Eli Lilly 2013 Annual Report Download - page 42

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28
Sales of Evista decreased 1 percent in the U.S., driven by decreased demand, largely offset by higher prices.
Sales outside the U.S. decreased 14 percent, driven by decreased volume and, to a lesser extent, the
unfavorable impact of foreign exchange rates.
Sales of Strattera decreased 2 percent in the U.S., due to decreased demand, partially offset by higher prices.
Sales outside the U.S. increased 4 percent, driven by increased demand in Japan, partially offset by lower
prices and the unfavorable impact of foreign exchange rates.
Sales of Effient increased 52 percent in the U.S., driven by increased demand and, to a lesser extent, higher
prices. Sales outside the U.S. increased 47 percent, due to increased demand, partially offset by the
unfavorable impact of foreign exchange rates.
Animal health product sales in the U.S. increased 30 percent, primarily due to increased demand for
companion animal products. Sales outside the U.S. increased 12 percent, driven primarily by the impact of
the acquisition of certain Janssen animal health assets in Europe (see Note 3 to the consolidated financial
statements), and the growth of other products, partially offset by the unfavorable impact of foreign exchange
rates.
Gross Margin, Costs, and Expenses
Gross margin as a percent of total revenue decreased by 0.3 percentage points in 2012 to 78.8 percent. This
decrease was primarily due to lower sales of Zyprexa and, to a lesser extent, higher miscellaneous
manufacturing costs, partially offset by the impact of foreign exchange rates on international inventories sold,
which decreased cost of sales in 2012 and increased cost of sales in 2011.
Marketing, selling, and administrative expenses decreased 5 percent in 2012 to $7.51 billion, driven by lower
marketing expense resulting from our cost-containment efforts. Research and development expenses
increased 5 percent to $5.28 billion, due to higher late-stage clinical trial costs.
No acquired IPR&D charges were incurred in 2012, compared with $388.0 million in 2011, all of which was
associated with the diabetes collaboration with Boehringer Ingelheim. We recognized asset impairment,
restructuring, and other special charges of $281.1 million in 2012. These charges comprised $122.6 million
related to an intangible asset impairment for liprotamase, $74.5 million related to restructuring to reduce our
cost structure and global workforce, $64.0 million related to the asset impairment of a delivery device
platform, and $20.0 million related to the withdrawal of Xigris. In 2011, we recognized asset impairment,
restructuring, and other special charges of $401.4 million, of which $316.4 million primarily related to
severance costs from strategic actions and $85.0 million related to the withdrawal of Xigris. See Notes 4 and
5 to the consolidated financial statements for additional information.
Other—net, (income) expense was income of $674.0 million in 2012, compared with expense of $179.0
million in 2011. The increase was driven by income of $787.8 million recognized from the early payment of the
exenatide revenue-sharing obligation by Amylin. See Note 18 to the consolidated financial statements for
additional information.
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 14 to the consolidated financial statements for additional information.
FINANCIAL CONDITION
As of December 31, 2013, cash and cash equivalents decreased to $3.83 billion compared with $4.02 billion
at December 31, 2012, as cash flow from operations of $5.74 billion was more than offset by dividends paid of
$2.12 billion, share repurchases of $1.70 billion, net purchases of investments of $1.02 billion, and purchases
of property and equipment of $1.01 billion. In addition to our cash and cash equivalents, we held total
investments of $9.19 billion and $7.98 billion as of December 31, 2013 and December 31, 2012, respectively.
See Note 7 to the consolidated financial statements for additional details.