LILLY (ELI) & COMPANY: 4th Quarter Earnings

Date: January 30, 2014
For Release: Immediately 
Refer to: (317) 276-5795 - Mark Taylor (Media) 
(317) 655-6874 - Philip Johnson (Investors) 
       Lilly Reports Fourth-Quarter and Full-Year 2013 Results 
- Fourth-quarter 2013 revenue declined 2 percent driven by Cymbalta U.S.
patent expiration, partially offset by growth in other products. 
- Fourth-quarter 2013 earnings per share were $0.67 (reported), or $0.74
(non-GAAP). 
- Full-year 2013 revenue increased 2 percent to $23.1 billion. 
- Full-year 2013 earnings per share totaled $4.32 (reported), or $4.15
(non-GAAP). 
- Approximately $3.8 billion in cash was returned to shareholders in 2013
through dividends and share repurchases. 
- 2014 EPS guidance confirmed to be in the range of $2.77 to $2.85. 
Eli Lilly and Company (NYSE: LLY) today announced financial results for the
fourth quarter and full year of 2013. 
$ in millions, except per share data  Fourth Quarter          %         Full 
Year   % 
                                   2013     2012   Growth   2013      2012  
  Growth
Total Revenue - Reported             $5,808.8 $5,957.3  (2)%  $23,113.1 
$22,603.4   2%
Net Income - Reported                 727.5    827.2   (12)%   4,684.8   
4,088.6   15%
EPS - Reported                         0.67     0.74    (9)%    4.32      3.66   
18% 
Net Income - non-GAAP                 796.9    945.2   (16)%   4,502.6   
3,784.0   19%
EPS - non-GAAP                         0.74     0.85   (13)%    4.15      3.39   
22% 
Certain financial information for 2013 and 2012 are presented on both a
reported and a non-GAAP basis. Some numbers in this press release may not add
due to rounding. Reported results were prepared in accordance with generally
accepted accounting principles (GAAP) and include all revenue and expenses
recognized during the period. Non-GAAP measures exclude the items described in
the reconciliation tables later in the release. The non-GAAP measures are
presented in order to provide additional insights into the underlying trends
in the company's business. The company's 2014 financial guidance is also being
provided on both a reported and a non-GAAP basis. 
"Lilly's fourth-quarter 2013 results reflect the initial impact from the U.S.
patent expiration for Cymbalta. The loss of the Cymbalta patent, along with
the expiration of the U.S. patent for Evista in March of this year will result
in a substantial decline in revenue and earnings in 2014," said John C.
Lechleiter, Ph.D., Lilly's chairman, president and chief executive officer.
"Yet, far from seeing 2014 as a trough year for Lilly, we see it as a moment
of tremendous opportunity. We anticipate launching several new medicines this
year and returning our company to growth in 2015 and beyond." 
Key Events Over the Last Three Months 
- U.S. patent exclusivity for Cymbalta® expired on December 11, 2013,
resulting in the entry of several generic competitors. 
- As part of its previously-announced share repurchase program, the company
repurchased approximately $500 million in company stock in the fourth quarter
of 2013. For the full-year 2013, the company returned approximately $3.8
billion in cash to shareholders through its dividend and share repurchase
program. 
- The company and its alliance partner, Boehringer Ingelheim, announced that
the U.S. Food and Drug Administration accepted the filing of the New Drug
Application for LY2963016, an investigational basal (long-acting) insulin.
This new insulin glargine product was also submitted in Japan. 
- The company acquired all development and commercial rights from Arteaus
Therapeutics for a calcitonin gene-related peptide (CGRP) antibody as a
potential treatment for the prevention of frequent, recurrent migraine
headaches, following a successful Phase II proof-of-concept study. 
- The company entered into a collaboration with Pfizer Inc. to co-develop and
jointly commercialize tanezumab, a monoclonal antibody being investigated to
treat moderate-to-severe chronic osteoarthritis pain, chronic low back pain,
and cancer-related bone pain. 
- The company announced that results from three Phase III studies of
edivoxetine did not achieve the primary study objective of superior efficacy
in depression after eight weeks of treatment. While the safety and
tolerability of edivoxetine were consistent with previous studies, the
efficacy results do not support a regulatory submission for adjunctive
treatment in patients with Major Depressive Disorder (MDD). 
Fourth-Quarter Reported Results 
In the fourth quarter of 2013, worldwide total revenue was $5.809 billion, a
decrease of 2 percent compared with the fourth quarter of 2012. Revenue
decline was comprised of 5 percent due to lower volume and 2 percent due to
the unfavorable impact of foreign exchange rates, partially offset by an
increase of 4 percent due to higher prices. The decrease in volume was driven
by the loss of U.S. patent exclusivity for Cymbalta in December 2013,
partially offset by volume gains for most other products. Total revenue in the
U.S. decreased 6 percent to $3.044 billion driven by lower volume for
Cymbalta, partially offset by higher prices. Total revenue outside the U.S.
increased 1 percent to $2.765 billion, as higher volume was partially offset
by the unfavorable impact of the continued weakening of the Japanese yen, and
to a lesser extent, lower prices. 
