Lilly Reports Strong First-Quarter Financial Results, Adjusts EPS Guidance

INDIANAPOLIS, April 23, 2020 /PRNewswire/ -- Eli Lilly and Company (NYSE: LLY) today announced financial results for the first quarter of 2020.





     $ in millions, except 
           
       First Quarter      
     
     %

      per share
       data



                               2020                   2019        Change



      Revenue                        $
     5,859.8                          $
     5,092.2  15%


      Net Income
       -
       Reported             1,456.5                             4,241.6        (66)%


      EPS -
       Reported                1.60                                4.31        (63)%








      Net Income
       - Non-
       GAAP                 1,598.8                             1,236.7          29%


      EPS - Non-
       GAAP                    1.75                                1.33          32%

Certain financial information for 2020 and 2019 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 U.S. generally accepted accounting principles (GAAP), include all revenue and expenses recognized during the periods, and reflect Elanco Animal Health (Elanco) as discontinued operations during 2019. Non-GAAP measures reflect adjustments for the items described in the reconciliation tables later in the release, and assume that the disposition of Elanco occurred at the beginning of 2019 (including the benefit from the reduction in shares of common stock outstanding). The company's 2020 financial guidance is 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 is rising to meet the challenges of the COVID-19 pandemic, whether it be by supporting our employees, our communities, patients with chronic diseases who are the most vulnerable to the virus, or directly attacking the disease with new and existing therapies," said David A. Ricks, Lilly's chairman and CEO. "Lilly's purpose - to make life better - has never been more important. We're focused on reliably supplying medicines, keeping our employees safe and pushing scientific efforts at top speed to defeat COVID-19. We're also committed to improving the affordability of and access to our medicines, particularly insulin, during these challenging times."

"Lilly exited 2019 with strong revenue growth and margin expansion, driven by the uptake of our newer medicines. That momentum continued in Q1 2020 and was augmented by higher patient and supply chain purchasing due to the COVID-19 pandemic," commented Josh Smiley, Lilly's CFO. "Our revenue and operating margin outlook for 2020 is unchanged, but the economic and healthcare consequences of this pandemic are uncertain and could negatively affect our financial results later in 2020 and beyond, due to reduced non-COVID healthcare activities and global economic challenges. We are therefore widening the range of our 2020 EPS guidance to reflect both our underlying strong performance as well as future uncertainty; however, the long-term fundamentals of our business remain strong, as does our financial outlook for the mid-2020s and beyond."

Key Events Over the Last Three Months

COVID-19

    --  The company entered into an agreement with the National Institute of
        Allergy and Infectious Diseases (NIAID), part of the National Institutes
        of Health, to study baricitinib as an arm in NIAID's Adaptive COVID-19
        Treatment Trial. The Phase 3 study will investigate the efficacy and
        safety of baricitinib as a potential treatment for hospitalized patients
        diagnosed with COVID-19.
    --  The company announced that it will advance LY3127804, an investigational
        selective monoclonal antibody against Angiopoietin 2 (Ang2), to Phase 2
        testing in pneumonia patients hospitalized with COVID-19 who are at a
        higher risk of progressing to acute respiratory distress syndrome
        (ARDS).
    --  The company entered into an agreement with AbCellera to co-develop
        antibody products for the potential treatment and prevention of
        COVID-19. The collaboration will leverage AbCellera's rapid pandemic
        response platform, developed under the DARPA Pandemic Prevention
        Platform (P3) Program, and Lilly's global capabilities for rapid
        development, manufacturing and distribution of therapeutic antibodies.
    --  The company announced an update on its clinical trial activities in
        light of the COVID-19 pandemic. The company has delayed most new study
        starts and has paused enrollment in most ongoing studies, but will
        continue ongoing clinical trials for patients who are already enrolled.

Regulatory

    --  The U.S. Food and Drug Administration (FDA) approved Trulicity(®) for
        the reduction of major adverse cardiovascular events in adults with type
        2 diabetes who have established cardiovascular disease or multiple
        cardiovascular risk factors.
    --  The FDA approved a supplemental Biologics License Application (sBLA) for
        Taltz(®) for the treatment of pediatric patients (ages 6 to under 18)
        with moderate to severe plaque psoriasis who are candidates for systemic
        therapy or phototherapy.
    --  The company's newest mealtime insulin received approval in both the
        European Union and Japan for the treatment of adults with diabetes as
        part of a multiple daily injection regimen or delivered by an insulin
        pump. This novel, fast-acting formulation of insulin lispro is for use
        by adults with type 1 and type 2 diabetes to reduce blood glucose.
    --  The FDA issued a complete response letter for the supplemental New Drug
        Application (sNDA) of the investigational medicine empagliflozin 2.5 mg
        as an adjunct to insulin for adults with type 1 diabetes. The letter
        indicates that the FDA is unable to approve the application in its
        current form.

