Lilly Reports Second-Quarter Financial Results, Raises EPS Guidance

INDIANAPOLIS, July 30, 2020 /PRNewswire/ -- Eli Lilly and Company (NYSE: LLY) today announced financial results for the second quarter of 2020.




                        
       $ in millions, except 
            
        Second Quarter      
         
       %


     per share data



                                                      2020                     2019             Change




     Revenue                                                $
      5,499.4                               $
     5,636.7  (2)%



     Net Income - Reported                        1,412.0                            1,327.2                   6%



     EPS - Reported                                  1.55                               1.44                   8%





     Net Income - Non-GAAP                        1,721.2                            1,388.0                  24%



     EPS - Non-GAAP                                  1.89                               1.50                  26%

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.

"In the second quarter, Lilly achieved several important R&D milestones, including three FDA approvals for new medicines, positive phase 3 results for several important clinical programs and continued progress in our quest to develop medicines for patients with COVID-19," said David A. Ricks, Lilly's chairman and CEO. "At the same time, the COVID-19 pandemic continues to strain healthcare systems around the world and has decreased new patient starts for some of Lilly's medicines. As anticipated, our second quarter financial results reflect the variability caused by the pandemic, but our year-to-date revenue performance, which includes 13 percent volume growth, demonstrates that our underlying business fundamentals remain strong. We expect growth in new prescription volume for our key growth products in the second half of 2020, and we remain confident in our outlook for the year."

Key Events Over the Last Three Months

COVID-19

    --  The company completed dosing of a phase 1 study and initiated a phase 2
        study of LY-CoV555, a potential antibody treatment designed to target
        COVID-19. LY-CoV555 is the first investigational medicine to emerge from
        the collaboration between Lilly and AbCellera Biologics to create
        antibody therapies for the potential prevention and treatment of
        COVID-19.
    --  The company entered into an agreement with Junshi Biosciences to
        co-develop therapeutic antibodies for the potential prevention and
        treatment of COVID-19, including LY-CoV016, the lead antibody from the
        collaboration. Dosing of a phase 1 study of LY-CoV016 in healthy
        volunteers has been completed and the antibody has demonstrated the
        safety and tolerability to proceed into further stages of clinical
        development.

Regulatory

    --  The U.S. Food and Drug Administration (FDA) approved Retevmo(TM), the
        first therapy specifically indicated for the treatment of adult patients
        with metastatic rearranged during transfection (RET) fusion-positive
        non-small cell lung cancer, and the treatment of adult and pediatric
        patients 12 years of age and older with advanced or metastatic
        RET-mutant medullary thyroid cancer who require systemic therapy, or
        advanced or metastatic RET fusion-positive thyroid cancer who require
        systemic therapy and who are radioactive iodine-refractory (if
        radioactive iodine is appropriate).
    --  The FDA approved Lyumjev(TM), a new rapid-acting insulin indicated to
        improve glycemic control in adults with type 1 and type 2 diabetes.
    --  The FDA approved a supplemental Biologics License Application (sBLA) for
        Taltz(®) for the treatment of active non-radiographic axial
        spondyloarthritis (nr-axSpA) in patients with objective signs of
        inflammation.
    --  The FDA approved Tauvid(TM), a radioactive diagnostic agent, for
        positron emission tomography imaging of the brain to estimate the
        density and distribution of aggregated tau neurofibrillary tangles in
        adult patients with cognitive impairment who are being evaluated for
        Alzheimer's disease.
    --  The FDA approved Cyramza(®) in combination with erlotinib for the
        first-line treatment of people with metastatic non-small cell lung
        cancer with epidermal growth factor receptor exon 19 deletions or exon
        21 mutations.

Clinical

    --  The company and Boehringer Ingelheim announced positive top-line results
        from a phase 3 study of Jardiance(®) in adults with heart failure with
        reduced ejection fraction, with and without diabetes. The study met its
        primary endpoint, demonstrating superiority with empagliflozin compared
        to placebo in reducing the risk for the composite of cardiovascular
        death or hospitalization due to heart failure, when added to standard of
        care.
    --  The company announced results from a pre-planned interim analysis of a
        phase 3 study of Verzenio(®) in combination with standard adjuvant
        endocrine therapy (ET). The study met the primary endpoint of invasive
        disease-free survival, significantly decreasing the risk of breast
        cancer recurrence or death compared to standard adjuvant ET alone.
    --  The company announced that mirikizumab met the primary and all key
        secondary endpoints in a phase 3 study comparing the efficacy and safety
        of mirikizumab to placebo and Cosentyx(®) in patients with moderate to
        severe plaque psoriasis.
    --  The company announced that higher investigational doses of Trulicity(®)
        meaningfully reduced A1C and body weight in people with type 2 diabetes.
        Data from a phase 3 study showed higher investigational doses of
        Trulicity (3 mg and 4.5 mg) were well-tolerated and led to A1C
        reductions up to 1.9 percent and weight reductions up to 10.4 pounds in
        people with type 2 diabetes.

