Lilly Reports Third-Quarter 2011 Results

INDIANAPOLIS, Oct. 20, 2011 /PRNewswire/ –

— Third-quarter 2011 revenue grew 9 percent to $6.148 billion due to
increased demand for several key brands and favorable exchange rates.
— Revenue for Cymbalta, Humalog, Forteo, Strattera, Cialis and Alimta all
grew in double-digits, with strong growth also seen in animal health,
Japan and China.
— Q3 operating expense growth was driven primarily by marketing efforts to
support new launches, investments in research and development, and
exchange rates.
— Clinical pipeline now contains 66 potential new medicines, including 10
in Phase III.
— Company delivered third quarter earnings per share of $1.11 (reported),
or $1.13 (non-GAAP).
— 2011 earnings per share guidance range revised to $3.89 – $3.94
(reported), or $4.30 – $4.35 (non-GAAP).

Eli Lilly and Company (NYSE: LLY) today announced financial results for the
third quarter of 2011.

$in millions, except per share data Third Quarter %
————- —
2011 2010 Growth
—- —- ——
Total Revenue – Reported $6,147.9 $5,654.8 9%
Net Income – Reported 1,236.3 1,302.9 (5)%
EPS – Reported 1.11 1.18 (6)%

Net Income – non-GAAP 1,253.8 1,341.4 (7)%
EPS – non-GAAP 1.13 1.21 (7)%
============== ==== ==== ===

Financial results for 2011 and 2010 are presented on both a reported and a
non-GAAP basis. Reported results were prepared in accordance with generally
accepted accounting principles (GAAP) and include all revenue and expenses
recognized during the period. Non-GAAP results exclude the items described in
the reconciliation tables. The non-GAAP results are presented in order to
provide additional insights into the underlying trends in the company’s
business. The company’s 2011 financial guidance is also being provided on both a
reported and a non-GAAP basis.

“In the third quarter Lilly continued to drive revenue growth for many key
brands, including Cymbalta, Humalog, Forteo and Strattera, with strong growth
also seen in animal health, Japan and China. This growth offset the continued
erosion of Gemzar sales due to generic competition,” said John C. Lechleiter,
Ph.D., Lilly’s chairman, president and chief executive officer. “As we face the
loss of patent exclusivity for Zyprexa in most major markets, we are
well-prepared as a company to meet the challenges before us. We remain committed
to our innovation-based strategy and are focused on delivering the next wave of
new medicines to patients in the coming years.”

Key Events Over the Last Three Months

— The European Commission granted marketing authorization for Trajenta®
for the treatment of adults with type 2 diabetes. The company and its
partner Boehringer Ingelheim have recently begun launching Trajenta in
the European Union, beginning with the United Kingdom.

— The U.S. Food and Drug Administration (FDA) approved Cialis® tablets for
once daily use for the treatment of men who have both erectile
dysfunction and the signs and symptoms of benign prostatic hyperplasia
(ED+BPH). The FDA also approved Cialis for once daily use for a separate
indication for the treatment of the signs and symptoms of BPH.

— The European Medicines Agency’s (EMA) Committee for Medicinal Products
for Human Use (CHMP) issued a positive opinion for the use of Alimta® as
continuation maintenance therapy in patients with advanced nonsquamous
non-small cell lung cancer (NSCLC).

— The U.S. Court of Appeals for the Federal Circuit overturned a prior
ruling by the U.S. District Court for the District of New Jersey and
upheld the validity of the company’s method-of-use patent on Strattera®.
The method-of-use patent provides protection for Strattera through May
of 2017.

— The company, along with its partners Amylin Pharmaceuticals, Inc. and
Alkermes, Inc., submitted a reply to a complete response letter issued
in October 2010 by FDA regarding Bydureon(TM), an investigational
medication for type 2 diabetes. The FDA has assigned a new Prescription
Drug User Fee Act (PDUFA) action date of January 28, 2012.

— The company submitted its reply to a complete response letter by FDA
regarding Amyvid(TM), a molecular Positron Emission Tomography (PET)
imaging agent under investigation for the detection of beta-amyloid
plaque in the brains of living patients.

— The America Invents Act was signed into law, aligning new U.S. patent
laws more closely with those from other countries and improving the
global competiveness of U.S. innovator companies such as Lilly. The law
will provide new advantages for U.S. inventors by streamlining the
application process and addressing the backlog of current applications.
This new law, which transitions the U.S. from a “first-to-invent” to a
“first-inventor-to-file” system, is the most significant overhaul of the
U.S. patent system in 175 years.