Clinical

    --  An analysis performed by Washington University School of Medicine in the
        Dominantly Inherited Alzheimer Network Trials Unit (DIAN-TU) Study
        showed that solanezumab did not meet the primary endpoint of the study.
        At this time, Lilly does not plan to pursue a submission for solanezumab
        in people with dominantly inherited Alzheimer's disease (DIAD), also
        known as autosomal dominant Alzheimer's disease.
    --  The company completed a Phase 4 study of Taltz in patients with moderate
        to severe psoriasis. Taltz demonstrated non-inferiority to guselkumab on
        the final secondary endpoint at week 24. As previously disclosed, Taltz
        achieved superiority compared to guselkumab on all primary and key
        secondary endpoints at week 12.
    --  Mirikizumab met the co-primary and key secondary endpoints in a Phase 3,
        placebo-controlled study, which evaluated the safety and efficacy of
        mirikizumab for the treatment of moderate to severe plaque psoriasis
        over 52 weeks. A second Phase 3, placebo- and active- controlled 52-week
        study is expected to be completed later in 2020.

Business Development/Other Developments

    --  The company entered into an exclusive global licensing and research
        collaboration with Sitryx, a biopharmaceutical company focused on
        regulating cell metabolism to develop disease-modifying therapeutics in
        immuno-oncology and immuno-inflammation. The collaboration will study up
        to four novel preclinical targets identified by Sitryx that could lead
        to potential new medicines for autoimmune diseases.
    --  The company completed the acquisition of Dermira, Inc. The acquisition
        expands Lilly's immunology pipeline with the addition of lebrikizumab,
        which is being evaluated in a Phase 3 clinical development program for
        the treatment of moderate to severe atopic dermatitis in adolescent and
        adult patients, ages 12 years and older. The acquisition also expands
        Lilly's portfolio of marketed dermatology medicines with the addition of
        QBREXZA(®), a medicated cloth approved by the FDA for the topical
        treatment of primary axillary hyperhidrosis.

First-Quarter Reported Results

In the first quarter of 2020, worldwide revenue was $5.860 billion, an increase of 15 percent compared with the first quarter of 2019. The increase in revenue was driven by a 22 percent increase due to volume, partially offset by a 6 percent decrease due to lower realized prices. The company estimates worldwide volume growth in the first quarter of 2020 was favorably impacted by increased customer buying patterns and patient prescription trends resulting from the COVID-19 pandemic that increased worldwide revenue by approximately $250 million.

Revenue in the U.S. increased 15 percent, to $3.329 billion, as increased volume of 19 percent was partially offset by lower realized prices. Increased U.S. volume for key growth products, including Trulicity, Taltz, Verzenio(®), Emgality, Basaglar(®), Jardiance(®), and Baqsimi(TM), as well as for Humalog(®), was partially offset by decreased volume for Cialis(®) due to loss of patent exclusivity. The company estimates that U.S. volume growth in the first quarter of 2020 was favorably impacted by increased customer buying patterns and patient prescription trends resulting from the COVID-19 pandemic that increased U.S. revenue by approximately $200 million.

Revenue outside the U.S. increased 15 percent, to $2.531 billion, driven by increased volume of 25 percent, which was primarily from key growth products, including Tyvyt(®), Trulicity, Olumiant(®), Taltz, Jardiance, Verzenio, Cyramza(®) and Basaglar, as well as for Alimta(®), partially offset by decreased volume for Strattera(®) due to loss of patent exclusivity. The increase in revenue due to volume was partially offset by lower realized prices and the unfavorable impact of foreign exchange rates. The company estimates that volume growth outside the U.S. in the first quarter of 2020 was favorably impacted by increased customer buying patterns and patient prescription trends resulting from the COVID-19 pandemic that increased revenue outside the U.S. by approximately $50 million.

Gross margin increased 18 percent, to $4.645 billion, in the first quarter of 2020 compared with the first quarter of 2019 and was favorably impacted by increased customer buying patterns and patient prescription trends resulting from the COVID-19 pandemic. Gross margin as a percent of revenue was 79.3 percent, an increase of 1.7 percentage points compared with the first quarter of 2019. The increase in gross margin percent was primarily due to the prior year charges resulting from the withdrawal of Lartruvo(®), favorable product mix, and greater manufacturing efficiencies, partially offset by lower realized prices on revenue.

Total operating expenses in the first quarter of 2020, defined as the sum of research and development and marketing, selling, and administrative expenses, increased 7 percent to $2.942 billion compared with the first quarter of 2019. Research and development expenses increased 13 percent to $1.392 billion, or 23.8 percent of revenue, driven by higher development expenses for late-stage assets. Marketing, selling, and administrative expenses increased 2 percent to $1.550 billion.

In the first quarter of 2020, the company recognized acquired in-process research and development charges of $52.3 million related to the business development transaction with Sitryx. In the first quarter of 2019, the company recognized acquired in-process research and development charges of $136.9 million related to business development transactions with AC Immune SA and ImmuNext, Inc.

In the first quarter of 2020, the company recognized asset impairment, restructuring and other special charges of $59.9 million. The charges were primarily related to acquisition and integration costs as part of the closing of the acquisition of Dermira. In the first quarter of 2019, the company recognized asset impairment, restructuring and other special charges of $423.9 million, primarily associated with accelerated vesting of Loxo Oncology employee equity awards as part of the closing of the acquisition of Loxo Oncology.