Business Development/Other Developments

    --  The company announced its participation in, and $100 million commitment
        to, the AMR Action Fund, a $1 billion initiative from more than 20
        biopharmaceutical companies to address the urgent need for new
        antibiotics to combat antimicrobial resistance (AMR).

Second-Quarter Reported Results

In the second quarter of 2020, worldwide revenue was $5.499 billion, a decrease of 2 percent compared with the second quarter of 2019, comprised of a 6 percent increase in volume, a 7 percent decrease due to lower realized prices, and a 1 percent decrease due to the unfavorable impact of foreign exchange rates. Key growth products launched since 2014, consisting of Trulicity, Tyvyt(®), Taltz, Verzenio, Emgality(®), Olumiant(®), Jardiance, Cyramza, Baqsimi(TM), Basaglar(®), and Retevmo, contributed nearly 9 percentage points of revenue growth and represented approximately 54 percent of total revenue. The company estimates that the COVID-19 pandemic negatively impacted worldwide revenue in the second quarter of 2020, including approximately $250 million of decreased customer buying that largely offset product stocking that occurred in the first quarter of 2020 and approximately $250 million resulting from delayed new patient prescription trends.

Revenue in the U.S. decreased 3 percent, to $3.145 billion, comprised of a 4 percent increase in volume and an 8 percent decrease due to lower realized prices. The decrease in realized prices in the U.S. was driven primarily by changes to estimates for rebates and discounts, mainly for diabetes products, reflecting both a favorable adjustment in the Medicaid segment in the second quarter of 2019 and an unfavorable adjustment in the commercial segment in the second quarter of 2020. The decrease in realized prices in the U.S. also reflects higher growth in lower net price segments across numerous products and increased rebates to gain and maintain broad commercial access across the portfolio. Increased U.S. volume for key growth products, including Trulicity, Taltz, Emgality, Verzenio, Baqsimi, Retevmo, Jardiance, Olumiant, Cyramza, and Basaglar was partially offset by lower volume for certain other products, including Tradjenta(®), Forteo(®) and Alimta(®). The company estimates that the COVID-19 pandemic negatively impacted U.S. revenue in the second quarter of 2020, including approximately $200 million of decreased customer buying that largely offset product stocking that occurred in the first quarter of 2020 and approximately $150 million resulting from delayed new patient prescription trends.

Revenue outside the U.S. decreased 1 percent, to $2.355 billion, comprised of a 7 percent increase in volume, a 7 percent decrease due to lower realized prices, and a 2 percent decrease due to the unfavorable impact of foreign exchange rates. The decrease in realized prices outside the U.S. was driven primarily by the inclusion of Tyvyt and Alimta in government reimbursement programs in China and bi-annual government mandated price decreases in Japan. The increase in volume outside the U.S. was driven primarily by the inclusion of Tyvyt and Alimta in government reimbursement programs in China, as well as volume gains for other key growth products, including Trulicity, Olumiant, Verzenio, Jardiance, Taltz, Cyramza, Emgality, Basaglar, and Baqsimi, partially offset by decreased volume for Cialis(®), Forteo, and Trajenta. The company estimates that the COVID-19 pandemic negatively impacted revenue outside the U.S. in the second quarter of 2020, including approximately $100 million resulting from delayed new patient prescription trends and approximately $50 million of decreased customer buying that largely offset product stocking that occurred in the first quarter of 2020.

Gross margin decreased 5 percent, to $4.277 billion, in the second quarter of 2020 compared with the second quarter of 2019 and was unfavorably impacted by decreased customer buying patterns and patient prescription trends resulting from the COVID-19 pandemic. Gross margin as a percent of revenue was 77.8 percent, a decrease of 2.2 percentage points compared with the second quarter of 2019. The decrease in gross margin percent was primarily due to the impact of lower realized prices on revenue and higher intangibles amortization expense associated with the launch of Retevmo.

