Eli Lilly & Co., Q1 2009 Earnings Call, Apr-20-2009 - NYSE:LLY

NYSE:LLY

Steven Paul [Executives] 💬

Here is a detailed list of the statements made by Steven Paul during the earnings call:

Byetta LAR Filing:
- Confirmed that Eli Lilly intends to file for Byetta LAR on track and does not believe it is impacted by the recent advisory committee meeting regarding lower glutide drugs.
- Stated that the case will be based on clinical data and preclinical toxicology data.
- Clarified that they have not been asked for any additional carcinogenicity studies before or after the panel.
mGlu Program:
- Mentioned that there is a robust backup program in the mGlu area and emphasized that they have not given up on the first molecule in clinical development.
- Acknowledged that a previous trial could not be interpreted due to the comparator (Zyprexa) not separating adequately.
- Expressed continued enthusiasm for the mGlu molecule, stating it seems efficacious and that they need to gather more data on both efficacy and safety.
Pipeline and Upcoming Products:
- Highlighted the increase in the number of new chemical entities (NMEs) and biologic entities in clinical development, stating that the current portfolio is larger and more exciting than ever.
- Mentioned that there are 61 distinct NMEs in clinical development, with 26 in Phase 2 and Phase 3.
- Expressed optimism about sustaining two launches per year of high-value medicines by 2013, estimating that 15 to 20 of the 61 compounds may reach the market as best in class or first in class medicines over the next five to ten years.
Regulatory and Clinical Milestones:
- Discussed upcoming regulatory and clinical milestones, including FDA action on prasugrel, Byetta monotherapy indication, and Zyprexa long-acting injection.
- Mentioned the anticipation of resubmitting applications for Erbitux and other compounds in the second half of the year.
Excitement About Specific Compounds:
- Identified several compounds of interest, including:
  - BAFF antibody (LA-294)
  - IL-17
  - GLP-1 platform (including LAR and next-generation molecules)
  - IMC-1121B and 11F8 for cancer
  - A-Beta antibody for Alzheimer’s disease
  - Other compounds like Tasisulam and iGluR5.
General Outlook:
- Concluded with a positive outlook for the year, emphasizing the excitement within Lilly Research Laboratories and the company as a whole regarding the pipeline and upcoming events.

These points summarize Steven Paul's contributions and insights during the earnings call, reflecting his focus on product development, regulatory strategy, and the overall pipeline of Eli Lilly.

Phil Johnson [Executives] 💬

Phil Johnson, Vice President of Investor Relations at Eli Lilly and Company, made several key statements during the Q1 2009 earnings call. Here’s a detailed list of his remarks:

Introduction and Welcome:
- He welcomed participants to the Q1 2009 earnings conference call and introduced the executives present, including Derica Rice (CFO), Dr. Steven Paul (President of Lilly Research Laboratories), and others from the Investor Relations department.
Forward-Looking Statements:
- He noted that the call would include projections and forward-looking statements based on current expectations, with actual results potentially differing due to various factors.
Access to Information:
- He mentioned that the earnings press release, supporting materials, and a podcast of the conference call would be available on the company’s website.
Financial Performance Overview:
- He highlighted that Eli Lilly had a strong start in 2009, with volume-driven revenue growth, effective management of operating expenses, increasing gross margin percentage, and strong operating cash flow.
Legal Updates:
- He provided updates on legal matters, including a bench trial regarding patent litigation for Evista and a favorable ruling in the case of Ariad Pharmaceuticals v. Eli Lilly.
Data Releases:
- He discussed the release of top-line data from the DURATION-2 study of exenatide once weekly, which showed positive results compared to other treatments.
- He mentioned a meta-analysis indicating no increased risk of cardiovascular events associated with exenatide use.
Pipeline Advancements:
- He noted that the European Commission granted marketing authorization for prasugrel and that it had been launched in Germany and the UK.
- He mentioned the launch of Zypadhera in the EU and the FDA's approval of new indications for Zyprexa.
FDA Interactions:
- He discussed the FDA's review of Zyprexa for adolescents and the agency's request for additional data.
Financial Results Summary:
- He summarized the financial results, stating that revenue grew 3% in Q1, with flat operating expenses and a significant decrease in the cost of sales due to foreign exchange impacts.
Guidance for 2009:
- He confirmed the 2009 earnings per share guidance range of $4.00 to $4.25 and reiterated expectations for low single-digit revenue growth on a pro forma non-GAAP basis.
Closing Remarks:
- He thanked participants for their time and emphasized the company’s commitment to innovation and the importance of their pipeline in addressing future challenges.

