Eli Lilly Reports Fourth-Quarter And Full-Year 2015 Results

INDIANAPOLIS, Jan. 28, 2016 /PRNewswire/ -- Eli Lilly and Company (NYSE: LLY) today announced financial results for the fourth quarter and full year of 2015.

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 2016 financial guidance is also being provided on both a reported and a non-GAAP basis. The non-GAAP measures are presented in order to provide additional insights into the underlying trends in the company's business.

"Lilly's 2015 results reinforce our confidence in the future with six FDA approvals and multiple positive Phase III data readouts, as well as encouraging results from newly launched products including Cyramza, Trulicity, Jardiance and Basaglar,"  said John C. Lechleiter, Ph.D., Lilly's chairman, president and chief executive officer. "In 2016, we aim to continue revenue growth, margin expansion and value creation for our shareholders, all while sustaining a flow of innovative medicines from our pipeline to improve people's lives."

Key Events Over the Last Three Months

Commercial

• The company launched Portrazza (necitumumab) in the U.S., in combination with gemcitabine and cisplatin, as the first biologic for the first-line treatment of patients with metastatic squamous non-small cell lung cancer (NSCLC).

Regulatory

• The U.S. Food and Drug Administration (FDA) approved Portrazza.
• The FDA approved Basaglar^® (insulin glargine injection) 100 units/mL. Basaglar is a long-acting insulin with an identical amino acid sequence to Lantus^®, another U-100 insulin glargine. Per the company's settlement agreement with Sanofi, Basaglar will be available in the U.S. starting on December 15, 2016. Basaglar is part of the Boehringer Ingelheim and Lilly Diabetes Alliance.
• Following positive opinions from Europe's Committee for Medicinal Products for Human Use (CHMP), the European Commission has approved:
  • Cyramza^® (ramucirumab) in combination with docetaxel for the treatment of adult patients with locally advanced or metastatic NSCLC with disease progression after platinum-based chemotherapy.
  • Cyramza in combination with FOLFIRI for the treatment of adult patients with metastatic colorectal cancer (mCRC) with disease progression on or after prior therapy with bevacizumab, oxaliplatin and a fluoropyrimidine.
• The company and Incyte Corporation announced the submission of a new drug application to the FDA for the approval of oral once-daily baricitinib for the treatment of moderately-to-severely active rheumatoid arthritis. Baricitinib was also submitted to the European Medicines Agency for the treatment of moderately-to-severely active rheumatoid arthritis.
• Within the Boehringer Ingelheim and Lilly Diabetes Alliance:
  • The FDA accepted the filing of data from the long-term clinical trial investigating cardiovascular (CV) outcomes for Jardiance^® (empagliflozin) in adults with type 2 diabetes at high risk for CV events. The data were also submitted to European regulators. Jardiance is the only diabetes medicine to have demonstrated a significant reduction in both cardiovascular risk and cardiovascular death in a dedicated outcomes trial.
  • The fixed-dose combination tablet containing empagliflozin and linagliptin was submitted to European regulators.
• The company received a positive opinion from Europe's CHMP recommending approval of Portrazza in combination with gemcitabine and cisplatin chemotherapy for the treatment of adult patients with locally advanced or metastatic epidermal growth factor receptor expressing squamous NSCLC who have not received prior chemotherapy for this condition.

Clinical

• The company ceased development of basal insulin peglispro, a potential treatment for type 1 and type 2 diabetes.
• The company announced that psoriatic arthritis patients treated with ixekizumab for 24 weeks achieved significant improvements in signs and symptoms of their disease when compared with placebo, while also experiencing significantly less progression of radiographic structural joint damage, reduced disability when performing certain physical functions and improved skin clearance of plaque psoriasis.

Business Development/Other

• The company and Merck announced extensions of an existing collaboration to:
  • Evaluate the safety and efficacy of the combination of Lilly's Alimta^® (pemetrexed for injection) and Merck's Keytruda^® (pembrolizumab) in a pivotal Phase III study in first-line nonsquamous NSCLC.
  • Evaluate abemaciclib, Lilly's cyclin-dependent kinase (CDK) 4 and 6 inhibitor, and Merck's Keytruda in a Phase I study across multiple tumor types.
• The company announced an agreement with Roche Diagnostics related to Roche's ongoing development of a commercially scalable cerebrospinal fluid assay for amyloid-beta 1-42.
• The company revealed plans to expand its global research and development headquarters in Indianapolis, Indiana. A new $70 million building within Lilly's development complex will feature a multi-disciplinary laboratory to facilitate collaboration across multiple R&D functions.
• The company announced it will close its animal health manufacturing facility in Sligo, Ireland. As a result of this action, the company expects to record a charge of approximately $100 million (pre-tax) or approximately $0.09 per share (after tax) in the first-quarter of 2016.
• The company announced a dividend for the first quarter of 2016 of $0.51 per share on outstanding common stock, representing a 2 percent increase. The annual indicated rate is now $2.04 per share.
• As part of its previously announced share repurchase program, the company repurchased approximately $250 million in company stock in the fourth quarter of 2015. For the full year 2015, the company returned approximately $2.9 billion in cash to shareholders through both its dividend and share repurchase program.