Gross margin decreased 6 percent to $4.422 billion in the fourth quarter of
2013, driven by the unfavorable impact of foreign exchange rates on
international inventories sold and lower sales of Cymbalta due to the loss of
U.S. patent exclusivity, partially offset by higher prices. Gross margin as a
percent of total revenue was 76.1 percent, a decrease of 2.9 percentage points
compared with the fourth quarter of 2012. 
Total operating expenses in the fourth quarter of 2013, defined as the sum of
research and development, marketing, selling and administrative expenses was
$3.429 billion, which was essentially flat compared with the fourth quarter of
2012. Marketing, selling and administrative expenses decreased 1 percent to
$1.954 billion, due to ongoing cost containment efforts, including the
previously-announced reduction in U.S. sales and marketing activities in
anticipation of the losses of patent exclusivity for Cymbalta and Evista®, and
the impact of foreign exchange rates, partially offset by increased marketing
spend for other products. Research and development expenses increased 1
percent to $1.475 billion, or 25.4 percent of total revenue, driven by higher
research and clinical development expenses, partially offset by lower
milestone payments. 
In the fourth quarter of 2013, the company recognized a charge of $57.1
million related to acquired in-process research and development associated
with the acquisition of a CGRP antibody from Arteaus Therapeutics. 
In the fourth quarter of 2013, the company recognized asset impairment,
restructuring and other special charges of $35.4 million, primarily related to
charges associated with restructuring to reduce the company's cost structure
and global workforce. In the fourth quarter of 2012, the company recognized a
$204.0 million charge for asset impairment, restructuring and other special
charges, comprised primarily of $122.6 million related to an intangible asset
impairment for liprotamase and $64.7 million related to restructuring to
reduce the company's cost structure and global workforce. 
Operating income in the fourth quarter of 2013 was $900.8 million, a decrease
of 15 percent, compared to the fourth quarter of 2012, due to lower gross
margin, partially offset by lower asset impairment, restructuring and other
special charges compared with the fourth quarter of 2012. 
Other income (expense) was income of $9.1 million in the fourth quarter of
2013, compared with expense of $52.0 million in the fourth quarter of 2012.
This difference was due primarily to $40.0 million of milestones received from
Boehringer Ingelheim for the regulatory submissions of the companies' new
insulin glargine product in the United States and Japan. 
The effective tax rate was 20.0 percent in the fourth quarter of 2013,
reflecting the reinstatement of the R&D tax credit in the U.S. effective
January 1, 2013. In the fourth quarter of 2012, the effective tax rate was
18.3 percent, reflecting a tax benefit related to the intangible asset
impairment for liprotamase. 
In the fourth quarter of 2013, net income decreased 12 percent and earnings
per share decreased 9 percent to $727.5 million and $0.67, respectively,
compared with fourth-quarter 2012 net income of $827.2 million and earnings
per share of $0.74. The decreases in net income and earnings per share were
driven by lower operating income and a higher effective tax rate in the fourth
quarter of 2013, partially offset by increased other income. Earnings per
share benefited from a lower number of shares outstanding in the fourth
quarter of 2013 compared to the fourth quarter of 2012. 
Fourth-Quarter 2013 non-GAAP Measures 
On a non-GAAP basis, fourth-quarter 2013 operating income decreased $275.1
million, or 22 percent, to $993.3 million, driven by lower gross margin. The
effective tax rate decreased to 20.5 percent, compared with 22.3 percent in
the fourth quarter of 2012, primarily driven by the reinstatement of the R&D
tax credit. Net income decreased 16 percent and earnings per share decreased
13 percent to $796.9 million and $0.74, respectively, compared with $945.2
million and $0.85 during the fourth quarter of 2012. 
The decreases in net income and earnings per share were driven by lower
operating income, partially offset by higher other income and a lower
effective tax rate. Earnings per share benefited from a lower number of shares
outstanding in the fourth quarter of 2013 compared to the fourth quarter of
2012. 
Non-GAAP measures exclude items totaling $0.07 and $0.11 per share of expense
in the fourth quarters of 2013 and 2012, respectively. For further detail, see
the reconciliation below as well as the Reconciliation of GAAP Reported to
Selected Non-GAAP Adjusted Information table later in this press release. 
                                     Fourth Quarter 
                                     2013       2012  % Change
Earnings per share (reported)           $0.67      $0.74    (9)%
Asset impairment, restructuring and
other                                     .03        .11
special charges
Acquired in-process research and          .03          -
development charge associated with CGRP
antibody
Earnings per share (non-GAAP)           $0.74      $0.85    (13)%
Numbers do not add due to rounding. 