Total operating expenses in the second quarter of 2020, defined as the sum of research and development and marketing, selling, and administrative expenses, decreased 5 percent to $2.839 billion compared with the second quarter of 2019. Research and development expenses decreased 1 percent to $1.390 billion, or 25.3 percent of revenue, driven primarily by lower development expenses for late-stage assets and the pause in new clinical trial initiations and patient enrollment as a result of the COVID-19 pandemic. Marketing, selling, and administrative expenses decreased 9 percent to $1.449 billion, primarily due to lower marketing expenses.

In the second quarter of 2020, the company recognized acquired in-process research and development charges of $241.8 million related to the acquisition of a pre-clinical stage company as well as the previously announced business development transactions with AbCellera Biologics, Evox Therapeutics, and Junshi Biosciences. In the second quarter of 2019, the company recognized an acquired in-process research and development charge of $25.0 million related to the business development transaction with Avidity Biosciences.

Operating income in the second quarter of 2020 was $1.197 billion, compared to $1.498 billion in the second quarter of 2019. The decrease in operating income was primarily driven by lower gross margin and higher acquired in-process research and development charges, partially offset by lower marketing, selling, and administrative expenses.

Other income was $446.9 million in the second quarter of 2020, compared with other expense of $32.4 million in the second quarter of 2019. The increase in other income was driven primarily by favorable mark-to-market adjustments on investment securities, including equity positions the company holds in Asian biopharmaceutical companies as well as two U.S.-based companies that had successful initial public offerings in the second quarter of 2020.

The effective tax rate was 14.1 percent in the second quarter of 2020, compared with 9.5 percent in the second quarter of 2019. The higher effective tax rate in the second quarter of 2020 was driven by a mix of earnings in higher tax jurisdictions, a lower net discrete tax benefit compared to the same period in 2019, and nondeductible acquired in-process research and development charges.

In the second quarter of 2020, net income and earnings per share were $1.412 billion and $1.55, respectively, compared with net income of $1.327 billion and earnings per share of $1.44 in the second quarter of 2019. The increase in net income and earnings per share in the second quarter of 2020 was primarily driven by higher other income, partially offset by lower operating income and, to a lesser extent, higher income tax expense.

Second-Quarter Non-GAAP Measures

On a non-GAAP basis, second-quarter 2020 gross margin decreased 4 percent, to $4.380 billion compared with the second quarter of 2019 and was unfavorably impacted by decreased customer buying patterns and patient prescription trends resulting from the COVID-19 pandemic. Gross margin as a percent of revenue was 79.6 percent, a decrease of 1.4 percentage points. The decrease in gross margin percent was primarily due to the impact of lower realized prices on revenue.

Operating income on a non-GAAP basis decreased $33.5 million, or 2 percent, to $1.541 billion in the second quarter of 2020 compared with the second quarter of 2019, due to lower gross margin, partially offset by lower marketing, selling, and administrative expenses.

The effective tax rate on a non-GAAP basis was 13.4 percent in the second quarter of 2020, compared with 10.0 percent in the second quarter of 2019. The higher effective tax rate for the second quarter of 2020 was driven by a mix of earnings in higher tax jurisdictions and a lower net discrete tax benefit compared to the same period in 2019.

On a non-GAAP basis, in the second quarter of 2020 net income increased 24 percent, to $1.721 billion, while earnings per share increased 26 percent, to $1.89, compared with $1.388 billion and $1.50, respectively, in the second quarter of 2019. The increase in net income and earnings per share was driven primarily by higher other income, partially offset by higher income tax expense.

For further detail on 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.


                                                          
       
       Second Quarter



                                                     2020                        2019     % Change




       
                Earnings per share (reported)         $
       
       1.55                     $
        
     1.44  8%



       Acquired in-process research and development  .25                             .02



       Amortization of intangible assets             .09                             .04



       
                Earnings per share (non-GAAP)         $
       
       1.89                     $
        
     1.50 26%



       Numbers may not add due to rounding.

