Eli Lilly 2009 Annual Report Download - page 37

to $1.44 billion in 2008 as compared to $1.22 billion in 2007. This includes $72.7 million of sales in the
Lilly ICOS joint-venture territories for the 2007 period prior to the acquisition of ICOS.
Sales of Alimta increased 25 percent in the U.S., driven by increased demand and, to a lesser extent,
higher prices. Sales outside the U.S. increased 46 percent, driven by increased demand and, to a lesser
extent, the favorable impact of foreign exchange rates.
Sales of Evista decreased 1 percent in the U.S., driven by decreased demand, partially offset by higher
prices. Sales outside the U.S. decreased 2 percent, driven by reduced demand and lower prices, partially
offset by the favorable impact of foreign exchange rates.
Sales of Humulin increased 4 percent in the U.S., driven by higher prices. Sales outside the U.S. increased
10 percent, driven by the favorable impact of foreign exchange rates and increased demand.
Sales of Forteo decreased 1 percent in the U.S., driven by decreased demand, partially offset by higher
prices. Sales outside the U.S. increased 34 percent, driven by increased demand and, to a lesser extent,
the favorable impact of foreign exchange rates.
Sales of Strattera decreased 6 percent in the U.S., driven by decreased demand, partially offset by higher
prices. Sales outside the U.S. increased 35 percent, driven primarily by increased demand.
Worldwide sales of Byetta increased 16 percent to $751.4 million during 2008. Our revenues increased
20 percent to $396.1 million in 2008.
Animal health product sales in the U.S. increased 12 percent, driven by the inclusion of U.S. Posilac sales
since the date of acquisition. Sales outside the U.S. increased 8 percent, driven by increased demand and,
to a lesser extent, the favorable impact of foreign exchange rates.
Gross Margin, Costs, and Expenses
The 2008 gross margin increased to 78.5 percent of total revenue compared with 77.2 percent for 2007.
This increase was primarily due to the favorable impact of foreign exchange rates.
Marketing, selling, and administrative expenses increased 9 percent in 2008, to $6.63 billion. This increase
was due to increased marketing and selling expenses, including prelaunch expenses for Effient and
marketing costs associated with Cymbalta and Evista; the impact of foreign exchange rates; and increased
litigation-related expenses. Investment in research and development increased 10 percent, to $3.84 billion,
due to increased late-stage clinical trial and discovery research costs.
Acquired IPR&D charges related to the acquisitions of ImClone and SGX, as well as our in-licensing
arrangements with BioMS and TransPharma, were $4.84 billion in 2008 as compared to $745.6 million in
2007. We recognized asset impairments, restructuring, and other special charges of $1.97 billion in 2008,
as compared to $302.5 million in 2007. The 2008 charges were primarily associated with the resolution of
Zyprexa investigations with the U.S. Attorney for the EDPA and multiple states. See Notes 3, 5 and 14 to
the consolidated financial statements for additional information.
Other—net, expense (income) changed from net income of $122.0 million in 2007 to net expense of
$26.1 million in 2008, primarily as a result of lower outlicensing income and increased net losses on
investment securities in 2008 (the majority of which consisted of unrealized losses).
We incurred tax expense of $764.3 million in 2008, despite having a loss before income taxes of
$1.31 billion. Our net loss was driven by the $4.69 billion acquired IPR&D charge for ImClone and the
$1.48 billion Zyprexa investigation settlements. The IPR&D charge was not tax deductible, and only a
portion of the Zyprexa investigation settlements was deductible. In addition, we recorded tax expense
associated with the ImClone acquisition, as well as a discrete income tax benefit of $210.3 million for the
resolution of a substantial portion of the 2001-2004 IRS audit. The effective tax rate was 23.8 percent in
2007. See Note 12 to the consolidated financial statements for additional information.
FINANCIAL CONDITION
As of December 31, 2009, cash, cash equivalents, and short-term investments totaled $4.50 billion
compared with $5.93 billion at December 31, 2008. The decrease in cash was driven by a reduction in
short-term borrowings of $5.82 billion and dividends paid of $2.15 billion, partially offset by cash from
operations of $4.34 billion (which included payments related to the Zyprexa EDPA settlement of $1.39 bil-
lion) and proceeds of long-term debt issuances of $2.40 billion.
Capital expenditures of $765.0 million during 2009 were $182.2 million less than in 2008. We expect 2010
capital expenditures to be approximately $1.0 billion as we invest in our biotechnology capabilities,
continue to upgrade our manufacturing and research facilities to enhance productivity and quality systems,
and invest in the long-term growth of our diabetes care products.
Total debt at December 31, 2009, was $6.66 billion, a decrease of $3.80 billion from December 31, 2008
reflecting the pay-down of our commercial paper that was issued to finance our acquisition of ImClone,
partially offset by $2.40 billion of long-term debt we issued in March 2009. Our current debt ratings from
Standard & Poor’s and Moody’s remain at AA and A1, respectively.
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FORM 10-K