Full-Year 2013 Reported Results 
For the full-year 2013, worldwide total revenue increased 2 percent to $23.113
billion. This increase was comprised of a 5 percent increase due to higher
prices, partially offset by a 2 percent decrease due to the unfavorable impact
of foreign exchange rates, and a 1 percent decrease due to lower volume. Total
revenue in the U.S. increased 5 percent to $12.890 billion due to higher
prices, partially offset by volume declines for Cymbalta and Zyprexa® due to
the loss of patent exclusivity. Total revenue outside the U.S. decreased 1
percent to $10.223 billion, due primarily to the unfavorable impact of the
continued weakening of the Japanese yen, and, to a lesser extent, lower
prices, partially offset by increased volume. 
Gross margin increased 2 percent to $18.205 billion in 2013. Gross margin as a
percent of total revenue remained flat with the prior year at 78.8 percent,
driven by higher prices, offset by the impact of foreign exchange rates on
international inventories sold which significantly decreased cost of sales in
2012. 
Total operating expenses decreased 1 percent in 2013. Marketing, selling and
administrative expenses decreased 5 percent to $7.126 billion, driven
primarily by lower selling and marketing expenses resulting from the company's
cost containment efforts, including the previously-announced reduction in U.S.
sales and marketing activities in anticipation of the losses of patent
exclusivity for Cymbalta and Evista, as well as the impact of foreign exchange
rates. Research and development expenses increased 5 percent to $5.531
billion, or 23.9 percent of total revenue, due to higher research and clinical
development expenses, including approximately $100 million of milestone
payments made to Boehringer Ingelheim following the regulatory submissions for
empagliflozin. 
In 2013, the company recognized an acquired in-process research and
development charge of $57.1 million related to the CGRP antibody. 
Additionally, in 2013 the company recognized asset impairment, restructuring,
and other special charges of $120.6 million. These charges were comprised of
$58.5 million associated with the anticipated closure of a production facility
outside the United States, and $62.1 million for restructuring to reduce the
company's cost structure and global workforce. In 2012, the company recognized
charges of $281.1 million for asset impairment, restructuring and other
special charges. These charges were comprised of $122.6 million related to an
intangible asset impairment for liprotamase, $74.5 million related to
restructuring to reduce the company's cost structure and global workforce,
$64.0 million related to the asset impairment of a delivery device platform,
and $20.0 million related to the withdrawal of Xigris. 
Operating income in 2013 increased 13 percent compared to 2012 to $5.370
billion, due to higher gross margin and lower marketing, selling and
administrative expenses, partially offset by higher research and development
expenses. 
Other income (expense) in 2013 was income of $518.9 million, compared to
income of $674.0 million in 2012. The difference was driven primarily by lower
income related to the termination of the exenatide collaboration with Amylin
Pharmaceuticals ($495.4 million in 2013 compared to $787.8 million in 2012),
partially offset by milestones received from Boehringer Ingelheim for
regulatory submissions in the United States, Europe and Japan. 
The effective tax rate was 20.5 percent in 2013, compared with 24.4 percent in
2012. The 2012 effective tax rate reflects the expiration of the R&D tax
credit and the tax impact of the payment received from Amylin, partially
offset by the tax benefit related to the intangible asset impairment for
liprotamase. The decrease in the 2013 effective tax rate reflects the
reinstatement of the R&D tax credit in the U.S. effective January 1, 2013 as
well as the one-time impact of the R&D tax credit for 2012 that was recorded
in the first quarter of 2013. 
For the full-year 2013, net income increased 15 percent and earnings per share
increased 18 percent to $4.685 billion and $4.32, respectively, compared to
full-year 2012 net income of $4.089 billion and earnings per share of $3.66.
The increases in net income and earnings per share were due to higher
operating income and, to a lesser extent, a lower effective tax rate,
partially offset by lower other income. Earnings per share benefited from a
lower number of shares outstanding in 2013 compared to 2012. 
Full-Year 2013 non-GAAP Measures 
Operating income increased 11 percent to $5.548 billion due to higher gross
margin and lower marketing, selling and administrative expenses, partially
offset by higher research and development expenses. The effective tax rate for
2013 was 19.2 percent, compared to 22.8 percent in 2012. The decrease in the
2013 effective tax rate reflects the reinstatement of the R&D tax credit in
the U.S. in 2013 as well as the one-time impact of the R&D tax credit for 2012
that was recorded in the first quarter of 2013. Net income increased 19
percent and earnings per share increased 22 percent, to $4.503 billion and
$4.15, respectively. Earnings per share benefited from a lower number of
shares outstanding in 2013 compared to 2012. 
