Eli Lilly 2012 Annual Report Download - page 42

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30
Our effective tax rate was 24.4 percent in 2012, compared with 18.7 percent in 2011. The increase in 2012
reflects the tax impact of the payment received from Amylin and the expiration of the research and
development tax credit at the end of 2011, partially offset by the tax benefit related to the intangible asset
impairment for liprotamase. The effective tax rate for 2011 was lower due to a tax benefit on the IPR&D
charge associated with the diabetes collaboration with Boehringer Ingelheim, as well as a benefit from the
resolution in 2011 of the IRS audits of tax years 2005-2007, along with certain matters related to 2008-2009.
See Note 13 to the consolidated financial statements for additional information.
Operating Results—2011
Financial Results
We achieved revenue growth of 5 percent to $24.29 billion in 2011, primarily driven by the collective growth of
Cymbalta, insulin products, animal health products, Alimta, Effient, and Cialis, partially offset by the decline in
Gemzar and Zyprexa revenue due to the loss of patent exclusivity. This revenue growth, as well as a lower
effective tax rate, was more than offset by lower gross margin percentage; increased marketing, selling, and
administrative costs; higher other expense; and the increased impact in 2011 of the items noted below. As a
result, net income decreased 14 percent to $4.35 billion, and EPS decreased 15 percent to $3.90 per share, in
2011 as compared to $5.07 billion, or $4.58 per share, in 2010. In addition to the highlighted items
summarized in the "Executive Overview," 2011 results also included the following items that affect
comparisons:
U.S. Health Care Reform
• As a result of higher rebates and subsidies included in health care reform enacted in the U.S. during
2010, total revenue in 2011 was reduced by $408.8 million (pretax), or $0.29 per share. Also,
marketing, selling, and administrative expenses increased by $178.0 million (pretax), or $0.16 per
share, as a result of the mandatory pharmaceutical manufacturers’ fee.
The 2010 highlighted items are summarized as follows:
U.S. Health Care Reform
• As a result of higher rebates included in health care reform enacted in the U.S. during 2010, total
revenue in 2010 was reduced by $229.0 million (pretax), or $0.16 per share. We also recorded a one-
time non-cash deferred income tax charge of $85.1 million, or $0.08 per share, associated with the
imposition of tax on the prescription drug subsidy of our U.S. retiree health plan.
Acquisitions (Note 3 to the consolidated financial statements)
• We incurred acquired IPR&D charges associated with the in-licensing arrangement with Acrux
Limited (Acrux) of $50.0 million (pretax), which decreased EPS by $0.03.
Asset Impairments, Restructuring, and Other Special Charges (Note 5 to the consolidated financial
statements)
• We recognized asset impairments, restructuring, and other special charges of $192.0 million (pretax),
or $0.13 per share, primarily related to severance costs.
Revenue
Our worldwide revenue for 2011 increased 5 percent, to $24.29 billion, driven by the collective growth of
Cymbalta, insulin products, animal health products, Alimta, Effient, and Cialis, partially offset by the decline in
Gemzar and Zyprexa revenue due to the loss of patent exclusivity. Worldwide sales volume increased
6 percent, and the favorable impact of foreign exchange rates contributed 2 percent of revenue growth,
partially offset by a 3 percent decrease due to lower prices. The increase in volume and reduction in price
were partially driven by the loss of U.S. patent exclusivity for Zyprexa and Gemzar and the agreements to
supply authorized versions of olanzapine and gemcitabine. Revenue in the U.S. increased 1 percent, to
$12.98 billion, due to higher volume, partially offset by lower prices. Revenue outside the U.S. increased
11 percent, to $11.31 billion, due to increased demand and the positive impact of foreign exchange rates,
partially offset by lower prices. Total revenue was reduced by $408.8 million in 2011 due to the impact of U.S.
health care reform, compared to a reduction of $229.0 million in 2010.