    ---

Year-to-Date Reported Results

For the first six months of 2020, worldwide revenue increased 6 percent to $11.359 billion, compared with $10.729 billion in the same period in 2019. The increase in revenue was driven by a 13 percent increase in volume, partially offset by a 7 percent decrease due to lower realized prices. The company estimates that the COVID-19 pandemic negatively impacted revenue in the first six months of 2020 by approximately $250 million due to lower patient prescription trends, while increased customer buying in the first quarter of 2020 was essentially offset by decreased customer buying in the second quarter of 2020. For the first six months of 2020, operating income was $2.788 billion, an increase of 30 percent compared to the same period of 2019. Reported net income and earnings per share for the first six months of 2020 were $2.869 billion and $3.15, respectively, compared with $5.569 billion and $5.84 in the same period of 2019. The decreases in net income and earnings per share in the first six months of 2020 were driven primarily by the approximate $3.7 billion gain recognized on the disposition of Elanco in 2019, partially offset by higher operating income and higher other income for the first six months of 2020.

Year-to-Date Non-GAAP Measures

For the first six months of 2020, operating income was $3.303 billion on a non-GAAP basis, an increase of 14 percent compared to the same period of 2019. Net income and earnings per share, on a non-GAAP basis, were $3.320 billion and $3.64, respectively, compared with $2.625 billion and $2.83 in the same period of 2019.

For further detail on 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.


                                                                 
              
                Year-to-Date



                                                          2020                                          2019                            % Change

                                                                                                                                     ---

                            Earnings per share
                             (reported)                          $
              
                3.15                                             $
          
     5.84  (46)%


               Discontinued
                operations                                   -                                                    (3.86)


                            Earnings per share
                             from continuing
                             operations
                             (reported)                   3.15                                                       1.98                              59%


               Acquired in-
                process research
                and development                            .30                                                        .14


               Amortization of
                intangible assets                          .14                                                        .08


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


               Lartruvo(R)
                charges                                      -                                                       .14


               Impact of reduced
                shares
                outstanding for
                non-GAAP
                reporting(a)                                 -                                                       .05


                            Earnings per share
                             (non-GAAP)                          $
              
                3.64                                             $
          
     2.83    29%



    Numbers may not add due to rounding.

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

    ---

Selected Revenue Highlights




                     (Dollars in
                      millions)                                 
              Second Quarter                                    
         Year-to-Date


                     Selected Products            2020                                2019         
        % Change               2020                   2019    
          % Change


        Trulicity                                        $
              1,229.8                         $
             1,028.5                         20%        $
       2,459.1                  $
       1,908.3      29%


        Humalog(R)(a)                            555.1                                       677.6                      (18)%               1,250.8              1,408.4           (11)%



       Alimta                                   539.1                                       577.8                       (7)%               1,099.2              1,076.9              2%



       Taltz                                    395.2                                       353.8                        12%                 838.7                606.3             38%


        Humulin(R)                               313.6                                       322.6                       (3)%                 629.3                620.3              1%



       Basaglar                                 290.4                                       290.7                       (0)%                 594.1                542.1             10%


        Jardiance(b)                             262.0                                       231.9                        13%                 529.5                435.5             22%



       Forteo                                   252.7                                       360.8                      (30)%                 525.0                673.7           (22)%



       Cyramza                                  256.7                                       241.8                         6%                 495.7                440.0             13%



       Verzenio                                 208.6                                       133.9                        56%                 396.7                243.3             63%



       Olumiant                                 145.0                                       102.4                        42%                 284.7                184.5             54%



       Emgality                                  87.4                                        34.3                         
         NM                 161.5                     48.5                
         NM



       Tyvyt                                     64.1                                        40.1                        60%                 121.5                 50.0                    
         NM



       Baqsimi                                   13.6                                                                    
         NM                  31.4                                        
         NM



       Retevmo                                    6.3                                                                    
         NM                   6.3                                        
         NM




                     Total Revenue             5,499.4                                     5,636.7                       (2)%              11,359.2             10,728.9              6%





       
                (a) Humalog includes Insulin Lispro


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


       NM - not meaningful

    ---

Trulicity

Second-quarter 2020 worldwide Trulicity revenue was $1.230 billion, an increase of 20 percent compared with the second quarter of 2019. U.S. revenue increased 20 percent, to $952.5 million, driven by increased demand, 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 $277.2 million, an increase of 17 percent, driven by increased volume, partially offset by the unfavorable impact of foreign exchange rates and lower realized prices.

