Eli Lilly Reports Third-Quarter 2016 Results

INDIANAPOLIS, Oct. 25, 2016 /PRNewswire/ -- Eli Lilly and Company (NYSE: LLY) today announced financial results for the third quarter of 2016.

Certain financial information for 2016 and 2015 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 2016 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 volume-driven growth in the third quarter was once again led by our portfolio of recently approved medicines including Trulicity, Cyramza, Taltz and Jardiance," said John C. Lechleiter, Ph.D., Lilly's chairman, president and chief executive officer. "Our pipeline also continues to advance with a wide array of promising treatments for conditions from Alzheimer's disease to diabetes and cancer. Our focus on innovation and bringing important new medicines to the people who need them is leading Lilly into a new era of growth for the benefit of patients and shareholders alike."

Key Events Over the Last Three Months

Regulatory

• The U.S. Food and Drug Administration (FDA) granted approval of Lartruvo (olaratumab), in combination with doxorubicin, for the treatment of adults with soft tissue sarcoma with a histologic subtype for which an anthracycline-containing regimen is appropriate and which is not amenable to curative treatment with radiotherapy or surgery. Lartruvo's indication was approved under the Accelerated Approval process and is based on data from a Phase 2 trial. Continued approval for this indication may be contingent upon verification and description of clinical benefit in a confirmatory trial.
• The company and AstraZeneca received FDA Fast Track designation for the development program in Alzheimer's disease for AZD3293, an oral beta secretase cleaving enzyme (BACE) inhibitor currently in Phase 3 clinical trials. The FDA's Fast Track program is designed to expedite the development and review of new therapies to treat serious conditions and address key unmet medical needs.
• The European Medicines Agency's (EMA) Committee for Medicinal Products for Human Use (CHMP) issued positive opinions recommending:
  • Conditional marketing authorization for Lartruvo (olaratumab), in combination with doxorubicin, for the treatment of adults with advanced soft tissue sarcoma not amenable to curative treatment with radiotherapy or surgery and who have not been previously treated with doxorubicin.
  • Marketing authorization for Glyxambi^®, a single tablet combining Jardiance^® (empagliflozin) and Trajenta^® (linagliptin), for use in adults with type 2 diabetes. Glyxambi, Jardiance and Trajenta are part of the company's alliance with Boehringer Ingelheim.

Clinical

• Following a pre-planned interim analysis, an independent Data Monitoring Committee recommended continuing a Phase 3 trial of abemaciclib without modification as the interim efficacy criteria were not met. The trial will continue into the first half of 2017. The trial compares abemaciclib with fulvestrant versus placebo with fulvestrant in women with hormone-receptor-positive, human epidermal growth factor receptor 2-negative locally advanced or metastatic breast cancer.
• Taltz^® met its primary endpoint of ACR20 response rate in a Phase 3 study investigating the treatment of psoriatic arthritis. Taltz showed improved signs and symptoms in adult patients who have previously been treated with a biologic disease-modifying antirheumatic drug. Lilly plans to submit to the FDA during the first half of 2017.
• Earlier this month, last patient visit was achieved in the Phase 3 trial evaluating solanezumab in patients with mild Alzheimer's disease. As a result, the company plans to issue a top-line press release before the end of the year.

Business Development/Other

• The company announced an agreement to acquire Boehringer Ingelheim Vetmedica, Inc.'s U.S. feline, canine and rabies vaccines portfolio, as well as a fully integrated manufacturing and research and development site, for approximately $885 million, including the estimated cost of acquired inventory. The acquisition is anticipated to close by early 2017, subject to approval by the U.S. Federal Trade Commission and also subject to both antitrust approval of and the closing of a previously announced asset swap transaction between Boehringer Ingelheim and Sanofi SA.
• The U.S. Patent and Trademark Office determined that the method-of-use patents for Effient^® are invalid. The patents would have provided intellectual property protection until 2023. The owners of the patent, Daiichi Sankyo and Ube, have appealed this ruling.
• The company announced that John C. Lechleiter will retire as president and chief executive officer from the company effective December 31, 2016. Lechleiter will continue on Lilly's board of directors until May 31, 2017, serving as non-executive chairman. David A. Ricks, currently senior vice president and president, Lilly Bio-Medicines, will assume the role of president and chief executive officer and join the board on January 1, 2017. He will become chairman of the board on June 1, 2017.

Third-Quarter Reported Results

In the third quarter of 2016, worldwide revenue was $5.192 billion, an increase of 5 percent compared with the third quarter of 2015. The increase in revenue was driven by a 4 percent increase in volume and 1 percent favorable impact of foreign exchange rates, partially offset by 1 percent due to lower realized prices. The increase in worldwide volume was driven by new pharmaceutical products, including Trulicity^®, Cyramza^®, Taltz and Jardiance, as well as Humalog^® and Erbitux^® (due to the transfer of commercialization rights in North America to Lilly), partially offset by lower volumes for Zyprexa^®, animal health products, Alimta^® and Cialis^®.

Revenue in the U.S. increased 12 percent to $2.838 billion, driven by increased volume for several pharmaceutical products, including Trulicity, Humalog, Taltz and Jardiance, as well as Erbitux (due to the transfer of commercialization rights in North America to Lilly), partially offset by lower volumes for animal health products, Zyprexa and Cialis. Higher realized prices in the U.S., primarily for Cialis and Forteo^®, were largely offset by lower realized prices for Humalog. When the Cymbalta^® patent expired at the end of 2013, the return reserve was increased to reflect expected product returns. As a result of lower-than-expected return volume, a reduction of approximately $145 million in the Cymbalta return reserve increased U.S. revenue in the third quarter of 2016, favorably impacting both volume and price.

Revenue outside the U.S. decreased 3 percent to $2.354 billion, as lower realized prices and volume, primarily from the losses of exclusivity for Cymbalta in Europe and Canada, Zyprexa in Japan and Alimta in several countries, more than offset increased volume for several recently launched pharmaceutical products, including Trulicity and Cyramza, and the favorable impact of foreign exchange rates, primarily the Japanese yen, partially offset by other foreign currencies.

Gross margin increased 2 percent to $3.791 billion in the third quarter of 2016 compared with the third quarter of 2015.

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