Third-Quarter Reported Results

In the third quarter of 2011, worldwide total revenue was $6.148 billion, an
increase of 9 percent compared with the third quarter of 2010. This 9 percent
revenue growth was comprised of increases of 4 percent in volume and 4 percent
due to the impact of foreign exchange rates. Price had a negligible impact on
revenue growth, reflecting the loss of U.S. patent exclusivity for Gemzar® in
November 2010. Total revenue in the U.S. increased 4 percent to $3.273 billion
due to higher prices and increased volume. Total revenue outside the U.S.
increased 15 percent to $2.874 billion due to the positive impact of foreign
exchange rates and increased volume. Third-quarter 2011 total revenue was
reduced by approximately $130 million due to the impact of U.S. health care
reform.

Gross margin increased 3.1 percent to $4.810 billion in the third quarter of
2011. Gross margin as a percent of total revenue was 78.2 percent, reflecting a
decrease of 4.3 percentage points compared with the third quarter of 2010. The
decrease in gross margin percent was due primarily to the impact of foreign
exchange rates on inventories sold during the quarter.

Total operating expense, defined as the sum of research and development,
marketing, selling and administrative expenses, increased 10 percent compared
with the third quarter of 2010. Marketing, selling and administrative expenses
increased 13 percent to $1.918 billion. Research and development expenses
increased 5 percent to $1.281 billion, or 20.8 percent of total revenue. Total
operating expense growth was driven by the recently-announced diabetes
collaboration with Boehringer Ingelheim, including late-stage clinical trial
costs, as well as the effect of foreign exchange rates. In addition,
approximately $45 million of the increase in operating expense was due to the
mandatory pharmaceutical manufacturers fee associated with U.S. health care
reform.

In the third quarter of 2011, the company recognized a charge of $25.2 million
for restructuring primarily related to severance costs from previously announced
strategic actions that the company is taking to reduce its cost structure and
global workforce. In the third quarter of 2010, the company recognized
restructuring charges of $59.5 million, primarily related to the previously
announced strategic actions.

Operating income in the third quarter of 2011 was $1.586 billion, a decrease of
6 percent compared to the third quarter of 2010, due primarily to lower gross
margin percent and increased marketing, selling and administrative expenses.

Other income (expense) was a net expense of $83.4 million, compared to net
expense of $21.7 million in the third quarter of 2010. The increase in third
quarter 2011 expense was driven primarily by the partial impairment of an
acquired in-process research and development asset related to Amyvid.

The effective tax rate was 17.7 percent in the third quarter of 2011, compared
with an effective tax rate of 22.0 percent in the third quarter of 2010. The
largest driver of the decrease in the effective tax rate was the recognition of
a $45.4 million discrete benefit primarily as a result of the resolution of the
IRS audit of the company’s 2007 federal income tax return. For the full year
2011, the company expects the effective tax rate to be approximately 19.5
percent.

Net income and earnings per share decreased to $1.236 billion and $1.11,
respectively, compared with third-quarter 2010 net income of $1.303 billion and
earnings per share of $1.18. The decreases in net income and earnings per share
were primarily driven by lower operating income and higher other expense,
partially offset by a lower effective tax rate.

Third-Quarter 2011 non-GAAP Results

Operating income decreased 8 percent to $1.611 billion, due to lower gross
margin percent and increased marketing, selling and administrative expenses. Net
income decreased 7 percent to $1.254 billion, while earnings per share decreased
7 percent to $1.13. These decreases were primarily driven by lower operating
income and higher other expense, partially offset by a lower net effective tax
rate. Excluding the impact of changes in foreign exchange rates, earnings per
share would have decreased approximately 1 percent.

For purposes of non-GAAP reporting, items totaling $.02 and $.03 per share in
the third quarters of 2011 and 2010, respectively, have been excluded. For
further detail, see the reconciliation below as well as the footnotes to the
non-GAAP income statement later in this press release.

Third Quarter
————-
2011 2010 % Growth
—- —- ——–
Earnings per share
(reported) $1.11 $1.18 (6)%
Restructuring charges .02 .03
Earnings per share (non-
GAAP) $1.13 $1.21 (7)%
—– —–

Year-to-Date Results

For the first nine months of 2011, worldwide total revenue was $18.240 billion,
an increase of 8 percent compared with the same period in 2010. Reported net
income and earnings per share were $3.489 billion and $3.13, respectively. Net
income and earnings per share, on a non-GAAP basis, were $3.945 billion and
$3.54, respectively.