These points encapsulate Phil Johnson's contributions during the earnings call, focusing on financial performance, legal updates, product pipeline advancements, and guidance for the future.

Derica Rice [Executives] 💬

Here is a detailed summary of the comments made by Derica Rice during the earnings call:

Focus on Pro Forma Non-GAAP Results: Derica emphasized that she would focus on pro forma non-GAAP results, which provide insight into underlying business trends, excluding certain items.
Revenue and Operating Expense Growth: She reported that first-quarter revenue grew by 3%, while operating expenses (SG&A and R&D) were flat, indicating positive operating leverage.
Cost of Sales Decrease: Derica noted a significant decrease in the cost of sales by 29% compared to Q1 2008, primarily due to the strengthening of the US dollar against international currencies, which benefited the cost of sales.
Gross Margin Improvement: The gross margin as a percentage of revenue increased to nearly 84%, driven by the decrease in cost of sales and revenue growth outpacing operating expense growth.
Earnings Per Share (EPS) Growth: She reported earnings per share of $1.20, a 36% increase on a pro forma non-GAAP basis.
Impact of Foreign Exchange: Derica explained that the 36% growth in EPS was positively impacted by foreign exchange rates on cost of sales. However, she clarified that the company still registered strong underlying performance growth in revenue and EPS, even when excluding the impact of foreign exchange.
Revenue Growth Breakdown: She provided details on revenue growth, indicating that volume growth contributed 5% to total revenue, while the underlying performance growth was 8%, which was masked by a 5% negative impact from weaker foreign currencies.
Guidance for 2009: Derica reconfirmed the previously issued 2009 earnings per share guidance range of $4.00 to $4.25, stating that the company expects continued volume-driven revenue growth despite challenges from foreign exchange impacts and generic competition.
Expectations for Future Quarters: She indicated that the negative impact of foreign exchange rates on international revenue and margins is likely to persist in Q2 and Q3, with a moderation expected in Q4.
Operating Expense Growth: Derica projected that operating expenses would grow due to the ramp-up of international prasugrel launches and the advancement of the pipeline.
Research and Development Expenses: She mentioned that R&D expenses are projected to grow in the high single digits on a pro forma non-GAAP basis due to increased late-stage clinical trial costs.
Tax Rate and Capital Expenditures: The effective tax rate is expected to be approximately 22%, and capital expenditures are projected to be around $1.1 billion.
Operating Cash Flow: Derica expressed confidence in continued strong operating cash flow.
Response to Foreign Exchange Impact: She reiterated that the benefit seen in Q1 from foreign exchange related to international inventories would not sustain itself through the remaining quarters of 2009.
Overall Financial Performance: Derica concluded by emphasizing the strong operational and financial performance generated in the quarter and the company's confidence in achieving its guidance for the year.

This summary encapsulates the key points made by Derica Rice during the earnings call, focusing on financial performance, guidance, and the impact of foreign exchange.

Nick Lumon [Executives] 💬

Here is a detailed list of what Nick Lumon said during the earnings call:

