Eli Lilly’s Revenue Boosted by New Pharma Products

Worldwide revenues grew 7% Y-o-Y to $5.76 billion, driven by an 8% increase in volume

Global pharma major Eli Lilly and Co. (NYSE: LLY) announced its Q4 FY16 and full-year FY16 financial results on January 31st, 2017.

The Indianapolis, Indiana-based company discovers, develops, manufactures, and markets pharmaceutical products worldwide. It operates through two segments: Human Pharmaceutical Products and Animal Health Products. The Company offers endocrinology products to treat diabetes, as well as treatments for osteoporosis, depressive disorders, diabetic peripheral neuropathic pain, anxiety disorders, and fibromyalgia. In addition, the Company offers drugs to treat non-small cell lung, colorectal, head and neck, pancreatic, metastatic breast, and metastatic gastric cancers. Further, it provides animal health products, feed additives; and antibiotics. Read more about Eli Lilly’s financial results below.

Q4 FY16 financial highlights

During Q4 FY16, Eli Lilly’s worldwide revenues grew by 7% Y-o-Y to $5.76 billion, driven by an 8% increase in volume, a 1% favorable impact of foreign exchange rates, and a realized price decrease of 1%, primarily due to lower realized prices outside the US. The increase in worldwide volume was driven by Trulicity® and other new pharmaceutical products, including Jardiance, Taltz®, Cyramza®, and Basaglar. The increase in volume was also driven by Humalog®, Humulin® and companion animal products. The total volume increase was partially offset by decreased volumes for Alimta, Zyprexa® and Cymbalta®.

During Q4 FY16, Eli Lilly’s US revenue jumped 14% to $3.22 billion, driven by higher volumes for Trulicity, Humalog, Taltz, Jardiance, Humulin and companion animal products. Realized prices increased US revenue by 1%, reflecting a favorable adjustment of approximately $130 million related to changes in estimates for rebates and discounts, primarily related to Humalog.

Eli Lilly’s revenue outside the US fell 1% to $2.53 billion as lower realized prices and volume from the loss of exclusivity for Alimta in several countries, Zyprexa in Japan, and Cymbalta in Europe and Canada were largely offset by increased volume for several new pharmaceutical products, including Cyramza, Trulicity, Basaglar and Jardiance, and the favorable impact of foreign exchange rates, primarily the Japanese yen, partially offset by other foreign currencies.

Gross margin grew 8% to $4.29 billion during the reporting quarter, while gross margin as a percentage of revenue was 74.6%, an increase of 0.4% compared to Q4 FY15. The increase in gross margin percent was primarily due to higher volume in the US and efficiencies in manufacturing processes. Operating expenses remained flat at $3.24 billion, as with marketing, selling and administrative expenses at $1.79 billion, since reduced spending on late-life-cycle products was largely offset by increased expenses related to new products.

During Q4 FY16, Eli Lilly recognized an acquired in-process R&D charge of $30.0 million associated with an agreement with AstraZeneca PLC (NYSE: AZN) to co-develop MEDI1814. Eli Lilly also recognized asset impairment, restructuring and other special charges of $147.6 million related to global severance costs and integration costs following the acquisition of Novartis Animal Health. Despite these charges, operating income jumped to $876.2 million, an increase of $476.3 million compared with the year-ago period, due to higher revenue and lower acquired in-process R&D charges.

As a result, Eli Lilly’s Q4 FY16 net income soared 61% to $771.8 million, or $0.73 per share, compared to $478.4 million, or $0.45 per share, in the year ago same period.

FY16 financial highlights

During FY16, Eli Lilly’s worldwide revenues grew 6% to $21.22 billion versus FY15 due to increased volume, as realized prices and the impact of foreign exchange rates were relatively flat. The worldwide volume increase was primarily driven by Trulicity and other new pharmaceutical products, including Cyramza, Jardiance and Taltz, as well as Humalog and Erbitux (due to the transfer of commercialization rights in North America to Lilly). The volume increases were partially offset by the impact of the loss of exclusivity for Cymbalta in Europe and Canada, Zyprexa in Japan, and Alimta in several countries.

Revenue in the US jumped 14% to $11.50 billion, while revenue outside the US decreased 1% to $9.71 billion. For FY16, net income jumped 14% to $2.73 billion, or $2.58 per share, compared to $2.40 billion, or $2.26 per share, in 2015. The increases in net income and earnings per share were due to higher operating income, partially offset by lower other income and a higher effective tax rate.

