Lilly sees slight dip in Q1

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Eli Lilly has reported a small decrease in net income and total revenue for the first quarter of 2012, compared with the first quarter of 2011.

The company said its net income decreased to $1.01 billion, compared with first quarter 2011 net income of $1.06 billion. The decreases in net income and earnings per share were primarily due to lower gross margin and the increase in the effective tax rate, partially offset by the in process research and development (IPR &D) charge in the first quarter of 2011.

In the first quarter of 2012, worldwide total revenue was $5.6 billion, a decrease of 4 percent compared with the first quarter of 2011. This 4 percent revenue decline was comprised of a decrease of 7 percent due to lower volume, partially offset by an increase of 4 percent in prices. Foreign exchange rates had a negligible impact.

The decrease in volume was driven by the loss of patent exclusivity for Zyprexa in most major markets, partially offset by volume gains for other products, according to the Indianapolis-based company. Total revenue in the U.S. remained relatively flat at $3.09 billion due to the loss of patent exclusivity for Zyprexa, offset by increased prices and, to a lesser extent, increased volume in other products. Total revenue outside the U.S. decreased by 9 percent to $2.52 billion, also driven by the loss of patent exclusivity for Zyprexa, which was partially offset by increased volume in other products including Cymbalta, Forteo, Humalog, Efient (Effient in the U.S.) and the animal health portfolio, as well as a 41 percent revenue increase in China.

Specifically, Effient (prasugrel) sales were $115.8 million in the first quarter of 2012, an increase of 106 percent compared with the first quarter of 2011. Lilly said its U.S. Effient sales increased 114 percent to $89.8 million, "driven by increased demand and higher prices." Sales outside the U.S. increased 82 percent to $26 million due to higher demand.

Total operating expense, defined as the sum of research and development, marketing, selling and administrative expenses, increased 3 percent compared with the first quarter of 2011. Marketing, selling and administrative expenses increased 3 percent to $1.85 billion, driven by the diabetes collaboration with Boehringer Ingelheim and increased expense for newer pharmaceutical and animal health products, partially offset by lower administrative expenses. Research and development expenses increased 2 percent to $1.15 billion, or 20.6 percent of total revenue, driven by expenses related to the diabetes collaboration with Boehringer Ingelheim and other late-stage clinical trial costs.

In the first quarter of 2012, the company recognized an asset impairment, restructuring and other special charge of $23.8 million primarily related to the withdrawal of Xigris. In the first quarter of 2011, the company recognized a charge of $76.3 million for restructuring related to severance costs from previously announced strategic actions that the company is taking to reduce its cost structure, as well as a $388 million IPR &D charge associated with the diabetes collaboration with Boehringer Ingelheim.

Operating income in the first quarter of 2012 was $1.38 billion, an increase of 7 percent compared to the first quarter of 2011, due primarily to the prior year IPR &D charge mentioned previously, partially offset by decreased revenue as a result of the loss of Zyprexa patent exclusivity. 

Other income (expense) was a net expense of $46 million, compared with net expense of $11.2 million in the first quarter of 2011. The increase in other expenses was driven by the recognition in the first quarter of 2011 of a gain on an equity investment and an insurance recovery, partially offset by increased interest income in the first quarter of 2012. 

The effective tax rate was 24.3 percent in the first quarter of 2012, compared with an effective tax rate of 17.1 percent in the first quarter of 2011. The increase in the effective tax rate was driven primarily by the tax benefit in 2011 of the IPR &D charge described above, as well as the expiration of the R &D tax credit in the U.S. at the end of 2011.