Non-GAAP measures exclude items totaling $0.17 and $0.27 per share of income
for 2013 and 2012, respectively. For further detail, see the reconciliation
below as well as the Reconciliation of GAAP Reported to Selected Non-GAAP
Adjusted Information table later in this press release. 
                                      Full-Year 
                                      2013   2012  % Change
Earnings per share (reported)            $4.32  $3.66     18%
Asset impairment, restructuring and
other special charges                      .08    .16
Income related to termination of the
exenatide                                (.29)  (.43)
collaboration with Amylin
Acquired in-process research and           .03      -
development charge associated with CGRP
antibody
Earnings per share (non-GAAP)            $4.15  $3.39     22%
Numbers do not add due to rounding. 
Revenue Highlights 
                                  % Change                         % Change
(Dollars in        Fourth Quarter   Over/(Under)      Full-Year      
Over/(Under)
millions) 
                2013     2012       2012       2013      2012        2012
Cymbalta            $883.2 $1,420.4    (38)%      $5,084.4  $4,994.1      2%
Alimta®              726.2    684.3      6%        2,703.0   2,594.3      4%
Humalog®             733.9    616.0     19%        2,611.2   2,395.5      9%
Cialis®              588.3    513.4     15%        2,159.4   1,926.8     12%
Humulin®             369.5    343.0      8%        1,315.8   1,239.1      6%
Forteo®              359.8    314.6     14%        1,244.9   1,151.0      8%
Zyprexa              348.2    384.8    (10)%       1,194.8   1,701.4    (30)%
Evista               275.9    241.0     14%        1,050.4   1,010.1      4%
Strattera®           201.1    163.9     23%          709.2     621.4     14%
Effient®             130.6    120.6      8%          508.7     457.2     11%
Animal Health        578.4    554.1      4%        2,151.5   2,036.5      6%
Total Revenue     $5,808.8 $5,957.3     (2)%     $23,113.1 $22,603.4      2% 
Cymbalta 
For the fourth quarter of 2013, Cymbalta generated $883.2 million in revenue,
a decrease of 38 percent compared with the fourth quarter of 2012. U.S. sales
of Cymbalta decreased 49 percent, to $577.3 million, due to lower demand
related to the loss of U.S. patent exclusivity for Cymbalta on December 11,
2013. Sales of Cymbalta outside the U.S. were $305.9 million, an increase of 9
percent, driven primarily by higher volume, partially offset by lower prices
and the unfavorable impact of foreign exchange rates. 
For the full year of 2013, worldwide Cymbalta sales increased 2 percent to
$5.084 billion. U.S. Cymbalta sales for 2013 were $3.961 billion, a 1 percent
increase driven by higher prices, largely offset by lower demand due to the
loss of U.S. patent exclusivity in December 2013. Cymbalta sales outside the
U.S. were $1.124 billion, a 4 percent increase driven by higher volume,
partially offset by lower prices and the unfavorable impact of foreign
exchange rates. 
Alimta 
For the fourth quarter of 2013, Alimta generated sales of $726.2 million, an
increase of 6 percent compared with the fourth quarter of 2012. U.S. sales of
Alimta increased 12 percent, to $332.0 million, driven by higher prices and
increased demand. Sales outside the U.S. increased 2 percent, to $394.2
million, driven by increased volume, partially offset by the unfavorable
impact of foreign exchange rates. 
For the full year of 2013, worldwide Alimta sales increased 4 percent to
$2.703 billion. U.S. Alimta sales for 2013 were $1.209 billion, an 8 percent
increase driven by higher prices and increased demand. Alimta sales outside
the U.S. were $1.494 billion, a 1 percent increase driven by higher volume,
partially offset by the unfavorable impact of foreign exchange rates and lower
prices. 
Humalog 
For the fourth quarter of 2013, worldwide Humalog sales increased 19 percent,
to $733.9 million. Sales in the U.S. increased 31 percent to $433.5 million,
driven by higher prices and increased volume. Sales outside the U.S. increased
6 percent to $300.4 million, driven by increased volume, partially offset by
the unfavorable impact of foreign exchange rates. 
For the full year of 2013, worldwide Humalog sales increased 9 percent to
$2.611 billion. U.S. Humalog sales for 2013 were $1.521 billion, an 11 percent
increase driven by higher prices, wholesaler buying patterns and increased
demand. Humalog sales outside the U.S. were $1.090 billion, a 6 percent
increase driven by higher volume, partially offset by the unfavorable impact
of foreign exchange rates. 
Cialis 
Cialis sales for the fourth quarter of 2013 increased 15 percent to $588.3
million. U.S. sales of Cialis were $279.8 million in the fourth quarter, a 33
percent increase compared with the fourth quarter of 2012, driven by higher
prices and, to a lesser extent, wholesaler buying patterns. Sales of Cialis
outside the U.S. increased 2 percent, to $308.5 million, driven by higher
prices, partially offset by the unfavorable impact of foreign exchange rates. 
