Eli Lilly 2012 Annual Report Download - page 68

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Under the terms of our prior arrangement, we reported as collaboration and other revenue our 50 percent
share of gross margin on Amylin’s net product sales in the United States. We reported as net product sales
100 percent of sales outside the U.S. and our sales of Byetta pen delivery devices to Amylin. We paid Amylin a
percentage of the gross margin of exenatide sales outside of the U.S., and these costs were recorded in cost of
sales. This arrangement for the commercial operations outside the U.S. will continue until those operations
transfer to Amylin. Prior to its termination, under the 50/50 profit-sharing arrangement for the U.S., in
addition to recording as revenue our 50 percent share of exenatide’s gross margin, we also recorded
approximately 50 percent of U.S. related research and development costs and marketing and selling costs in
the respective line items on the consolidated statements of operations.
In accordance with the prior arrangement and pursuant to Amylin’s request, we loaned Amylin $165.0 million
in the second quarter of 2011. This loan and related accrued interest were also paid in full in August 2012.
The following table summarizes the revenue and other income recognized with respect to exenatide:
2012 2011 2010
Net product sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 207.8 $ 179.6 $ 168.1
Collaboration and other revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70.1 243.1 262.5
Total revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 277.9 $ 422.7 $ 430.6
Income related to prepayment of Amylin's obligation(1). . . . . . . . . . . $ 787.8 $ — $ —
1 Presented in other-net, (income) expense
Erbitux
We have several collaborations with respect to Erbitux. The most significant collaborations are in the U.S.,
Japan, and Canada (Bristol-Myers Squibb Company); and worldwide except the U.S. and Canada (Merck
KGaA). The agreements are expected to expire in 2018, upon which all of the rights with respect to Erbitux in
the U.S. and Canada return to us and certain rights with respect to Erbitux outside the U.S. and Canada
(excluding Japan) remain with Merck KGaA (Merck). The following table summarizes the revenue recognized
with respect to Erbitux:
2012 2011 2010
Net product sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 76.4 $ 87.6 $ 71.9
Collaboration and other revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320.6 321.6 314.2
Total revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 397.0 $ 409.2 $ 386.1
Bristol-Myers Squibb Company
Pursuant to a commercial agreement with Bristol-Myers Squibb Company and E.R. Squibb (collectively, BMS),
relating to Erbitux, we are co-developing Erbitux in the U.S. and Canada with BMS, exclusively, and in Japan
with BMS and Merck. The companies have jointly agreed to expand the investment in the ongoing clinical
development plan for Erbitux to further explore its use in additional tumor types. Under this arrangement,
Erbitux research and development and other costs are shared by both companies according to a
predetermined ratio.
Responsibilities associated with clinical and other ongoing studies are apportioned between the parties under
the agreement. Collaborative reimbursements received by us for supply of clinical trial materials; for
research and development; and for a portion of marketing, selling, and administrative expenses are recorded
as a reduction to the respective expense line items on the consolidated statement of operations. We receive a
distribution fee in the form of a royalty from BMS, based on a percentage of net sales in the U.S. and Canada,
which is recorded in collaboration and other revenue. Royalty expense paid to third parties, net of any
reimbursements received, is recorded as a reduction of collaboration and other revenue.
We are responsible for the manufacture and supply of all requirements of Erbitux in bulk-form active
pharmaceutical ingredient (API) for clinical and commercial use in the territory, and BMS will purchase all of
its requirements of API for commercial use from us, subject to certain stipulations per the agreement. Sales
of Erbitux to BMS for commercial use are reported in net product sales.