Eli Lilly and Company has registered smart gain of 31 per cent in net earnings during the second quarter ended June 2013 to US$ 1,206 million from $924 million in the corresponding period of last year. Its worldwide total revenue was $5,930 million, an increase of 6 per cent compared with the second quarter of 2012. Revenue growth was comprised of 6 per cent due to higher prices and 2 per cent due to higher volume, partially offset by a decrease of 2 per cent due to the unfavorable impact of foreign exchange rates.
The increase in volume was driven by solid volume gains for various products, partially offset by continued volume declines of Zyprexa due to the loss of patent exclusivity in most major markets and the transfer of exenatide commercial rights outside of the US to Amylin Pharmaceuticals. Total revenue in the US increased by 13 per cent to $3,397 million. driven by increased prices, primarily for Cymbalta. Total revenue outside the US decreased by 2 per cent to $2,532 million, driven by the unfavorable impact of foreign exchange rates, primarily the Japanese yen, and the loss of market exclusivity for Zyprexa in most markets outside of Japan and, to a lesser extent, decreased prices, partially offset by increased volume.
Gross margin increased 7 per cent to $4,764 million in the second quarter of 2013, as growth in other products offset the loss of patent exclusivity for Zyprexa. Gross margin as a per cent of total revenue was 80.3 per cent, an increase of 0.8 percentage points compared with the second quarter of 2012. The increase in gross margin percent was primarily due to higher prices and production volumes, partially offset by the impact of foreign exchange rates on international inventories sold.
Research and development expenses increased one per cent to $1,330 million, or 22.4 per cent of total revenue.
In the second quarter of 2013, the company recognized asset impairment, restructuring and other special charges of $63.5 million, related primarily to costs associated with the anticipated closure of a packaging and distribution facility in Germany.
Operating income in the second quarter of 2013 was $1,503 million, an increase of 25 per cent or $300.8 million, compared to the second quarter of 2012, due primarily to higher gross margin and lower operating expenses, partially offset by higher asset impairment, restructuring and other special charges.
Other income (expense) was income of $11.9 million in the second quarter of 2013, compared with expense of $16.5 million in the second quarter of 2012. This increase was primarily related to a gain on the sale of an investment during the second quarter of 2013.
The effective tax rate was 20.4 per cent in the second quarter of 2013, compared with an effective tax rate of 22.1 per cent in the second quarter of 2012. The decrease in the second quarter 2013 effective tax rate reflects the reinstatement of the R&D tax credit in the US effective January 1, 2013.
In the second quarter of 2013, net income and earnings per share increased to $1,206 million and $1.11, respectively, compared with second-quarter 2012 net income of $923.6 million and earnings per share of $0.83. The increases in net income and earnings per share were driven by higher operating income, and to a lesser extent, higher other income and a lower effective tax rate. Earnings per share also benefited from a lower number of shares outstanding in the second quarter of 2013 compared to the second quarter of 2012.
"In the second quarter, Lilly delivered solid financial results, highlighted by good revenue growth and strict cost containment efforts that led to robust earnings growth," said John C. Lechleiter, Ph.D., Lilly's chairman, president and chief executive officer. "Continued operating and financial discipline, along with a maturing pipeline of potential new medicines, gives me great confidence in the company's ability to meet the challenges we face from upcoming patent expirations and to resume growth after 2014."
For the first six months of 2013, worldwide total revenue was $11.5 billion, an increase of 3 per cent compared with the same period in 2012. Reported net income and earnings per share were $2.754 billion ($1,935 million in the previous period and $2.53, respectively. Net income and earnings per share, on a non-GAAP basis, were $2.503 billion and $2.30, respectively.
The company has raised its 2013 earnings per share guidance and now expects full-year 2013 earnings per share to be in the range of $4.28 to $4.38 on a reported basis, or $4.05 to $4.15 on a non-GAAP basis. The company has also revised certain other elements of its 2013 financial guidance, as outlined below.
The company still anticipates 2013 revenue of between $22.6 billion and $23.4 billion. Despite the initial impact of the US Cymbalta patent expiration in the fourth quarter of 2013 and the loss of the anticipated 15 percent revenue sharing obligation on worldwide exenatide sales, the company expects overall revenue growth, driven by a portfolio of products including Humalog, Humulin, Cialis, Strattera, Forteo, Alimta, Cymbalta outside the US, Effient, Tradjenta and Axiron, as well as animal health products. In addition, significant revenue growth is expected in the emerging markets, particularly China, while a weaker Japanese yen will dampen revenue growth in Japan.