For purposes of non-GAAP reporting, items totaling $.41 per share for the first
nine months of 2011 and $.10 per share for the first nine months of 2010 have
been excluded. For further detail, see the reconciliation below as well as the
footnotes to the non-GAAP income statement later in this press release.

Year-to-date % Growth
———— ——–
2011 2010
—- —-
Earnings per share (reported) $3.13 $3.53 (11)%
In-process research and development
charges .23 .03
associated with Boehringer Ingelheim
collaboration (2011) and Acrux
licensing
agreement (2010)
Restructuring charges .18 .07
Earnings per share (non-GAAP) $3.54 $3.63 (2)%
—– —–

U.S. Health Care Reform Impact

U.S. health care reform reduced earnings per share in the third quarters of 2011
and 2010 by approximately $.13 and $.02 per share, respectively, on both a
reported and non-GAAP basis. U.S. health care reform reduced earnings per share
in the first nine months of 2011 and 2010 by approximately $.35 and $.19 per
share, respectively, on both a reported and non-GAAP basis. For the first nine
months of 2011, U.S. health care reform reduced revenue by approximately $330
million due to higher rebates and subsidies, and increased administrative
expenses by approximately $135 million related to the mandatory pharmaceutical
manufacturers fee. For the first nine months of 2010, U.S. health care reform
reduced revenue by approximately $160 million due to higher rebates, and
increased tax expense by $85 million due to the imposition of tax on the
prescription drug subsidy of the company’s retiree health plan.

Revenue Highlights – Reported
—————————–

% Change
(Dollars in
millions) Third Quarter Over/(Under)
2011 2010 2010
—- —-
Zyprexa(R) $1,182.3 $1,212.7 (3)%
Cymbalta(R) 1,068.6 825.3 29%
Alimta 629.7 560.3 12%
Humalog(R) 593.2 494.0 20%
Cialis 469.8 406.5 16%
Humulin(R) 301.5 278.0 8%
Evista(R) 270.1 256.8 5%
Forteo(R) 240.3 199.7 20%
Strattera 153.2 127.9 20%
Gemzar 91.0 324.6 (72)%
Animal Health 451.0 353.2 28%
Total Revenue $6,147.9 $5,654.8 9%

% Change
(Dollars in
millions) Year-to-Date Over/(Under)
2011 2010 2010
—-
Zyprexa(R) $3,872.4 $3,690.6 5%
Cymbalta(R) 2,980.8 2,496.2 19%
Alimta 1,823.0 1,639.5 11%
Humalog(R) 1,705.5 1,505.1 13%
Cialis 1,381.4 1,233.5 12%
Humulin(R) 903.2 801.0 13%
Evista(R) 799.7 757.9 6%
Forteo(R) 687.3 603.8 14%
Strattera 449.5 421.3 7%
Gemzar 359.5 905.8 (60)%
Animal Health 1,210.4 967.0 25%
Total Revenue $18,239.9 $16,889.0 8%

Zyprexa

In the third quarter of 2011, Zyprexa sales totaled $1.182 billion, a decrease
of 3 percent compared with the third quarter of 2010. U.S. sales of Zyprexa
decreased 7 percent to $563.2 million, driven by lower volume, partially offset
by higher net effective selling prices. Zyprexa sales in international markets
increased 2 percent, to $619.1 million, driven primarily by the favorable impact
of foreign exchange rates, partially offset by lower prices and lower volume.
The company lost patent exclusivity for Zyprexa in most of Europe in September
2011 and will lose exclusivity in the U.S. on October 23, 2011. While it is
difficult to predict the precise timing and magnitude of the impact on Zyprexa
sales, the company expects the introduction of generics to result in a rapid and
severe decline in Zyprexa sales.

Cymbalta

For the third quarter of 2011, Cymbalta generated $1.069 billion in revenue, an
increase of 29 percent compared with the third quarter of 2010. U.S. sales of
Cymbalta increased 26 percent, to $809.5 million, driven by increased prices and
higher demand. Revenue outside the U.S. was $259.1 million, an increase of 42
percent, driven primarily by higher demand in international markets and, to a
lesser extent, the favorable impact of foreign exchange rates.