Operating income in the first quarter of 2020 was $1.591 billion, compared to $645.1 million in the first quarter of 2019. The increase in operating income was primarily driven by higher gross margin and lower asset impairment, restructuring and other special charges and acquired in-process research and development charges, partially offset by higher research and development expenses.

Other income was $89.1 million in the first quarter of 2020, compared with $86.0 million in the first quarter of 2019. The increase in other income was driven primarily by higher net gains on investment securities, partially offset by lower interest income. The higher net gains on investments were due primarily to increased market valuations of two companies in Lilly's investment portfolio that are currently developing potential vaccines against COVID-19.

The effective tax rate was 13.3 percent in the first quarter of 2020, compared with 23.3 percent in the first quarter of 2019. The higher effective tax rate in the first quarter of 2019 was primarily due to the non-deductibility of the accelerated vesting of Loxo Oncology employee equity awards as part of the closing of the acquisition of Loxo Oncology, as well as tax expenses associated with the withdrawal of Lartruvo.

In the first quarter of 2020, net income and earnings per share were $1.457 billion and $1.60, respectively, compared with net income of $4.242 billion and earnings per share of $4.31 in the first quarter of 2019. The decrease in net income and earnings per share in the first quarter of 2020 was primarily driven by the $3.681 billion gain recognized on the disposition of Elanco in the first quarter of 2019, partially offset by higher operating income in 2020. Earnings per share in the first quarter of 2020 benefited from lower weighted-average shares outstanding as a result of the Elanco exchange offer.

First-Quarter Non-GAAP Measures

On a non-GAAP basis, first-quarter 2020 gross margin increased 15 percent, to $4.703 billion compared with the first quarter of 2019 and was favorably impacted by increased customer buying patterns and patient prescription trends resulting from the COVID-19 pandemic. Gross margin as a percent of revenue was 80.3 percent, an increase of 0.1 percentage points. The increase in gross margin percent was primarily due to favorable product mix and manufacturing efficiencies, offset by the impact of lower realized prices on revenue.

Operating income on a non-GAAP basis increased $427.5 million, or 32 percent, to $1.762 billion in the first quarter of 2020 compared with the first quarter of 2019, due to higher gross margin, partially offset by higher research and development expenses.

The effective tax rate on a non-GAAP basis was 13.6 percent in the first quarter of 2020, compared with 12.9 percent in the first quarter of 2019. The higher effective tax rate for the first quarter of 2020 was driven primarily by a mix of earnings in higher tax jurisdictions, partially offset by an increase in net discrete tax benefits.

On a non-GAAP basis, in the first quarter of 2020 net income increased 29 percent, to $1.599 billion, while earnings per share increased 32 percent, to $1.75, compared with $1.237 billion and $1.33, respectively, in the first quarter of 2019. The increase in net income and earnings per share was driven primarily by higher operating income, partially offset by higher income taxes.

For further detail of non-GAAP measures, see the reconciliation below as well as the "Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information" table later in this press release.


                                                    
            
       First Quarter



                                                       2020                      2019         % Change



                     Earnings per share
                      (reported)                            $
     
                1.60                  $
       
     4.31 (63)%


        Discontinued
         operations                                                                   (3.74)



                     Earnings per share
                      from continuing
                      operations
                      (reported)                       1.60                              0.57


        Asset impairment,
         restructuring and
         other special
         charges                                        .06                               .44


        Lartruvo charges                                                                 .13


        Amortization of
         intangible assets                              .05                               .04


        Acquired in-process
         research and
         development                                    .05                               .12


        Impact of reduced
         shares outstanding
         for non-GAAP
         reporting(a)                                                                    .03


                     Earnings per share
                      (non-GAAP)                            $
     
                1.75                  $
       
     1.33   32%





        Numbers may not add
         due to rounding.

        (a) Non-GAAP
         earnings per share             stock retired in
         assume that the                the Elanco exchange
         disposition of                 offer.
         Elanco occurred at
         the beginning of
         2019 and,
         therefore, exclude
         the approximately
         65.0 million shares
         of Lilly common

    ---



       
                Selected Revenue Highlights


    ---

                     (Dollars in
                      millions)                           
              First Quarter


                     Selected Products            2020                                 2019         
        % Change

                                                                                                                 ---

        Trulicity                                        $
              1,229.4                          $
              879.7           40%


        Humalog(a)                               695.8                                        730.8                      (5)%



       Alimta                                   560.1                                        499.2                       12%



       Taltz                                    443.5                                        252.5                       76%


        Humulin(R)                               315.7                                        297.7                        6%



       Basaglar                                 303.7                                        251.4                       21%


        Forteo(R)                                272.4                                        312.9                     (13)%


        Jardiance(b)                             267.5                                        203.6                       31%



       Cyramza                                  239.0                                        198.3                       21%


        Cymbalta(R)                              210.4                                        164.1                       28%



       Verzenio                                 188.0                                        109.4                       72%



       Olumiant                                 139.7                                         82.1                       70%