Humalog

For the second quarter of 2020, worldwide Humalog revenue decreased 18 percent compared with the second quarter of 2019, to $555.1 million. Revenue in the U.S. decreased 29 percent, to $281.7 million, driven primarily by lower realized prices due to changes in estimates for rebates and discounts, reflecting both a favorable Medicaid adjustment in the second quarter of 2019 and an unfavorable Managed Care adjustment in the second quarter of 2020. Revenue outside the U.S. decreased 3 percent, to $273.3 million, driven primarily by the unfavorable impact of foreign exchange rates.

Alimta

For the second quarter of 2020, worldwide Alimta revenue decreased 7 percent compared with the second quarter of 2019, to $539.1 million. U.S. revenue decreased 7 percent, to $317.2 million, primarily driven by decreased demand, partially offset by higher realized prices. Revenue outside the U.S. decreased 6 percent to $221.9 million, primarily driven by lower realized prices, partially offset by increased volume.

Taltz

For the second quarter of 2020, worldwide Taltz revenue increased 12 percent compared with the second quarter of 2019, to $395.2 million. U.S. revenue increased 8 percent, to $289.2 million, driven by increased demand, partially offset by lower realized prices. Revenue outside the U.S. increased 24 percent, to $106.0 million, driven by increased volume, partially offset by lower realized prices.

Humulin

For the second quarter of 2020, worldwide Humulin revenue decreased 3 percent compared with the second quarter of 2019, to $313.6 million. U.S. revenue decreased 3 percent, to $214.3 million, driven by lower realized prices due to changes in segment mix and, to a lesser extent, lower demand. Revenue outside the U.S. decreased 3 percent, to $99.3 million, due to the unfavorable impact of foreign exchange rates, partially offset by higher realized prices.

Basaglar

For the second quarter of 2020, worldwide Basaglar revenue was $290.4 million and was flat compared with the second quarter of 2019. U.S. revenue decreased 1 percent, to $229.7 million, driven by lower realized prices, partially offset by increased demand. Revenue outside the U.S. increased 4 percent, to $60.7 million, driven by increased volume, partially offset by lower realized prices and 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.

Jardiance

The company's worldwide Jardiance revenue during the second quarter of 2020 was $262.0 million, an increase of 13 percent compared with the second quarter of 2019. U.S. revenue increased 2 percent, to $145.1 million, driven by increased demand. Revenue outside the U.S. was $116.9 million, an increase of 31 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.

Forteo

For the second quarter of 2020, worldwide Forteo revenue decreased 30 percent compared with the second quarter of 2019, to $252.7 million. U.S. revenue decreased 31 percent, to $119.6 million, driven by lower demand and lower realized prices primarily due to the unfavorable impact of higher contracted rates. Revenue outside the U.S. decreased 29 percent to $133.0 million, primarily driven by decreased volume and 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.

Cyramza

For the second quarter of 2020, worldwide Cyramza revenue was $256.7 million, an increase of 6 percent compared with the second quarter of 2019. U.S. revenue was $94.1 million, an increase of 5 percent, primarily driven by higher realized prices and increased demand. Revenue outside the U.S. was $162.7 million, an increase of 7 percent, driven by increased volume, partially offset by lower realized prices.

Verzenio

For the second quarter of 2020, worldwide Verzenio revenue increased 56 percent compared with the second quarter of 2019, to $208.6 million. U.S. revenue was $141.7 million, an increase of 35 percent, primarily driven by increased demand and, to a lesser extent, higher realized prices. Revenue outside the U.S. was $66.9 million, an increase of $38.3 million compared with the second quarter of 2019.

Olumiant

For the second quarter of 2020, Olumiant generated worldwide revenue of $145.0 million. U.S. revenue was $13.2 million. Revenue outside the U.S. was $131.8 million, an increase of 44 percent compared with the second quarter of 2019, driven by increased volume.

Emgality

For the second quarter of 2020, Emgality generated worldwide revenue of $87.4 million, an increase of $13.4 million compared with the first quarter of 2020. U.S. revenue was $80.6 million, an increase of $13.2 million compared with the first quarter of 2020, primarily driven by increased demand and, to a lesser extent, higher realized prices due to changes to estimates in rebates and discounts. Revenue outside of the U.S. was $6.8 million in the second quarter of 2020.