For the full year of 2013, worldwide Cialis sales increased 12 percent to
$2.159 billion. U.S. Cialis sales for 2013 were $942.8 million, a 21 percent
increase driven by higher prices. Cialis sales outside the U.S. were $1.217
billion, a 6 percent increase driven by higher prices and higher volume,
partially offset by the unfavorable impact of foreign exchange rates. 
Humulin 
Worldwide Humulin sales increased 8 percent in the fourth quarter of 2013, to
$369.5 million. U.S. sales increased 19 percent to $194.2 million, driven by
higher prices and wholesaler buying patterns, partially offset by decreased
demand. Sales outside the U.S. decreased 3 percent, to $175.3 million, driven
by the unfavorable impact of foreign exchange rates and lower prices,
partially offset by increased volume. 
For the full year of 2013, worldwide Humulin sales increased 6 percent to
$1.316 billion. U.S. Humulin sales for 2013 were $677.2 million, a 14 percent
increase, driven by higher prices, partially offset by decreased demand.
Humulin sales outside the U.S. were $638.6 million, a 1 percent decrease,
driven by the unfavorable impact of foreign exchange rates, partially offset
by increased volume. 
Forteo 
Fourth-quarter 2013 sales of Forteo were $359.8 million, a 14 percent increase
compared with the fourth quarter of 2012. U.S. sales of Forteo increased 29
percent to $156.2 million, due to higher prices, wholesaler buying patterns
and, to a lesser extent, increased demand. Sales outside the U.S. increased 5
percent, to $203.6 million, due to increased volume, primarily in Japan,
partially offset by the unfavorable impact of foreign exchange rates. 
For the full year of 2013, worldwide Forteo sales increased 8 percent to
$1.245 billion. U.S. Forteo sales for 2013 were $511.4 million, a 5 percent
increase driven primarily by higher prices. Forteo sales outside the U.S. were
$733.5 million, an 11 percent increase driven by higher volume, primarily in
Japan, partially offset by the unfavorable impact of foreign exchange rates. 
Zyprexa 
In the fourth quarter of 2013, Zyprexa sales totaled $348.2 million, a
decrease of 10 percent compared with the fourth quarter of 2012 due to the
continued erosion following patent expiration in the U.S. and most major
international markets outside of Japan. U.S. sales of Zyprexa decreased 35
percent to $39.2 million. Zyprexa sales outside the U.S. decreased 5 percent,
to $309.0 million. Zyprexa sales in Japan were approximately $145 million and
were negatively impacted by the continued weakening of the Japanese yen. 
For the full year of 2013, worldwide Zyprexa sales decreased 30 percent to
$1.195 billion, due to the continued erosion following patent expiration in
the U.S. and most major international markets outside of Japan. U.S. Zyprexa
sales for 2013 decreased 66 percent to $123.6 million. Zyprexa sales outside
the U.S. were $1.071 billion, a 20 percent decrease driven by the unfavorable
impact of foreign exchange rates, lower volume in markets outside of Japan,
and lower prices. Zyprexa sales in Japan for the full year were approximately
$510 million and were negatively impacted by the continued weakening of the
Japanese yen. 
Evista 
Evista sales for the fourth quarter of 2013 increased 14 percent to $275.9
million. U.S. sales of Evista increased 18 percent to $209.3 million, driven
by higher prices. Sales outside the U.S. increased 4 percent to $66.6 million,
driven by higher volume in Japan, partially offset by lower prices and the
unfavorable impact of foreign exchange rates. The company will lose U.S.
patent exclusivity for Evista in March 2014. 
For the full year of 2013, worldwide Evista sales increased 4 percent to
$1.050 billion. U.S. Evista sales for 2013 were $772.0 million, a 10 percent
increase driven by higher prices, partially offset by decreased demand. Evista
sales outside the U.S. were $278.4 million, a 10 percent decrease driven by
the unfavorable impact of foreign exchange rates and lower prices, partially
offset by increased volume in Japan. 
Strattera 
During the fourth quarter of 2013, Strattera generated $201.1 million of
sales, an increase of 23 percent compared with the fourth quarter of 2012.
U.S. sales increased 33 percent to $127.0 million, driven primarily by higher
prices and, to a lesser extent, wholesaler buying patterns. Sales outside the
U.S. increased 9 percent to $74.1 million, driven primarily by increased
volume in Japan, partially offset by lower prices and the unfavorable impact
of foreign exchange rates. 
For the full year of 2013, worldwide Strattera sales increased 14 percent to
$709.2 million. U.S. Strattera sales for 2013 were $446.3 million, a 16
percent increase driven primarily by higher prices. Strattera sales outside
the U.S. were $262.9 million, an 11 percent increase driven primarily by
higher volume in Japan, partially offset by lower prices and the unfavorable
impact of foreign exchange rates. 