       Emgality                                  74.0                                         14.2                         
      NM



       Tyvyt                                     57.4                                          9.9                         
      NM



       Baqsimi                                   17.8                                                                     
      NM




                     Total Revenue             5,859.8                                      5,092.2                       15%





       
                (a) Humalog includes Insulin Lispro


       
                (b) Jardiance includes Glyxambi(R), Synjardy(R), and Trijardy(R) XR


       NM - not meaningful; Numbers may not add due to rounding

Impact of COVID-19 on First-Quarter 2020 Revenue

The company estimates that revenue in the first quarter of 2020 for many of its products was favorably impacted by increased customer buying patterns and patient prescription trends resulting from the COVID-19 pandemic that increased revenue by approximately $250 million worldwide, including approximately $200 million in the U.S. and approximately $50 million outside the U.S. The company believes that the increase in U.S. revenue from COVID-19 primarily impacted its portfolio of diabetes medicines, with estimated increases of approximately $70 million to $80 million for insulin products and approximately $30 million to $40 million for Trulicity. The company also estimates that U.S. revenue for Taltz was favorably impacted by approximately $20 million to $25 million.

Trulicity

First-quarter 2020 worldwide Trulicity revenue was $1.229 billion, an increase of 40 percent compared with the first quarter of 2019. U.S. revenue increased 40 percent, to $929.5 million, driven by increased volume, partially offset by lower realized prices. Trulicity's lower realized prices in the U.S. were primarily due to higher contracted rebates and changes in segment mix, partially offset by higher list prices. Revenue outside the U.S. was $299.9 million, an increase of 40 percent, driven by increased volume, partially offset by the unfavorable impact of foreign exchange rates and lower realized prices.

Humalog

For the first quarter of 2020, worldwide Humalog revenue decreased 5 percent compared with the first quarter of 2019, to $695.8 million. Revenue in the U.S. decreased 11 percent, to $398.6 million, driven primarily by lower realized prices due to changes in estimates for rebates and discounts and changes in segment mix, partially offset by increased volume. Revenue outside the U.S. increased 5 percent, to $297.2 million, primarily driven by increased volume, partially offset by the unfavorable impact of foreign exchange rates.

Alimta

For the first quarter of 2020, worldwide Alimta revenue increased 12 percent compared with the first quarter of 2019, to $560.1 million. U.S. revenue increased 15 percent, to $324.2 million, primarily driven by increased volume and, to a lesser extent, higher realized prices. Revenue outside the U.S. increased 8 percent to $235.8 million, primarily driven by increased volume, partially offset by lower realized prices and, to a lesser extent, the unfavorable impact of foreign exchange rates.

Taltz

For the first quarter of 2020, worldwide Taltz revenue increased 76 percent compared with the first quarter of 2019, to $443.5 million. U.S. revenue increased 81 percent, to $327.5 million, driven by increased volume and, to a lesser extent, higher realized prices primarily due to changes in estimates for rebates and discounts. Revenue outside the U.S. increased 62 percent, to $116.0 million, primarily driven by increased volume, partially offset by lower realized prices and the unfavorable impact of foreign exchange rates.

Humulin

For the first quarter of 2020, worldwide Humulin revenue increased 6 percent compared with the first quarter of 2019, to $315.7 million. U.S. revenue increased 6 percent, to $214.1 million, driven by increased volume, partially offset by lower realized prices due to changes in segment mix. Revenue outside the U.S. increased 5 percent, to $101.5 million, due to increased volume and, to a lesser extent, higher realized prices, partially offset by the unfavorable impact of foreign exchange rates.

Basaglar

For the first quarter of 2020, worldwide Basaglar revenue increased 21 percent compared with the first quarter of 2019, to $303.7 million. U.S. revenue increased 16 percent, to $230.4 million, primarily driven by increased volume. Revenue outside the U.S. increased 38 percent, to $73.3 million, driven by increased volume, partially offset by the unfavorable impact of foreign exchange rates. Basaglar is part of the company's alliance with Boehringer Ingelheim. Lilly reports as cost of sales payments made to Boehringer Ingelheim for royalties and for its portion of the gross margin in 2020 and 2019, respectively.

Forteo

For the first quarter of 2020, worldwide Forteo revenue decreased 13 percent compared with the first quarter of 2019, to $272.4 million. U.S. revenue decreased 3 percent, to $122.5 million, driven by lower realized prices primarily due to the unfavorable impact of higher contracted rates. Revenue outside the U.S. decreased 20 percent to $149.8 million, primarily driven by decreased volume and, to a lesser extent, lower realized prices.

The company expects further volume declines for Forteo as a result of competitive dynamics in the U.S. and the entry of generic and biosimilar competition following the loss of patent exclusivity in the third quarter of 2019 in the U.S., Japan and major European markets.

Jardiance

The company's worldwide Jardiance revenue during the first quarter of 2020 was $267.5 million, an increase of 31 percent compared with the first quarter of 2019. U.S. revenue increased 15 percent, to $144.6 million, driven by increased volume. Revenue outside the U.S. was $122.9 million, an increase of 57 percent, driven by increased volume. Jardiance is part of the company's alliance with Boehringer Ingelheim. Lilly reports as revenue royalties received on net sales of Jardiance and its portion of Jardiance's gross margin in 2020 and 2019, respectively.