Alimta

For the third quarter of 2011, Alimta generated sales of $629.7 million, an
increase of 12 percent compared with the third quarter of 2010. U.S. sales of
Alimta increased 5 percent, to $258.9 million, driven by increased demand. Sales
outside the U.S. increased 18 percent, to $370.8 million, due to the favorable
impact of foreign exchange rates, as well as increased demand.

Humalog

For the third quarter of 2011, worldwide Humalog sales increased 20 percent, to
$593.2 million. Sales in the U.S. increased 20 percent to $345.5 million, driven
by increased demand and, to a lesser extent higher prices. Sales outside the
U.S. increased 21 percent to $247.7 million, due to the favorable impact of
foreign exchange rates, as well as increased demand.

Cialis

Cialis sales for the third quarter of 2011 increased 16 percent to $469.8
million. U.S. sales of Cialis were $168.2 million in the third quarter, a 10
percent increase compared with the third quarter of 2010, driven primarily by
higher prices. Sales of Cialis outside the U.S. increased 19 percent, to $301.6
million, driven by the favorable impact of foreign exchange rates and, to a
lesser extent higher prices and increased demand.

Humulin

Worldwide Humulin sales increased 8 percent in the third quarter of 2011, to
$301.5 million. U.S. sales increased 18 percent to $142.6 million, driven
primarily by higher prices for Humulin, as well as increased demand for Humulin®
ReliOn®. Sales outside the U.S. increased 1 percent, to $158.9 million, driven
by the favorable impact of foreign exchange rates, offset by lower prices.

Evista

Evista sales were $270.1 million in the third quarter of 2011, a 5 percent
increase compared with the third quarter of 2010. U.S. sales of Evista increased
6 percent to $176.8 million, driven by higher prices, partially offset by lower
volume. Sales outside the U.S. increased 3 percent to $93.3 million, driven by
the favorable impact of foreign exchange rates, partially offset by lower
prices.

Forteo

Third-quarter sales of Forteo were $240.3 million, a 20 percent increase
compared with the third quarter of 2010. U.S. sales of Forteo decreased 7
percent to $110.4 million due to decreased demand. Sales outside the U.S.
increased 60 percent, to $129.9 million, due primarily to increased demand
resulting from the recent launch in Japan, and, to a lesser extent, the
favorable impact of foreign exchange rates.

Strattera

During the third quarter of 2011, Strattera generated $153.2 million of sales,
an increase of 20 percent compared with the third quarter of 2010. U.S. sales
increased 13 percent to $96.3 million, due to higher prices and increased
volume. Sales outside the U.S. increased 33 percent, to $56.8 million, driven
primarily by higher demand in international markets including Japan and, to a
lesser extent the favorable impact of foreign exchange rates.

Gemzar

Gemzar sales totaled $91.0 million in the third quarter of 2011, a decrease of
72 percent from the third quarter of 2010 due to generic competition in most
major markets.

Erbitux®

Lilly recognizes net royalties received from its Erbitux collaboration partners
and revenue from manufactured product sold to these partners. For the third
quarter of 2011, Lilly recognized total revenue of $97.2 million for Erbitux, an
increase of 2 percent from the third quarter of 2010.

Exenatide (Byetta® and Bydureon)

Lilly recognizes in revenue its 50 percent share of Byetta’s gross margin in the
U.S., 100 percent of Byetta and Bydureon sales outside the U.S., and its sales
of Byetta pen delivery devices to its partner, Amylin Pharmaceuticals. For the
third quarter of 2011, Lilly recognized total exenatide revenue of $106.7
million, an increase of 4 percent.

Worldwide exenatide sales were $171.0 million in the third quarter of 2011, a 1
percent increase compared with the third quarter of 2010. U.S. sales of Byetta
decreased 3 percent to $128.1 million compared with the third quarter of 2010
due to competitive pressures, while sales of Byetta and Bydureon outside the
U.S. increased 18 percent to $42.9 million.

Effient®

Effient sales were $83.5 million in the third quarter of 2011, up from $71.7
million in the second quarter of 2011 due to increased demand. U.S. Effient
sales were $61.4 million. Sales outside the U.S. were $22.1 million.

Animal Health

Worldwide sales of animal health products in the third quarter of 2011 were
$451.0 million, an increase of 28 percent compared with the third quarter of
2010. U.S. sales grew 20 percent, to $237.9 million, due to increased demand for
food animal products and the recent U.S. launch of Trifexis(TM). Sales outside
the U.S. increased 37 percent, to $213.2 million, driven by the impact of the
acquisition of certain Janssen and Pfizer animal health assets in Europe, and to
a lesser extent the favorable impact of foreign exchange rates and increased
demand.