Effient 
Effient sales were $130.6 million in the fourth quarter of 2013, an increase
of 8 percent compared with the fourth quarter of 2012. U.S. Effient sales
increased 10 percent to $96.8 million, driven by higher prices and wholesaler
buying patterns, partially offset by decreased demand. Sales outside the U.S.
increased 3 percent to $33.8 million. 
For the full year of 2013, worldwide Effient sales increased 11 percent to
$508.7 million. U.S. Effient sales for 2013 were $376.9 million, an 11 percent
increase driven primarily by higher prices. Effient sales outside the U.S.
were $131.8 million, a 12 percent increase driven primarily by higher volume. 
Animal Health 
In the fourth quarter of 2013, worldwide animal health sales totaled $578.4
million, an increase of 4 percent compared with the fourth quarter of 2012
driven by higher prices and volume growth for food animal products, partially
offset by volume decline for companion animal products. U.S. animal health
sales decreased 2 percent, to $305.5 million, driven by lower volume,
partially offset by increased prices. Animal health sales outside the U.S.
were $272.9 million, a 13 percent increase, driven by increased volume and, to
a lesser extent, higher prices, partially offset by the unfavorable impact of
foreign exchange rates. 
For the full year of 2013, worldwide animal health sales increased 6 percent
to $2.151 billion, driven primarily by the growth of companion animal
products. Animal health sales in the U.S. increased 6 percent to $1.227
billion, driven primarily by higher volume for Trifexis® and, to a lesser
extent, higher prices. Animal health sales outside the U.S. increased 6
percent to $924.9 million, driven by higher volume and, to a lesser extent,
higher prices, partially offset by the unfavorable impact of foreign exchange
rates. 
2014 Financial Guidance 
The company has confirmed its 2014 financial guidance. The company still
expects full-year 2014 earnings per share to be in the range of $2.77 to $2.85
on both a reported and non-GAAP basis. 
                                        2014         2013 
                                    Expectations    Results      % Change
Earnings per share (reported)           $2.77 to         $4.32    (36)% to 
(34)% 
                                    $2.85
Asset impairment, restructuring and
other                                         -           .08
special charges
Income related to termination of the
exenatide                                     -          (.29)
collaboration with Amylin
Acquired in-process research and
development                                   -           .03
charge associated with CGRP antibody
Earnings per share (non-GAAP)           $2.77 to $2.85   $4.15    (33)% to 
(31)% 
                                     
The company anticipates 2014 revenue of between $19.2 billion and $19.8
billion. Patent expirations are expected to drive a rapid and severe decline
in U.S. Cymbalta and U.S. Evista sales. These revenue declines are expected to
be partially offset by growth from a portfolio of other products including
Humalog, Trajenta®, Cialis, Forteo and Alimta, as well as the animal health
business. In addition, strong revenue growth is expected in China, while a
weaker Japanese yen will dampen revenue growth in Japan. 
The company anticipates that gross margin as a percent of revenue will be
approximately 74 percent in 2014. 
Total operating expenses in 2014 are expected to decrease substantially
compared to 2013. Marketing, selling and administrative expenses are expected
in the range of $6.2 billion to $6.5 billion. Research and development
expenses are expected to be in the range of $4.4 billion to $4.7 billion. 
Other income (expense) is expected to be in a range between $100 million and
$200 million of income in 2014, benefited by gains of $150 million to $200
million on the sale of equity investments acquired as part of past business
development transactions. 
The 2014 tax rate is expected to be approximately 20 percent, assuming a
full-year 2014 benefit of the R&D tax credit and other tax provisions up for
extension. If these items are not extended, the 2014 tax rate would be
approximately 2 percentage points higher. 
The company expects to meet its 2014 net income and operating cash flow goals
of $3.0 billion and $4.0 billion, respectively. Operating cash flows are
expected to be sufficient to pay the company's dividend of approximately $2.1
billion, allow for capital expenditures of approximately $1.3 billion, and
fund potential business development activity and share repurchases. 
The company's 2014 financial guidance does not include a potential charge
related to the collaboration with Pfizer to develop and commercialize
tanezumab. As previously communicated, if the partial clinical hold for the
molecule is removed and Lilly and Pfizer move forward with development, Lilly
will pay a $200 million upfront fee to Pfizer. This charge would cause Lilly's
GAAP tax rate to be roughly 1 percentage point lower than its non-GAAP tax
rate and would reduce GAAP EPS by approximately $0.12. 
Webcast of Conference Call 
As previously announced, investors and the general public can access a live
webcast of the fourth-quarter and full-year 2013 financial results conference
call through a link on Lilly's website at www.lilly.com. The conference call
will be held today from 9:00 a.m. to 10:00 a.m. Eastern Daylight Time (EST)
and will be available for replay via the website. 