Tyvyt

The company's Tyvyt revenue during the second quarter of 2020 was $64.1 million, an increase of $6.7 million compared with the first quarter of 2020. 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 second quarter of 2020, Baqsimi generated worldwide revenue of $13.6 million, a decrease of 4.2 million compared with the first quarter of 2020. U.S revenue was $11.1 million, while revenue outside the U.S. was $2.6 million.

Retevmo

For the second quarter of 2020, Retevmo generated U.S. revenue of $6.3 million. Retevmo was approved by the FDA and launched in the U.S. during the second quarter of 2020.

2020 Financial Guidance

The company has updated certain elements of its 2020 financial guidance to reflect management's current expectations for underlying business performance.

There is uncertainty in the company's 2020 financial guidance surrounding the extent and duration of the impact of the COVID-19 pandemic. Key management assumptions related to the COVID-19 pandemic that support the company's 2020 guidance include:

    --  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;
    --  New-to-brand prescription trends will improve in the U.S. in the second
        half of 2020, exceeding pre-pandemic levels by the fourth quarter of
        2020 for most brands;
    --  Increased utilization of patient affordability programs and changes in
        segment mix due to higher U.S. unemployment will have a modestly
        negative impact U.S. pricing;
    --  Promotional spend will constitute a mix of in-person customer
        interactions, direct-to-consumer advertising and investments in digital
        promotion;
    --  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.

The company now expects earnings per share for 2020 to be in the range of $6.48 to $6.68 on a reported basis and $7.20 to $7.40 on a non-GAAP basis, reflecting expectations of lower marketing, selling and administrative expenses, higher other income and a lower effective tax rate.


                                                                                2020    
              
                % Change

                                                                       Expectations                            from 2019


                            Earnings per
                             share
                             (reported)(a)    
              
                $6.48 to $6.68                          31% to 35%


               Amortization of
                intangible
                assets                                                           .36


               Acquired IPR&D(b)                                                 .30


               Asset impairment,
                restructuring
                and other
                special charges                                                  .06


                            Earnings per
                             share (non-
                             GAAP)            
              
                $7.20 to $7.40                          19% to 23%



    Numbers may not add due to rounding

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

                            (b) Includes costs related to both a business development transaction with a pre-
                             clinical stage company as well as business development transactions with Sitryx,
                             AbCellera Biologics Inc., Evox Therapeutics, and Junshi Biosciences.

    ---

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, Tyvyt, and Retevmo. 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 mid-single digit net price decline in the U.S. (driven primarily by rebates and legislated increases to Medicare Part D cost sharing, and patient affordability programs), as well as net price declines in China, Japan and Europe.

Gross margin as a percent of revenue is now expected to be approximately 78 percent on a reported basis and approximately 80 percent on a non-GAAP basis, reflecting changes in the geographic mix of product sales and lower realized prices on revenue.

Marketing, selling and administrative expenses are now expected to be in the range of $6.0 billion to $6.2 billion, reflecting savings from reduced travel, meetings, and promotional activities. 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 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 $350 to $500 million of income, reflecting mark-to-market gains on investment securities in the second quarter of 2020.

The 2020 effective tax rate is now expected to be approximately 14 percent on both a reported basis and a non-GAAP basis, reflecting net discrete tax benefits recognized in the first six months of 2020.

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%              Approx. 78%



       Gross Margin % of Revenue (non-GAAP)                                                                     Approx. 81%              Approx. 80%





       Marketing, Selling & Administrative                                                       
         $6.2 to $6.4 billion 
        $6.0 to $6.2 billion





       Research & Development                                                                    
         $5.6 to $5.9 billion   
           Unchanged





       Other Income/(Expense)                                                                    
         $(150) to $0 million 
        $350 to $500 million





       Tax Rate                                                                                                 Approx. 15%              Approx. 14%





       Earnings per share (reported)                                                               
             $6.20 to $6.40    
           $6.48 to $6.68



       Earnings per share (non-GAAP)                                                               
             $6.70 to $6.90    
           $7.20 to $7.40





       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 second-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 the company's 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)
Lyumjev(TM) (insulin lispro-aabc injection, Lilly)
Olumiant(®) (baricitinib, Lilly)
QBREXZA(®) (Glycopyrronium cloth, Dermira)
Retevmo(TM) (selpercatinib, Lilly)
Synjardy(®) (empagliflozin/metformin, Boehringer Ingelheim)
Taltz(® )(ixekizumab, Lilly)
Tauvid(TM) (flortaucipir F 18 injection, Lilly)
Tradjenta(®)(linagliptin, Boehringer Ingelheim)
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.