Zyprexa Sales:
- Worldwide Zyprexa sales totaled $1.123 billion in Q1, which was essentially flat compared to Q1 2008.
- US sales increased 7% to $535 million, driven by higher prices and favorable wholesaler buying patterns, partially offset by lower demand.
- International sales were down 5% to $588 million, driven by unfavorable foreign exchange rates, partially offset by increased volume. Demand outside the US was positively impacted by the withdrawal of generic competition in Germany.
Cymbalta Sales:
- Cymbalta sales in Q1 were $709 million, up 17% compared to Q1 2008.
- US sales increased 17% to $597 million, driven by higher demand, increased prices, and favorable wholesaler buying patterns.
- International sales totaled $112 million, an increase of 19%, driven primarily by higher demand, partially offset by unfavorable foreign exchange rates.
Humalog Sales:
- Humalog sales grew 11% to $451 million.
- US sales increased 20% to $286 million, driven by increased prices and demand.
- Sales outside the US decreased 3% to $164 million, driven by unfavorable foreign exchange rates, partially offset by increased demand.
Cialis Sales:
- Cialis sales were up 6% in the quarter, reaching $359 million.
- US sales were up 21% to $149 million, driven by higher prices, increased demand, and favorable wholesaler buying patterns.
- Sales outside the US decreased 2% to $210 million, driven primarily by unfavorable foreign exchange rates, partially offset by increased demand and higher prices.
Alimta Sales:
- Alimta sales in Q1 were strong at $335 million, an increase of 36% over Q1 2008.
- US sales increased 42% to $173 million due to increased demand.
- Sales outside the US were up 30% to $162 million due to increased demand, partially offset by unfavorable foreign exchange rates.
Humulin Sales:
- Humulin sales for the quarter were down 7% to $241 million.
- US sales increased 6% to $99 million due to higher net effective selling prices.
- International sales decreased 14% to $142 million, driven by unfavorable foreign exchange rates and lower prices.
Forteo Sales:
- Forteo sales were $187 million, up 1% over Q1 of last year.
- US sales increased 3% to $122 million driven by increased net effective selling prices, partially offset by lower demand.
- International sales of Forteo decreased by 1% to $66 million due to unfavorable foreign exchange rates, partially offset by higher demand.
Byetta Sales:
- Worldwide Byetta sales for the quarter were $181 million, a 7% increase.
- US Byetta sales were essentially flat at $158 million while international sales were $24 million compared to $10 million in Q1 2008.
- Lilly reports half of the gross margin for US sales for Byetta plus sales of pens to Amylin and 100% of international sales. Total Byetta revenue recognized in Lilly’s income statement was $98 million, an 18% increase.
Revenue Analysis:
- Slide 21 showed the impact of price, exchange rates, and volume on revenue presented on a pro forma, non-GAAP basis.
- The 3% increase in total revenue was driven by a 5% increase in volumes and a 3% increase in net effective selling prices, partially offset by the negative foreign exchange impact of 5%.
Overall Summary:
- Nick Lumon provided a comprehensive overview of the sales performance of key products, highlighting the impact of foreign exchange rates and pricing strategies on revenue growth. He emphasized the importance of underlying demand and market share gains in several product categories.

Ronika Pletcher [Executives] 💬

Here is a detailed list of what Ronika Pletcher said during the earnings call:

Revenue Breakdown: Ronika discussed the impact of price, exchange rates, and volume on revenue presented on a pro forma, non-GAAP basis. She noted that the 3% increase in total revenue was driven by a 5% increase in volumes and a 3% increase in net effective selling prices, partially offset by a negative foreign exchange impact of 5%.
New Accounting Pronouncement: She mentioned that beginning with this quarter, Eli Lilly is adopting a new accounting pronouncement to break out total revenue into two distinct elements: product sales and collaboration and other revenues. Product sales will consist of sales of pharmaceutical and animal health products, as well as third-party sales of manufactured products.
Animal Health Performance: Ronika highlighted that the volume growth in the Animal Health division benefited from the inclusion of US Posilac sales acquired from Monsanto in Q4 of the previous year.
Sales Performance: She provided insights into the sales performance of various products:
- Zyprexa: Worldwide sales totaled $1.123 billion, essentially flat compared to Q1 2008, with US sales increasing by 7% and international sales decreasing by 5%.
- Cymbalta: Sales were $709 million, up 17% compared to Q1 2008, with US sales increasing by 17% and international sales increasing by 19%.
- Humalog: Sales grew 11% to $451 million, with US sales increasing by 20%.
- Cialis: Sales were up 6% to $359 million, with US sales increasing by 21%.
- Alimta: Sales were $335 million, an increase of 36% over Q1 2008.
- Humulin: Sales decreased by 7% to $241 million.
- Forteo: Sales were $187 million, up 1% over Q1 of last year.
- Byetta: Worldwide sales were $181 million, a 7% increase.
Income Statement Overview: Ronika presented the income statement for Q1 2009, noting that worldwide pro forma total revenue was $5.047 billion, an increase of 3% compared to Q1 2008. She highlighted that gross margin as a percentage of total revenues increased by 7.3 percentage points to 83.8%.
Operating Expenses: She mentioned that marketing, selling, and administrative expenses decreased by 3% to $1.529 billion, while research and development expenses grew by 4% to $947 million.
Operating Income: Ronika noted that the expansion of gross margin percentage drove a robust 38% increase in operating income.
Reported Earnings: She discussed the reported earnings per share and significant items affecting net income and earnings per share, stating that there were no significant items affecting net income for Q1 2009.
Pipeline Updates: Ronika did not provide specific details on pipeline updates but indicated that the company is focused on advancing its pipeline and that there are several compounds in various stages of development.
Closing Remarks: She concluded her remarks by emphasizing the strong operational performance and the company's commitment to innovation and pipeline advancement.

This summary captures the key points made by Ronika Pletcher during the earnings call.