Cyramza

For the first quarter of 2020, worldwide Cyramza revenue was $239.0 million, an increase of 21 percent compared with the first quarter of 2019. U.S. revenue was $89.1 million, an increase of 19 percent, primarily driven by increased volume. Revenue outside the U.S. was $149.9 million, an increase of 22 percent, primarily driven by increased volume.

Cymbalta

For the first quarter of 2020, worldwide Cymbalta revenue increased 28 percent compared with the first quarter of 2019, to $210.4 million. U.S. revenue was $11.6 million in the first quarter. Revenue outside the U.S. increased 29 percent to $198.8 million, driven by increased volume, partially offset by lower realized prices. The increase in volume outside the U.S. was primarily driven by the company's sale of its rights for Xeristar in Spain.

Verzenio

For the first quarter of 2020, worldwide Verzenio revenue increased 72 percent compared with the first quarter of 2019, to $188.0 million. U.S. revenue was $129.4 million, an increase of 38 percent, primarily driven by increased volume. Revenue outside the U.S. was $58.6 million, an increase of $42.7 million compared with the first quarter of 2019 driven by increased volume.

Olumiant

For the first quarter of 2020, Olumiant generated worldwide revenue of $139.7 million. U.S. revenue was $11.3 million. Revenue outside the U.S. was $128.4 million, an increase of 70 percent compared with the first quarter of 2019, driven by increased volume.

Emgality

For the first quarter of 2020, Emgality generated worldwide revenue of $74.0 million, an increase of $7.8 million compared with the fourth quarter of 2019. U.S. revenue was $67.3 million, an increase of $4.2 million compared with the fourth quarter of 2019, primarily driven by increased volume, partially offset by lower realized prices due to changes to estimates in rebates and discounts. Revenue outside of the U.S. was $6.7 million in the first quarter of 2020.

Tyvyt

The company's Tyvyt revenue during the first quarter of 2020 was $57.4 million, an increase of $20.0 million compared with the fourth quarter of 2019. Tyvyt is part of the company's alliance with Innovent Biologics, Inc. in China. Lilly reports total sales of Tyvyt made by Lilly as revenue, with payments made to Innovent for its portion of the gross margin reported as cost of sales. Lilly also reports as revenue a portion of the gross margin for Tyvyt sales made by Innovent.

Baqsimi

For the first quarter of 2020, Baqsimi generated worldwide revenue of $17.8 million. U.S revenue was $15.8 million, while revenue outside the U.S. was $2.0 million.

2020 Financial Guidance

The company has updated certain elements of its 2020 financial guidance on a reported basis and a non-GAAP basis to reflect both management's expectations for operational performance and the uncertainty surrounding the extent and duration of the impact of the COVID-19 pandemic. Key management assumptions supporting the updated guidance include:

    --  The increased customer buying patterns and patient prescription trends
        associated with COVID-19 that were experienced in the first quarter of
        2020 will largely be reversed over the course of 2020;
    --  The reduction in new-to-brand prescription trends will peak in the
        second quarter of 2020 in the U.S. and much of Europe;
    --  Healthcare activity, including non-COVID-19 related patient visits with
        their physicians, will align more closely with historical levels in the
        second half of 2020;
    --  Increased utilization of patient affordability programs and changes in
        segment mix due to increased U.S. unemployment will negatively impact
        U.S. pricing;
    --  Clinical trial enrollment in existing studies, as well as initiation of
        new clinical trials, will resume in the second half of 2020; and
    --  Investment in COVID-19 related research, testing and support will
        continue throughout 2020.

Based on the key assumptions outlined above, the company has adjusted earnings per share for 2020 to now be in the range of $6.20 to $6.40 on a reported basis and $6.70 to $6.90 on a non-GAAP basis.


                                                    2020 % Change from 2019

                                     
      
      Expectations



                     Earnings per
                      share
                      (reported)(a) 
      
      $6.20 to $6.40        25% to 29%


        Amortization
         of
         intangible
         assets                                      .37


        Acquired
         IPR&D(b)                                    .07


        Asset
         impairment,
         restructuring
         and other
         special
         charges                                     .06




                     Earnings per
                      share (non-
                      GAAP)         
      
      $6.70 to $6.90        11% to 14%



        Numbers may
         not add due
         to rounding

                     (a) Reported
                      earnings             per share
                      per share            from
                      percent              continuing
                      change from          operations.
                      2019
                      calculated
                      based on
                      change from
                      2019
                      earnings

                     (b) Includes
                      upfront              and
                      payments             AbCellera.
                      for
                      acquired
                      in-process
                      research
                      and
                      development
                      transactions
                      with Sitryx



    ---

The company still anticipates 2020 revenue between $23.7 billion and $24.2 billion. Revenue growth is still expected to be driven by volume from key growth products including Trulicity, Taltz, Basaglar, Jardiance, Verzenio, Cyramza, Olumiant, Emgality, Baqsimi and Tyvyt, as well as the addition of QBREXZA revenue and the potential launch of other new medicines. Revenue growth is expected to be partially offset by lower revenue for products that have lost patent exclusivity. Revenue growth is also expected to be partially offset by a low-single digit net price decline in the U.S. driven primarily by rebates and legislated increases to Medicare Part D cost sharing, patient affordability programs, and net price declines in China, Japan and Europe.

