Eli Lilly & Co has posted dismal performance during the third quarter ended September 2017 and its net profit declined sharply by 28.5 per cent to US$ 556 million from $778 million in the corresponding period of last year. Its operating profit declined by 36 per cent to $606 million from $944 million. R&D expenditure increased by 7 per cent to $1,319 million. The lower profit is mainly due to asset impairment, restructuring and other special charges, and acquired in-process research and development, partially offset by higher gross margin.
Its net sales increased by 9 per cent to $5,658 million from $5,191 million mainly due to volume growth from new pharmaceutical products. With lower net profit its EPS declined to $0.53 from $0.73 in the last period. The company has lowered 2017 reported EPS to be in the range of $1.73 to $1.83 to reflect charges associated with recently announced streamlining initiatives.
Its pharmaceutical revenue increased by 10 per cent as the volume of sales of new products like trulicity, basaglar, taltz, jardiance, lartruvo, cyramza, olumiant and portrazza increased by 14 per cent. Its revenue in US increased by 9 per cent to $3,104 million and that in other part of world increased by 8 per cent to $2,554 million.
David A Ricks, chairman and chief executive officer, said, “Lilly's facus on our key priorities led to strong performance in the third quarter, highlighted by revenue growth from our new pharmaceutical products. In addition, worldwide revenue from our diabetes products collectively grew 39 per cent, and we continued to make improvements in our operating margins. Our pipeline also continues to deliver. Including Verzenio, we've now launched nine medicines since 2014, and we are on a path to launch eleven more by 2013.”
“Today, we are also announcing a strategic review of our Elanco Animal Health business. Elanco has developed into a premier animal health company, and has been an important growth driver and source of revenue diversification for Lilly. Through acquisitions and organic growth, we've grown Elanco to a size and scale that now allows us to consider a variety of options to maximize future value.”
The company announced actions to streamline operations to more efficiently focus resources on developing new medicines and to improve its cost structure. Global workforce reductions, including those from a US voluntary early retirement program, are expected to impact approximately 3,500 positions. This will save nearly $500 million which will improve its cost structure. It is planning to reinvest in the business, including product launches and clinical development for new indications and line extensions. Lilly confirmed these savings would improve upon its previous commitment and now expects to achi9eve an OPEX-to-revenue ratio of 49 per cent or less in 2018.
The company is planning to invest $72 million in an insulin manufacturing project at one of its Indianapolis facilities. The investment will be used to replace an existing insulin vial filing line and allow Lilly to meet growing demand for its insulin. This new project is part of $850 million in anticipated US capital investments the company announced in March of this year.
For the nine months period ended September 2017, Lilly's net sales increased by 8 per cent to $16.7 billion from $15.5 billion in the corresponding period of last year. Its net profit declined by 26 per cent to $1,453 million from $1,966 million. R&D expenditure remained almost same at $3,809 million as against $3,793 million. EPS worked out to $1.37 as against $1.85 in the last period.