, Lilly) Zyprexa(R) (olanzapine, Lilly) (Logo: )

Photo: NewsCom: Photo Desk, photodesk@prnewswire.comEli Lilly and Company

CONTACT: Terra Fox, +1-317-276-5795, or Phil Belt (on-site in New York),+1-317-431-6506, both of Eli Lilly and Company

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