Gross margin as a percent of revenue is still expected to be approximately 79.0 percent on a reported basis and approximately 81.0 percent on a non-GAAP basis.

Marketing, selling and administrative expenses are still expected to be in the range of $6.2 billion to $6.4 billion. Research and development expenses are still expected to be in the range of $5.6 billion to $5.9 billion.

Operating margin percentage, defined as operating income as a percent of revenue, is still expected to be approximately 28 percent on a reported basis and 31 percent on a non-GAAP basis.

Other income (expense) is now expected to be in the range of $0 to $150 million of expense.

The 2020 effective tax rate is still expected to be approximately 15 percent on both a reported basis and a non-GAAP basis.

The following table summarizes the company's 2020 financial guidance:


                                                            2020 Guidance


                                                                Prior                                       Updated

                                                                                                                ---


       Revenue                         
              $23.7 to $24.2 billion                   
           Unchanged




        Gross Margin % of
         Revenue (reported)                                   Approx. 79%                  
           Unchanged


        Gross Margin % of
         Revenue (non-GAAP)                                   Approx. 81%                  
           Unchanged




        Marketing, Selling &
         Administrative                   
              $6.2 to $6.4 billion                   
           Unchanged




        Research &
         Development                      
              $5.6 to $5.9 billion                   
           Unchanged




        Other Income/
         (Expense)                    
              $(250) to $(100) million                
         $(150) to $0 million





       Tax Rate                                              Approx. 15%                  
           Unchanged




        Earnings per share
         (reported)                             
              $6.18 to $6.28                    
           $6.20 to $6.40


        Earnings per share
         (non-GAAP)                             
              $6.70 to $6.80                    
           $6.70 to $6.90




        Operating Income %
         of Revenue
         (reported)                                                   28%                   
           Unchanged


        Operating Income %
         of Revenue (non-
         GAAP)                                                        31%                   
           Unchanged




        Non-GAAP guidance reflects adjustments presented in the earnings per share table
         above.

    ---

Webcast of Conference Call

As previously announced, investors and the general public can access a live webcast of the first-quarter 2020 financial results conference call through a link on Lilly's website at www.lilly.com. The conference call will begin at 9:00 a.m. Eastern time (ET) today and will be available for replay via the website.

Lilly is a global healthcare leader that unites caring with discovery to create medicines that make life better for people around the world. We were founded more than a century ago by a man committed to creating high-quality medicines that meet real needs, and today we remain true to that mission in all our work. Across the globe, Lilly employees work to discover and bring life-changing medicines to those who need them, improve the understanding and management of disease, and give back to communities through philanthropy and volunteerism. F-LLY

This press release contains management's current intentions and expectations for the future, all of which are forward- looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words "estimate", "project", "intend", "expect", "believe", "target", "anticipate" and similar expressions are intended to identify forward-looking statements. 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 that pipeline 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 the timing of anticipated regulatory approvals and launches of new products; market uptake of recently launched products; competitive developments affecting current products and our pipeline; the expiration of intellectual property protection for certain of the company's products; the company's ability to protect and enforce patents and other intellectual property; the impact of actions of governmental and private payers affecting the pricing of, reimbursement for, and access to pharmaceuticals; regulatory compliance problems or government investigations; regulatory actions regarding currently marketed products; unexpected safety or efficacy concerns associated with the company's products; issues with product supply stemming from manufacturing difficulties or disruptions; regulatory changes or other developments; changes in patent law or regulations related to data-package exclusivity; litigation involving past, current or future products; unauthorized disclosure, misappropriation, or compromise of trade secrets or other confidential data stored in the company's information systems, networks and facilities, or those of third parties with which the company shares its data; changes in tax law and regulations, including the impact of U.S. tax reform legislation enacted in December 2017 and related guidance; changes in inflation, interest rates, and foreign currency exchange rates; asset impairments and restructuring charges; changes in accounting standards promulgated by the Financial Accounting Standards Board and the Securities and Exchange Commission (SEC); acquisitions and business development transactions and related integration costs; information technology system inadequacies or operating failures; the impact of the evolving COVID-19 pandemic, and the global response thereto; reliance on third-party relationships and outsourcing arrangements; and global macroeconomic conditions. For additional information about the factors that could cause actual results to differ materially from forward-looking statements, please see the company's latest Form 10-K and subsequent Forms 8-K and 10-Q filed with the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date of this release. Except as is required by law, the company expressly disclaims any obligation to publicly release any revisions to forward-looking statements to reflect events after the date of this release.

