Lilly Reports Lower Quarterly Profit

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Indianapolis-based Eli Lilly and Co. (NYSE: LLY) is reporting first quarter net income of $529.5 million, compared to $727.9 million during the same quarter the previous year. Chief Executive Officer John Lechleiter says the results show the effects of "foreign exchange headwinds" and U.S. patent expirations, but adds the company remains on track to "return to growth in 2015."

April 23, 2015

News Release

Indianapolis, Ind. -- Eli Lilly and Company (NYSE: LLY) today announced financial results for the first quarter 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. The non-GAAP measures are presented to provide additional insights into the underlying trends in the company's business. The company's 2015 financial guidance is also being provided on both a reported and a non-GAAP basis. 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.

"While our first-quarter revenue reflects the impact of foreign exchange headwinds and the lingering effects of U.S. patent expirations for Cymbalta and Evista, Lilly remains on track to return to growth in 2015 driven by excellent progress in our innovation-based strategy," said John C. Lechleiter, Ph.D., Lilly's chairman, president and chief executive officer. "Recent new product launches, the growing success of our late-stage pipeline, and the recent acquisition of Novartis Animal Health reinforce our confidence in our future. Results in the first quarter also reflect ongoing cost-containment efforts, even as we continue to make the appropriate investments in both internal and external innovation necessary to sustain our pipeline for the future."

Key Events Over the Last Three Months

Cyramza (ramucirumab) achieved a number of development and commercialization milestones:

Launched in the U.S. for second-line metastatic non-small cell lung cancer

Launched in the EU for advanced second-line gastric cancer

Approved in Japan for patients with unresectable, advanced or recurrent gastric cancer. The company expects to launch in mid-2015.

Submitted in the U.S. and the EU for second-line metastatic colorectal cancer

Submitted in the EU for second-line metastatic non-small cell lung cancer.

The U.S. Food and Drug Administration (FDA) approved Glyxambi (empagliflozin/linagliptin) tablets as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes when both empagliflozin and linagliptin are appropriate treatments. Glyxambi is part of the company's diabetes collaboration with Boehringer Ingelheim. Glyxambi has now been launched in the U.S.

The company and Boehringer Ingelheim announced that Boehringer Ingelheim has received a positive opinion from the Committee for Medicinal Products for Human Use of the European Medicines Agency (EMA), recommending approval for a single-pill combination therapy with empagliflozin/metformin hydrochloride for the treatment of adults with type 2 diabetes. If approved, the new therapy will be marketed under the name Synjardy in Europe.

The company will delay the submission of basal insulin peglispro (BIL), a potential once-daily treatment for type 1 and type 2 diabetes, to regulatory agencies until after 2016. The delay includes filings with the FDA and the EMA in order to generate additional clinical data to further understand and characterize the potential effects, if any, of changes in liver fat observed with BIL treatment in the Phase III trials.

The company submitted ixekizumab to the FDA for the treatment of moderate-to-severe plaque psoriasis.

The company announced that the investigational medicine ixekizumab was statistically superior to placebo in the treatment of patients with active psoriatic arthritis, as demonstrated by the proportion of patients achieving an ACR 20 response in a Phase III trial.

The company and Incyte Corporation announced that the investigational medicine baricitinib demonstrated a statistically significant improvement compared to placebo in a second consecutive Phase III trial in rheumatoid arthritis. The study included patients with moderately to severely active rheumatoid arthritis who had an inadequate response to, or were intolerant of, at least one conventional disease-modifying antirheumatic drug.

The company and Pfizer Inc. announced that the Phase III clinical program for tanezumab, a potential treatment for chronic pain, will resume. As a result, Lilly paid $200 million to Pfizer in accordance with the collaboration agreement. This announcement follows a decision by the FDA to lift the partial clinical hold on the tanezumab development program after a review of a robust body of nonclinical data characterizing the sympathetic nervous system's response to tanezumab.

Enrollment in the Phase III clinical study for the investigational medicine solanezumab is now complete. Solanezumab is the company's monoclonal antibody being studied as a potential therapy for patients with mild Alzheimer's disease. The company now expects the last patient visit to occur in October 2016.

The company and Innovent Biologics Inc. (Innovent) announced one of the largest biotech drug development collaborations in China to date between a multinational and domestic company. Lilly and Innovent will collaborate to support the development and potential commercialization of at least three cancer treatments over the next decade.

The company and Hanmi Pharmaceutical Co., Ltd. (Hanmi) announced an exclusive license and collaboration agreement for the development and commercialization of Hanmi's oral Bruton's tyrosine kinase (BTK) inhibitor for the treatment of autoimmune and other diseases. This small molecule is ready to enter Phase II trials.

The company has restructured its agreement with Bristol-Myers Squibb Company to transfer rights of Erbitux (cetuximab) in North America, including the U.S., Canada, and Puerto Rico, from Bristol-Myers Squibb to Lilly. Rights include, but are not limited to, full commercialization and manufacturing operational responsibilities. The transition is expected to be completed in the fourth quarter of 2015.

The German Court of Appeal has ruled that the company's vitamin regimen patent for Alimta (pemetrexed disodium) would not be infringed by a generic competitor that intends to market a dipotassium salt form of pemetrexed in Germany once the compound patent expires in December 2015. The company has asked for permission to appeal this ruling to the German Supreme Court.

First-Quarter Reported Results

In the first quarter of 2015, worldwide revenue was $4.645 billion, a decline of 1 percent compared with the first quarter of 2014. The change in revenue included a 6 percent decline due to the unfavorable impact of foreign exchange rates, largely offset by increases of 3 percent due to higher prices and 3 percent due to increased volume. The 3 percent increase in worldwide volume was primarily due to the inclusion of revenue from Novartis Animal Health, U.S. wholesaler buying patterns, and increased volumes for several other products including Cyramza and Humalog. These worldwide volume increases were partially offset by lower demand for Cymbalta and Evista, largely due to U.S. patent expirations in December 2013 and March 2014, respectively. Revenue in the U.S. increased 6 per