Lilly, a leading innovation-driven corporation, is developing a growing
portfolio of pharmaceutical products by applying the latest research from its
own worldwide laboratories and from collaborations with eminent scientific
organizations. Headquartered in Indianapolis, Ind., Lilly provides answers -
through medicines and information - for some of the world's most urgent
medical needs. Additional information about Lilly is available at
www.lilly.com. 
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" 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 with
respect to pipeline products that the products will receive the necessary
clinical and manufacturing regulatory approvals or that they will prove to be
commercially successful. Pharmaceutical products can develop unexpected safety
or efficacy concerns. The company's results may also be affected by such
factors as competitive developments affecting current products; market uptake
of recently launched products; the timing of anticipated regulatory approvals
and launches of new products; regulatory actions regarding currently marketed
products; issues with product supply; regulatory changes or other
developments; regulatory compliance problems or government investigations;
patent disputes; changes in patent law or regulations related to data-package
exclusivity; other litigation involving current or future products; the impact
of governmental actions regarding pricing, importation, and reimbursement for
pharmaceuticals, including U.S. health care reform and deficit-reduction
measures; changes in tax laws, including the American Taxpayer Relief Act of
2013; asset impairment and restructuring charges; acquisitions and business
development transactions; and the impact of exchange rates 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-Q and Form 10-K filed with
the U.S. Securities and Exchange Commission. 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, Lilly) 
Cialis® (tadalafil, Lilly) 
Cymbalta® (duloxetine hydrochloride, Lilly) 
Effient® (prasugrel, Lilly) 
Evista® (raloxifene hydrochloride, Lilly) 
Forteo® (teriparatide of recombinant DNA origin injection, Lilly) 
Humalog® (insulin lispro injection of recombinant DNA origin, Lilly) 
Humulin® (human insulin of recombinant DNA origin, Lilly) 
Strattera® (atomoxetine hydrochloride, Lilly) 
Trajenta® (linagliptin, Boehringer Ingelheim) 
Trifexis® (spinosad + milbemycin oxime, Lilly) 
Zyprexa® (olanzapine, Lilly) 
Eli Lilly and Company Employment Information 
December 31, 2013 December 31, 2012 
Worldwide Employees 37,925 38,350 
Eli Lilly and Company
Operating Results (Unaudited) - REPORTED
(Dollars in millions, except per share data) 
                               Three Months Ended                 Twelve 
Months Ended 
                                  December 31,                       
December 31, 
                              2013       2012    % Chg.        2013          
2012    % Chg. 
Total revenue               $  5,808.8  $   5,957.3   (2)%       $  23,113.1  $ 
 22,603.4    2% 
Cost of sales                  1,386.5      1,248.3   11%            4,908.1    
  4,796.5    2%
Research and development       1,475.4      1,463.1    1%            5,531.3    
  5,278.1    5%
Marketing, selling and         1,953.6      1,977.5   (1)%           7,125.6    
  7,513.5   (5)%
administrative
Acquired in-process
research and                    57.1           -       NM             57.1       
 -       NM
development
Asset impairment,
restructuring and               35.4         204.0   (83)%            120.6      
281.1   (57)%
other special charges 
Operating income                900.8       1,064.4  (15)%           5,370.4    
  4,734.2   13% 
Net interest income             (5.5)       (16.5)                   (40.4)     
  (72.8)
(expense)                         -            -                      495.4      
787.8
Other income - special
Net other income (expense)      14.6        (35.5)                    63.9      
  (41.0)
Other income (expense)           9.1        (52.0)     NM             518.9      
674.0   (23)% 
Income before income taxes      909.9       1,012.4  (10)%           5,889.3    
  5,408.2    9%
Income taxes                    182.4        185.2    (2)%           1,204.5    
  1,319.6   (9)% 
Net income                  $   727.5   $    827.2   (12)%       $   4,684.8  $ 
  4,088.6   15% 
Earnings per share -        $   0.67    $    0.74     (9)%       $    4.32    $  
3.66     18%
diluted 
Dividends paid per share    $   0.49    $    0.49      0%        $    1.96    $  
1.96      0% 
Weighted-average shares
outstanding (thousands) -     1,078,976    1,113,880                1,084,766   
 1,117,294
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 
                                   December 31, 2013                     
December 31, 2012 


                                 GAAP                    Non-GAAP      GAAP       
              Non-GAAP


                         Reported  Adjustments   Adjusted(a)   Reported  
Adjustments    Adjusted(a) 
Total revenue       $        5,808.8    $      -      $    5,808.8 5,957.3    $  
  -      $    5,957.3 
Cost of sales                1,386.5           -           1,386.5 1,248.3       
  -           1,248.3 
Operating                    3,429.0           -           3,429.0 3,440.6       
  -           3,440.6
expenses(b) 
Acquired in-process
research                       57.1          (57.1)           -       -          
  -              -
and development(c) 
Asset impairment,
restructuring and
other
special charges(d)             35.4          (35.4)           -     204.0        
(204.0)           - 
Other income                   9.1             -             9.1    (52.0)       
  -           (52.0)
(expense) 
Income taxes                  182.4           23.2          205.5   185.2        
86.1           271.2 
Net income                    727.5           69.3          796.9   827.2        
117.9          945.2 
Earnings per share -           0.67           0.07          0.74     0.74        
0.11           0.85
diluted
Numbers do not add due to rounding. 