Alimta(®) (pemetrexed disodium, Lilly)
Baqsimi(TM) (glucagon, Lilly)
Basaglar(®) (insulin glargine injection, Lilly)
Cialis(®) (tadalafil, Lilly)
Cymbalta(®) (duloxetine, Lilly)
Cyramza(®) (ramucirumab, Lilly)
Emgality(®) (galcanezumab-gnlm, Lilly)
Forteo(®) (teriparatide of recombinant DNA origin injection, Lilly)
Glyxambi(®) (empagliflozin/linagliptin, Boehringer Ingelheim)
Humalog(®) (insulin lispro injection of recombinant DNA origin, Lilly)
Humulin(®) (human insulin of recombinant DNA origin, Lilly)
Jardiance(® )(empagliflozin, Boehringer Ingelheim)
Lartruvo(®) (olaratumab, Lilly)
Olumiant(®) (baricitinib, Lilly)
QBREXZA(®) (Glycopyrronium cloth, Dermira)
Strattera(®) (atomoxetine, Lilly)
Synjardy(®) (empagliflozin/metformin, Boehringer Ingelheim)
Taltz(® )(ixekizumab, Lilly)
Trijardy((TM)) XR (empagliflozin/linagliptin/metformin hydrochloride extended release tablets, Boehringer Ingelheim)
Trulicity(® )(dulaglutide, Lilly)
Tyvyt(®) (sintilimab injection, Lilly)
Verzenio(®) (abemaciclib, Lilly)

Third party trademarks used herein are trademarks of their respective owners.


               Eli Lilly and Company Employment
                Information

                         March 31, 2020 December 31, 2019



     Worldwide Employees         33,815             33,755



     Eli Lilly and Company



     Operating Results  (Unaudited) - REPORTED



     (Dollars in millions, except per share data)


                                                                           
        Three Months Ended


                                                                              
          March 31,


                                                                         2020                                              2019      
     % Chg.






     Revenue                                                   $
        5,859.8                      $
        5,092.2             15%





     Cost of sales                                                   1,215.1                            1,138.7              7%



     Research and development                                        1,392.1                            1,230.5             13%



     Marketing, selling and administrative                           1,549.6                            1,517.1              2%



     Acquired in-process research and development                       52.3                              136.9           (62)%



     Asset impairment, restructuring and other special charges          59.9                              423.9           (86)%






     Operating income                                                1,590.8                              645.1         
        NM





     Net interest income (expense)                                    (78.2)                            (55.9)



     Net other income (expense)                                        167.3                              141.9




     Other income (expense)                                             89.1                               86.0              4%





     Income before income taxes                                      1,679.9                              731.1         
        NM



     Income tax expense                                                223.4                              170.0             31%






     Net income from continuing operations                           1,456.5                              561.1         
        NM



     Net income from discontinued operations                                                                    3,680.5        
     NM






     Net income                                                $
        1,456.5                      $
        4,241.6           (66)%






     Earnings from continuing operations - diluted                      1.60                               0.57         
        NM



     Earnings from discontinued operations - diluted                                                               3.74        
     NM




     Earnings per share - diluted                                 $
        1.60                         $
        4.31           (63)%






     Dividends paid per share                                   $
        0.7400                       $
        0.6450             15%


                                                                      911,713                            984,001


     Weighted-average shares outstanding (thousands) - diluted





     NM - not meaningful



     Eli Lilly and Company



     Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information (Unaudited)



     (Dollars in millions, except per share data)




                                                                                                                               
              Three Months Ended                                                                   
         Three Months Ended
                                                                                                                                                                                                                                    March 31, 2019
                                                                                                                                 
              March 31, 2020

                                                                                                                                                                                                          ---



                                                                                                        GAAP Reported       Adjustments(b)                Non-GAAP                 GAAP Reported Adjustments(c)       Non-GAAP
                                                                                                                                                           Adjusted(a)                                                 Adjusted(a)

                                                                                                                                                                                                                             ---



      Cost of sales                                                                                 $
     
                1,215.1                                             $
      (58.6)                                 $
           1,156.5                      $
     
      1,138.7             $
        (128.2)         $
      1,010.5




                                                                                               52.3                                                              (52.3)                                                                           136.9                   (136.9)

      Acquired in-process
       research and development


      Asset impairment,
       restructuring and other
       special charges                                                                         59.9                                                              (59.9)                                                                           423.9                   (423.9)




      Income tax expense                                                                                            223.4                                                   28.5                                             251.9                              170.0                      13.4                183.4




      Net income from continuing
       operations                                                                                                 1,456.5                                                  142.3                                           1,598.8                              561.1       675.6                1,236.7




      Net income from discontinued
       operations                                                                                                                                                                                                                              3,680.5                 (3,680.5)





     Net income                                                                                                  1,456.5                                                  142.3                                           1,598.8                            4,241.6                 (3,004.9)             1,236.7




      Earnings per share -diluted                                                                                    1.60                                                   0.15                                              1.75                               4.31                    (2.98)                1.33




      Weighted-average shares
       outstanding (thousands) -
       diluted                                                                              911,713                                                                                                        911,713                               984,001                  (54,167)               929,834





     Numbers may not add due to rounding.