2011 Financial Guidance

The company has updated certain elements of its 2011 financial guidance. The
company has narrowed its full-year 2011 non-GAAP earnings per share guidance to
a range of $4.30 to $4.35 per share. On a reported basis, the company now
expects full-year 2011 earnings per share to be in the range of $3.89 to $3.94.
Earnings per share guidance excludes potential future restructuring charges.

2011 Earnings Per Share Expectations:

2011 2010
Expectations Results
———— ——- % Growth
——–
(14)% to
Earnings per share (reported) $3.89 to $3.94 $4.58 (15)%
In-process research and
development charges .23 .03
associated with Boehringer
Ingelheim
collaboration (2011) and Acrux
licensing
agreement (2010)
Asset impairments and restructuring
charges .18 .13
Earnings per share (non-GAAP) $4.30 to $4.35 $4.74 (8)% to (9)%
————– —–

The company still expects total revenue to grow in the mid-single digits. The
company still anticipates that the impact of U.S. health care reform will lower
2011 revenue by $400 million to $500 million. 2011 revenue guidance assumes
rapid and severe erosion of global Zyprexa sales after patent expirations in
major markets, including the U.S. starting in October 2011, and the continued
erosion of U.S. Gemzar sales. The company expects these reductions in revenue to
be offset by sales growth of Alimta, Cialis, Cymbalta, Effient, Humalog and
animal health products.

The company still anticipates that gross margin as a percent of revenue will
decline between 2 and 3 percentage points.

Marketing, selling and administrative expenses are still projected to grow in
the high-single digits and still include an estimated $150 million to $200
million in non-tax deductible expense for the mandatory pharmaceutical
manufacturers fee associated with U.S. health care reform. Research and
development expense growth is still projected to be in the low single digits.

Other income is now expected to be a net expense of between $175 million and
$225 million.

The tax rate is now expected to be approximately 20 percent on a non-GAAP basis
and approximately 19.5 percent on a reported basis.

Cash flows are still expected to be sufficient to fund capital expenditures that
are now expected to be approximately $700 million, as well as anticipated
business development activity and the company’s dividend.

Webcast of Conference Call

As previously announced, investors and the general public can access a live
webcast of the third-quarter 2011 financial results conference call through a
link on Lilly’s website at www.investor.lilly.com. The conference call will be
held today from 9:00 a.m. to 10:00 a.m. Eastern Daylight Time (EDT) and will be
available for replay via the website through November 18, 2011.

Lilly, a leading innovation-driven corporation, is developing a growing
portfolio of pharmaceutical products by applying the latest research from its
own worldwide laboratories and from collaborations with eminent scientific
organizations. Headquartered in Indianapolis, Ind., Lilly provides answers -
through medicines and information – for some of the world’s most urgent medical
needs. Additional information about Lilly is available at www.lilly.com; Lilly’s
clinical trial registry is available at www.lillytrials.com.

F-LLY

This press release contains forward-looking statements that are based on
management’s current expectations, but actual results may differ materially due
to various factors. There are significant risks and uncertainties in
pharmaceutical research and development. There can be no guarantees with respect
to pipeline products that the products will receive the necessary clinical and
manufacturing regulatory approvals or that they will prove to be commercially
successful. Pharmaceutical products can develop unexpected safety or efficacy
concerns. The company’s results may also be affected by such factors as
competitive developments affecting current products; market uptake of
recently-launched products; the timing of anticipated regulatory approvals and
launches of new products; regulatory actions regarding currently marketed
products; issues with product supply; regulatory changes or other developments;
regulatory compliance problems or government investigations; patent disputes;
changes in patent law or regulations related to data-package exclusivity; other
litigation involving current or future products; the impact of governmental
actions regarding pricing, importation, and reimbursement for pharmaceuticals,
including U.S. health care reform; changes in tax law; asset impairments and
restructuring charges; acquisitions and business development transactions; and
the impact of exchange rates and global macroeconomic conditions. For additional
information about the factors that affect the company’s business, please see the
company’s latest Form 10-Q and Form 10-K filed with the U.S. Securities and
Exchange Commission. The company undertakes no duty to update forward-looking
statements.