Fourth-Quarter Reported Results
In the fourth quarter of 2015, worldwide revenue was $5.376 billion, an increase of 5 percent compared with the fourth quarter of 2014. The revenue increase was comprised of 7 percent due to increased volume and 3 percent due to higher prices, partially offset by 6 percent due to the unfavorable impact of foreign exchange rates. The increase in worldwide volume was primarily due to the inclusion of revenue from Novartis Animal Health and increased volume for several products, including Trulicity and Cyramza, as well as Erbitux due to the transfer of commercialization rights in North America. These worldwide volume increases were partially offset by the residual impact of the loss of exclusivity for Cymbalta^®. Revenue in the U.S. increased 15 percent to $2.821 billion, driven by higher prices, the inclusion of revenue from Novartis Animal Health and increased volumes for several pharmaceutical products. Revenue outside the U.S. decreased 4 percent to $2.555 billion, driven by the unfavorable impact of foreign exchange rates and the loss of exclusivity for Cymbalta in Europe in 2014, partially offset by the inclusion of revenue from Novartis Animal Health and increased volumes for several pharmaceutical products.

Gross margin increased 3 percent to $3.986 billion in the fourth quarter of 2015 compared to the fourth quarter of 2014. Gross margin as a percent of revenue was 74.2 percent, a decrease of 1.3 percentage points compared with the fourth quarter of 2014. The decrease in gross margin percent was primarily due to the inclusion of Novartis Animal Health and the transfer of Erbitux commercialization rights in North America, partially offset by productivity improvements from the company's diabetes manufacturing technical agenda, efficiencies in other manufacturing processes and higher prices in the U.S.

Operating expenses in the fourth quarter of 2015, defined as the sum of research and development, and marketing, selling and administrative expenses, were $3.243 billion, an increase of 9 percent compared with the fourth quarter of 2014. Research and development expenses increased 22 percent to $1.444 billion, or 26.9 percent of revenue, primarily driven by charges associated with the terminations of evacetrapib and basal insulin peglispro of approximately $135 million, and higher late-stage clinical development costs. Marketing, selling and administrative expenses remained flat at $1.798 billion, as the favorable impact of foreign exchange rates and lower litigation expenses were offset by expenses related to new product launches and the inclusion of Novartis Animal Health.

In the fourth quarter of 2015, the company recognized acquired in-process research and development charges of $199.0 million. These charges were primarily associated with the acquisition of worldwide rights to an intranasal glucagon from Locemia Solutions. In the fourth quarter of 2014, the company recognized acquired in-process research and development charges of $105.2 million. The 2014 charges were comprised of $55.2 million associated with revisions to the agreement between Lilly and Boehringer Ingelheim and $50.0 million related to a collaboration with Adocia focused on developing an ultra-rapid insulin, known as BioChaperone Lispro.

In the fourth quarter of 2015, the company recognized asset impairment, restructuring and other special charges of $144.9 million. The charges are associated with severance costs, integration costs related to the acquisition of Novartis Animal Health and asset impairments. In the fourth quarter of 2014, the company recognized asset impairment, restructuring and other special charges of $401.0 million, comprised of asset impairments primarily associated with the closure of a manufacturing site in Puerto Rico, severance costs related to ongoing cost containment efforts to reduce the company's cost structure and global workforce, and costs for the then-pending acquisition of Novartis Animal Health.

Operating income in the fourth quarter of 2015 was $399.9 million, an increase of 6 percent compared with the fourth quarter of 2014, as lower asset impairment, restructuring and other special charges, and higher gross margin were largely offset by higher operating expenses and acquired in-process research and development charges.

Other income (expense) was income of $44.7 million in the fourth quarter of 2015, compared with income of $137.2 million in the fourth quarter of 2014. Other income during the fourth quarter of 2014 was primarily driven by $92.0 million of other income associated with revisions to the agreement between Lilly and Boehringer Ingelheim and net gains on investments.

The effective tax rate was a benefit of 7.6 percent in the fourth quarter of 2015, compared with an expense of 16.6 percent in the fourth quarter of 2014. The effective tax rates for both periods include the full-year benefit of the renewal of certain U.S. tax provisions, including the R&D tax credit, at the end of each respective period. The 2015 effective tax rate also includes a favorable tax impact of acquired in-process research and development charges, asset impairment, restructuring and other special charges, and a net discrete tax benefit of $17 million.

In the fourth quarter of 2015, net income increased 12 percent to $478.4 million, and earnings per share increased 13 percent to $0.45, compared with $428.5 million and $0.40, respectively, in the fourth quarter of 2014. The increases in net income and earnings per share were driven by a lower effective tax rate and higher operating income, partially offset by lower other income.

Fourth-Quarter Non-GAAP Measures
On a non-GAAP basis, worldwide revenue of $5.376 billion in the fourth quarter of 2015 remained flat compared with the fourth quarter of 2014.

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