Established drugs revenues

During Q4 FY16, products that recorded growth included Forteo (up 12% to $422.5 million), Humalog (up 3% to $819.8 million), Strattera (up 10% to $243.2 million), and Cialis (up 6% to $676.3 million). However, Alimta sales fell 14% to $541.6 million, reflecting lower demand in the US due to competitive pressure mainly from immuno-oncology agents. Outside the US, sales of Alimta were hurt by loss of exclusivity in several countries. Zyprexa sales declined 33% to $153 million due to loss of exclusivity. Meanwhile, Erbitux sales plunged 13% to $153.7 million in the quarter.

New drugs revenues

With regard to new drugs that Eli Lilly recently launched, Trulicity generated revenues of $337 million with US revenues benefiting from increasing momentum in the glucagon-like peptide-1 (GLP-1) market and a higher market share. Cyramza revenues jumped 51% Y-o-Y to $177.1 million, despite US revenues being negatively impacted by competition in the non-small cell lung cancer indication. Ex-US revenues benefited from strong uptake in the gastric cancer indication in Japan.

During Q4 FY16, Jardiance sales ($76.1 million) were driven by increased market share within the growing SGLT2 class. Basaglar, approved for controlling high blood sugar in adults and children with type I diabetes and adults with type II diabetes, recorded revenues of $39.5 million. Basaglar was launched in the US in mid-2016. Lung cancer drug Portrazza generated sales of $3.8 million, while plaque psoriasis drug Taltz brought in sales of $61.3 million.

Animal health revenues

During Q4 FY16, Eli Lilly’s sales in the Animal Health segment increased 3% to $837.6 million. Favorable wholesaler buying patterns for companion animal products in the US, and higher food animal products’ sales in ex-U.S. markets drove segment sales. US animal health revenue grew 2% to $389.0 million, due to increased revenue for companion animal products reflecting new launches and expanding relationships with distributors, largely offset by decreased revenue for food animal products due to market access pressures. Animal health revenue outside the US rose 4% to $448.6 million, primarily due to increased revenue for food animal products. Excluding the impact of foreign exchange rates, worldwide animal health revenue increased 4%.

Drug approvals

During Q4 FY16, The U.S. Food and Drug Administration (FDA) approved and the company began efforts to promote a new indication for Jardiance® (empagliflozin) tablets to reduce the risk of cardiovascular (CV) death in adults with type 2 diabetes and established CV disease.

The FDA approved Synjardy® XR (empagliflozin and metformin hydrochloride extended-release) tablets for adults with type 2 diabetes.

The FDA approved supplemental new drug applications for Synjardy (empagliflozin/metformin hydrochloride), Synjardy XR and Glyxambi® (empagliflozin/linagliptin) to include data showing empagliflozin reduced the risk for CV death in adults with type 2 diabetes and established CV disease.

The European Commission granted approval to update the Jardiance label including a change to the indication statement and inclusion of data on the reduction of risk of CV death in patients with type-2 diabetes and established CV disease.

The European Commission granted marketing authorization for Glyxambi, a single pill combining Jardiance and Trajenta® (linagliptin), for use in adults with type-2 diabetes to improve blood sugar control when metformin and/or sulphonylurea and one of the monocomponents of Glyxambi do not provide adequate blood sugar control, or when a patient is already being treated with the free combination of Jardiance and Trajenta.

Product and pipeline updates

Eli Lilly announced an agreement to acquire CoLucid Pharmaceuticals Inc. (NASDAQ: CLCD) for $46.50 per share or approximately $960 million. Lilly will add lasmiditan, in development for the acute treatment of migraine, to its Phase-3 pipeline.

Eli Lilly and AstraZeneca announced a worldwide agreement to co-develop MEDI1814, an antibody selective for amyloid-beta 42, which is currently in Phase 1 trials as a potential disease-modifying treatment for Alzheimer’s disease.

Guidance for full year FY17

For FY17, Eli Lilly expects revenues in the range of $21.8 billion to $22.3 billion, consistent with the outlook provided in December 2016. Lilly also continues to expect EPS in the range of $4.05 to $4.15. Marketing, selling, and administrative expenses are expected in the range of $6.4 billion to $6.6 billion, while research and development expenses are projected in the range of $4.9 billion to $5.1 billion. Pharmaceutical products including Trajenta, Forteo and Humalog, and the Animal Health segment should drive growth. However, Alimta will continue to be impacted by competition.

Stock Performance

Eli Lilly’s stock stood at $78.11, gaining 0.53%, at the close on Wednesday, February 08th, 2017, having vacillated between an intraday high of $78.65 and a low of $77.19 during the session. The stock’s trading volume was at 2,820,805 for the day. The Company’s market cap was at $86.41 billion as of Wednesday’s close.

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