     The table above reflects only line items with non-GAAP adjustments.



               (a)               The company uses non-GAAP
                                  financial measures that differ
                                  from financial statements reported
                                  in conformity with U.S. generally
                                  accepted accounting principles
                                  (GAAP). The company's non-GAAP
                                  measures adjust reported results
                                  to exclude amortization of
                                  intangibles and items that are
                                  typically highly variable,
                                  difficult to predict, and of a
                                  size that could have a substantial
                                  impact on the company's reported
                                  operations for a period. The
                                  company believes that these non-
                                  GAAP measures provide useful
                                  information to investors. Among
                                  other things, they may help
                                  investors evaluate the company's
                                  ongoing operations. They can
                                  assist in making meaningful
                                  period-over-period comparisons
                                  and in identifying operating
                                  trends that would otherwise be
                                  masked or distorted by the items
                                  subject to the adjustments.
                                  Management uses these non-GAAP
                                  measures internally to evaluate
                                  the performance of the business,
                                  including to allocate resources
                                  and to evaluate results relative
                                  to incentive compensation targets.
                                  Investors should consider these
                                  non-GAAP measures in addition to,
                                  not as a substitute for or
                                  superior to, measures of financial
                                  performance prepared in accordance
                                  with GAAP.


               (b)               Adjustments to certain GAAP
                                  reported measures for the three
                                  months ended March 31, 2020,
                                  include the following:

     (Dollars in       Amortization    IPR&D(ii)   Other
      millions, except      (i)                  specified
      per share data)                            items(iii)    Total



     Cost of sales                  $
        (54.4)             
         $                   $
     (4.2) $
     
     (58.6)




     Operating
      expenses




     Acquired in-
      process research
      and development                                (52.3)                   (52.3)


     Asset impairment,
      restructuring
      and other
      special charges                                                (59.9)   (59.9)




     Income taxes              11.3                     11.0              6.2      28.5




     Net income                43.1                     41.3             57.9     142.3




     Earnings per
      share -diluted           0.05                     0.05             0.06      0.15



      Numbers may not
       add due to
       rounding.


     The table above
       reflects only
       line items with
       non-GAAP
       adjustments.


                   i.  Exclude amortization of
                         intangibles primarily
                         associated with costs of
                         marketed products acquired or
                         licensed from third parties.


                  ii.  Exclude costs associated with
                         upfront payments for acquired
                         in-process research and
                         development projects acquired
                         in a transaction other than a
                         business combination. These
                         costs were related to a
                         business development
                         transaction with Sitryx.


                 iii.  Asset impairment, restructuring
                         and other special charges
                         exclude primarily acquisition
                         and integration costs as part
                         of the closing of the
                         acquisition of Dermira.






              (c)                Adjustments to certain GAAP
                                   reported measures for the three
                                   months ended March 31, 2019,
                                   include the following:



     (Dollars in        Amortization    IPR&D (ii)   Other         Reduced      Lartruvo      Discontinued
      millions, except       (i)                   specified        shares     charges (v)   operations(vi)
      per share data)                              items(iii)  outstanding(iv)                                Total



     Cost of sales                   $
         (43.6)                
              $                              
         $             
     $                      $
     (84.6) 
     $ $
     
     (128.2)




     Acquired in-
      process research
      and development                                 (136.9)                                                                                  (136.9)


     Asset impairment,
      restructuring and
      other special
      charges                                                                      (411.8)                             (12.1)                  (423.9)




     Income taxes                8.9                      28.7                           4.2                              (28.5)                     13.4




     Net income                 34.7                     108.1                         407.6                               125.2    (3,680.5)    (3,004.9)




     Earnings per share
      -diluted                  0.04                      0.12                          0.44                      0.03       0.13       (3.74)       (2.98)



      Numbers may not
       add due to
       rounding.


     The table above
       reflects only
       line items with
       non-GAAP
       adjustments.


     i.                Exclude amortization of
                         intangibles primarily
                         associated with costs of
                         marketed products acquired or
                         licensed from third parties.


     ii.               Exclude costs associated with
                         upfront payments for acquired
                         in-process research and
                         development projects acquired
                         in a transaction other than a
                         business combination. These
                         costs were related to business
                         development transactions with
                         AC Immune SA and ImmuNext, Inc.


     iii.              Exclude charges primarily
                         associated with the accelerated
                         vesting of Loxo Oncology
                         employee equity awards as part
                         of the closing of the
                         acquisition of Loxo Oncology.


     iv.               Non-GAAP earnings per share
                         assume that the disposition of
                         Elanco occurred at the
                         beginning of 2019 and therefore
                         include the benefit from the
                         reduction in shares of common
                         stock outstanding.


      v.                Exclude charges related to the
                         withdrawal of Lartruvo.


      vi.               Exclude discontinued operations
                         of Elanco.


     Refer to: Mark Taylor; mark.taylor@lilly.com; (317) 276-5795
                (Media)


               Kevin Hern; hern_kevin_r@lilly.com; (317) 277-1838
                (Investors)

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SOURCE Eli Lilly and Company