(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 items that are excluded when non-GAAP measures or
expectations provided 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) Operating expenses include research and development, marketing, selling
and administrative expenses. 
(c) Certain GAAP reported measures have been adjusted to eliminate acquired
in-process research and development charges. During the three months ended
December 31, 2013, amounts totaling $57.1 million (pretax), or $0.03 per share
(after-tax), of expense were eliminated related to the acquired in-process
research and development for the CGRP antibody. There were no similar charges
during the fourth quarter of 2012. 
(d) Certain GAAP reported measures have been adjusted to eliminate asset
impairment, restructuring and other special charges. During the three months
ended December 31, 2013, amounts totaling $35.4 million (pretax), or $0.03 per
share (after-tax), of expense were eliminated primarily related to costs
associated with restructuring to reduce the company's cost structure and
global workforce. During the three months ended December 31, 2012, amounts
totaling $204.0 million (pretax), or $0.11 per share (after-tax), of expense
were eliminated primarily related to an intangible asset impairment for
liprotamase and restructuring to reduce the company's cost structure and
global workforce. 
Eli Lilly and Company
Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information
(Unaudited)
(Dollars in millions, except per share data) 
                                     Twelve Months Ended                     
Twelve Months Ended 
                                    December 31, 2013                       
December 31, 2012 


                                 GAAP                     Non-GAAP       GAAP     
                Non-GAAP


                         Reported  Adjustments     Adjusted(a)   Reported  
Adjustments     Adjusted(a) 
Total revenue       $        23,113.1           -      $    23,113.1 22,603.4   
$       -      $    22,603.4 
Cost of sales                4,908.1            -           4,908.1  4,796.5     
    -           4,796.5 
Operating                    12,656.9           -           12,656.9 12,791.6    
    -           12,791.6
expenses(b) 
Acquired in-process
research and
development(c)                 57.1          (57.1)            -        -        
    -              - 
Asset impairment,
restructuring and
other
special charges(d)            120.6          (120.6)           -      281.1      
 (281.1)           - 
Other income                  518.9          (495.4)          23.5    674.0      
 (787.8)        (113.8)
(expense)(e) 
Income taxes                 1,204.5         (135.4)        1,069.0  1,319.6     
 (202.2)        1,117.5 
Net income                   4,684.8         (182.3)        4,502.6  4,088.6     
 (304.5)        3,784.0 
Earnings per share -           4.32           0.17            4.15     3.66      
  0.27            3.39
diluted 
Numbers do not add due to rounding. 
(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 items that are excluded when non-GAAP measures or
expectations provided 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) Operating expenses include research and development, marketing, selling
and administrative expenses 
(c) Certain GAAP reported measures have been adjusted to eliminate acquired
in-process research and development charges. During the twelve months ended
December 31, 2013, amounts totaling $57.1 million (pretax), or $0.03 per share
(after-tax), of expense were eliminated related to the acquired in-process
research and development for the CGRP antibody. There were no similar charges
in 2012. 
(d) Certain GAAP reported measures have been adjusted to eliminate asset
impairment, restructuring and other special charges. During the twelve months
ended December 31, 2013, amounts totaling $120.6 million (pretax), or $0.08
per share (after-tax), of expense were eliminated primarily related to the
anticipated closure of a production facility outside the U.S., and
restructuring to reduce the company's cost structure and global workforce.
During the twelve months ended December 31, 2012, amounts totaling $281.1
million (pretax), or $0.16 per share (after-tax), of expense were eliminated
primarily related to an intangible asset impairment for liprotamase,
restructuring to reduce the company's cost structure and global workforce, the
withdrawal of Xigris, and an asset impairment associated with a delivery
device platform. 
(e) Certain GAAP reported measures have been adjusted to eliminate a portion
of other income (expense). During the twelve months ended December 31, 2013,
amounts totaling $495.4 million (pretax), or $0.29 per share (after-tax), of
income were eliminated related to the termination of the exenatide
collaboration with Amylin. During the twelve months ended December 31, 2012,
amounts totaling $787.8 million (pretax), or $0.43 per share (after-tax), of
income were eliminated related to the to the termination of the exenatide
collaboration with Amylin. 
END 
-0- Jan/30/2014 14:27 GMT
 
 
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