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


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



     Eli Lilly and Company Employment Information


                                                   June 30, 2020 December 31, 2019



      Worldwide Employees                                 34,720             33,755



     Eli Lilly and Company



     Operating Results  (Unaudited) - REPORTED



     (Dollars in millions, except per share data)


                                                                  
         Three Months Ended                                           
          Six Months Ended


                                                                      
          June 30,                                                   
           June 30,


                                                               2020            2019
            %                                          2020 2019
            %
                                                                                                     Chg.                                                         Chg.





     Revenue                                         $
          5,499.4                           $
              5,636.7             (2)%                         $
             11,359.2            $
          10,728.9                 6%





     Cost of sales                                         1,222.0                                       1,124.9               9%                                     2,437.1                     2,263.6                 8%


      Research and development                              1,390.2                                       1,402.2             (1)%                                     2,782.3                     2,632.7                 6%


      Marketing, selling and
       administrative                                       1,448.6                                       1,586.3             (9)%                                     2,998.2                     3,103.4               (3)%


      Acquired in-process research
       and development                          241.8                                      25.0                       
       NM                           294.1                          161.9                          82%


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





     Operating income                                      1,196.8                                       1,498.3            (20)%                                     2,787.6                     2,143.4                30%




      Net interest income (expense)            (81.2)                                   (91.5)                                                     (159.4)                       (147.4)


      Net other income (expense)                528.1                                      59.1                                                        695.4                          201.0


      Other income (expense)                    446.9                                    (32.4)                      
       NM                           536.0                           53.6                     
         NM




      Income before income taxes                            1,643.7                                       1,465.9              12%                                     3,323.6                     2,197.0                51%



     Income tax expense                                      231.7                                         138.7              67%                                       455.1                       308.7                47%




      Net income from continuing
       operations                                           1,412.0                                       1,327.2               6%                                     2,868.5                     1,888.3                52%


      Net income from discontinued
       operations                                                                                                   
       NM                                                       3,680.5                     
         NM




      Net income                                      $
          1,412.0                           $
              1,327.2               6%                          $
             2,868.5             $
          5,568.8              (48)%




      Earnings from continuing
       operations -diluted                                     1.55                                          1.44               8%                                        3.15                        1.98                59%


      Earnings from discontinued
       operations -diluted                                                                                          
       NM                                                          3.86                     
         NM


      Earnings per share
       -diluted                                          $
          1.55                              $
              1.44               8%                             $
             3.15                $
          5.84              (46)%




      Dividends paid per
       share                                            $
          0.740                             $
              0.645              15%                            $
             1.480               $
          1.290                15%


      Weighted-average shares
       outstanding (thousands) -
       diluted                                910,890                                   924,630                                                      911,605                        954,156





     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

                                                                                               
              June 30, 2020                                                             
              June 30, 2019

                                                                                                                                                                                              ---

                                                                  GAAP                      Adjustments(b)                Non-GAAP                  GAAP   Adjustments(c)      Non-GAAP

                                                                Reported                                                Adjusted(a)               Reported                   Adjusted(a)




      Cost of sales                             $
              
                1,222.0                                                       $
     (102.8)                         $
            1,119.2                        $
     
      1,124.9        $
     (51.6) $
     1,073.3




      Acquired in-process
       research and development         241.8                                                                                  (241.8)                                                                        25.0               (25.0)




      Income tax expense                                                 231.7                                                             35.4                                      267.1                                138.7             15.8       154.5





     Net income                                                       1,412.0                                                            309.2                                    1,721.2                              1,327.2             60.8     1,388.0




      Earnings per share -diluted                                         1.55                                                             0.34                                       1.89                                 1.44             0.07        1.50




     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 June 30, 2020,
                                      include the following:


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



     Cost of sales                                             $
       (102.8)          
     $           $
     
     (102.8)





     Acquired in-process research and development                           (241.8)      (241.8)





     Income taxes                                         21.3                  14.1          35.4





     Net income                                           81.5                 227.7         309.2





     Earnings per share - diluted                         0.09                  0.25          0.34



     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 both a business
                                           development transaction with a
                                           pre-clinical stage company as
                                           well as business development
                                           transactions with AbCellera
                                           Biologics Inc., Evox
                                           Therapeutics, and Junshi
                                           Biosciences.




     (c)               Adjustments to
                        certain GAAP
                        reported
                        measures for the
                        three months
                        ended June 30,
                        2019, include
                        the following:


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




     Cost of sales                                             $
         (51.6)         
     $          (51.6)





     Acquired in-process research and development                            (25.0)      (25.0)





     Income taxes                                         10.6                   5.2         15.8





     Net income                                           41.0                  19.8         60.8





     Earnings per share - diluted                         0.04                  0.02         0.07



               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 the
                                  business development
                                  transaction with Avidity
                                  Biosciences, Inc.



     Eli Lilly and Company



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



     (Dollars in millions, except per share data)




                                                                                             
              Six Months Ended                                                                 
         Six Months Ended

                                                                                               
              June 30, 2020                                                                   
         June 30, 2019

                                                                                                                                                                                                ---

                                                                     GAAP                   Adjustments(b)                Non-GAAP                  GAAP   Adjustments(c)         Non-GAAP

                                                                   Reported                                             Adjusted(a)               Reported                      Adjusted(a)




      Cost of sales                                $
              
                2,437.1                                                    $
     (161.4)                            $
            2,275.7                    $
     
      2,263.6             $
        (179.8)         $
      2,083.8




      Acquired in-process
       research and development            294.1                                                                               (294.1)                                                                     161.9                   (161.9)


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




      Income tax expense                                                    455.1                                                          63.9                                         519.0                            308.7                      29.2                337.9




      Net income from continuing
       operations                                                         2,868.5                                                         451.5                                       3,320.0                          1,888.3                     736.4              2,624.7




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





     Net income                                                          2,868.5                                                         451.5                                       3,320.0                          5,568.8                 (2,944.1)             2,624.7




      Earnings per share -diluted                                            3.15                                                          0.49                                          3.64                             5.84                    (3.01)                2.83




      Weighted-average shares
       outstanding (thousands) -
       diluted                           911,605                                                                                                                     911,605                              954,156                  (27,083)               927,073



               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 six
                                  months ended June 30, 2020,
                                  include the following:

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

                                                       items(iii)


     Cost of sales                     $
       (157.2)                  
         $                    $
     (4.2) $
     
     (161.4)




     Acquired in-
      process research
      and development                                       (294.1)                   (294.1)


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




     Income taxes                 32.6                          25.1              6.2       63.9




     Net income                  124.6                         269.0             57.9      451.5




     Earnings per
      share - diluted             0.14                          0.30             0.06       0.49



     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
                                               payments for acquired in-
                                               process research and development
                                               projects acquired in a
                                               transaction other than a
                                               business combination. These
                                               costs were related to both a
                                               business development transaction
                                               with a pre-clinical stage
                                               company as well as business
                                               development transactions with
                                               Sitryx, AbCellera Biologics
                                               Inc., Evox Therapeutics, and
                                               Junshi Biosciences.


                       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
                        six months ended
                        June 30, 2019,
                        include the
                        following:

     (Dollars in
      millions, except
      per share data)  Amortization(i)    IPR&D(ii)    Other        Reduced      Lartruvo     Discontinued    Total

                                                    specified        shares     charges(v)   operations(vi)

                                                    items(iii)  outstanding(iv)


     Cost of sales                     $
        (95.2)                
              $                             
         $             
     $                      $
     (84.6) 
     $ $
     
     (179.8)




     Acquired in-
      process research
      and development                                  (161.9)                                                                                 (161.9)


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




     Income taxes                 19.5                     34.0                          4.2                              (28.5)                     29.2




     Net income                   75.7                    127.9                        407.6                               125.2    (3,680.5)    (2,944.1)




     Earnings per
      share -diluted              0.08                     0.14                         0.44                      0.05       0.14       (3.86)       (3.01)



               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 activity, primarily
                                   driven by the acquisition of AC
                                   Immune SA, ImmuNext, Inc. and
                                   Avidity Biosciences, 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 all periods
                                   presented and therefore include
                                   the benefit from the reduction
                                   in shares of common stock
                                   outstanding.


               v.                 Exclude charges related to the
                                   suspension of promotion of
                                   Lartruvo.


               vi.                Exclude discontinued operations
                                   of Elanco.

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SOURCE Eli Lilly and Company