Alimta(R) (pemetrexed, Lilly)
Amyvid(TM) (florbetapir, Lilly)
Byetta(R) (exenatide injection, Amylin Pharmaceuticals)
Bydureon(TM) (exenatide for extended-release injectable suspension, Amylin
Pharmaceuticals)
Cialis(R) (tadalafil, Lilly)
Cymbalta(R) (duloxetine hydrochloride, Lilly)
Effient(R) (prasugrel, Lilly)
Erbitux(R) (cetuximab, ImClone Systems, Lilly)
Evista(R) (raloxifene hydrochloride, Lilly)
Forteo(R) (teriparatide of recombinant DNA origin injection, Lilly)
Gemzar(R) (gemcitabine hydrochloride, Lilly)
Humalog(R) (insulin lispro injection of recombinant DNA origin, Lilly)
Humulin(R) (human insulin of recombinant DNA origin, Lilly)
Strattera(R) (atomoxetine hydrochloride, Lilly)
Trajenta(R) (linagliptin, Boehringer Ingelheim)
Trifexis(TM) (spinosad + milbemycin oxime, Lilly)
Zyprexa(R) (olanzapine, Lilly)

Eli Lilly and Company Employment Information

September 30, 2011 December 31, 2010
—————— —————–
Worldwide Employees 38,380 38,350

Eli Lilly and Company
Operating Results (Unaudited) – REPORTED
(Dollars in millions, except per share data)
Three Months Ended Nine Months Ended
September 30 September 30
2011 2010 % Chg. 2011 2010 % Chg.
—- —- —— —- ——

Total
Revenue $6,147.9 $5,654.8 9% $18,239.9 $16,889.0 8%

Cost of
sales 1,338.1 987.6 35% 3,746.2 3,134.0 20%
Research
and
development 1,280.9 1,219.8 5% 3,665.5 3,446.1 6%
Marketing,
selling
and
administrative 1,917.8 1,694.9 13% 5,746.5 5,064.7 13%
Acquired
in-
process
research
and
development – – NM 388.0 50.0 NM
Asset
impairments,
restructuring
and
other
special
charges 25.2 59.5 (58)% 233.8 113.0 NM
—– —–

Operating
income 1,585.9 1,693.0 (6)% 4,459.9 5,081.2 (12)%

Net
interest
income
(expense) (22.9) (30.9) (80.5) (104.4)
Net other
income
(expense) (60.5) 9.2 (71.7) 138.8
—– —–
Other
income
(expense) (83.4) (21.7) NM (152.2) 34.4 NM

Income
before
income
taxes 1,502.5 1,671.3 (10)% 4,307.7 5,115.6 (16)%
Income
taxes 266.2 368.4 (28)% 818.2 1,215.7 (33)%
—– —– —– ——-

Net
income $1,236.3 $1,302.9 (5)% $3,489.5 $3,899.9 (11)%
======== ======== ======== ========

Earnings
per
share -
basic
and
diluted $1.11 $1.18 (6)% $3.13 $3.53 (11)%
===== ===== ===== =====

Dividends
paid per
share $.49 $.49 0% $1.47 $1.47 0%
1,113,820 1,105,173 1,113,324 1,104,265
Weighted-
average
shares
outstanding
(thousands)
– basic
Weighted-
average
shares 1,113,841 1,105,198 1,113,347 1,104,290
outstanding
(thousands)
-
diluted

Eli Lilly and Company
Operating Results (Unaudited) – Non-GAAP
(Dollars in millions, except per share data)
Three Months Ended Nine Months Ended
September 30 September 30
%
2011(a) 2010(b) % Chg. 2011(a) 2010(b) Chg.
——- ——- —— ——- —–

Total
Revenue $6,147.9 $5,654.8 9% $18,239.9 $16,889.0 8%

Cost of
sales 1,338.1 987.6 35% 3,746.2 3,134.0 20%
Research
and
development 1,280.9 1,219.8 5% 3,665.5 3,446.1 6%
Marketing,
selling
and
administrative 1,917.8 1,694.9 13% 5,746.5 5,064.7 13%

Operating
income 1,611.1 1,752.5 (8)% 5,081.7 5,244.2 (3)%

Net
interest
income
(expense) (22.9) (30.9) (80.5) (104.4)
Net other
income
(expense) (60.5) 9.2 (71.7) 138.8
—– —–
Other
income
(expense) (83.4) (21.7) NM (152.2) 34.4 NM

Income
before
income
taxes 1,527.7 1,730.8 (12)% 4,929.5 5,278.6 (7)%
Income
taxes 273.9 389.4 (30)% 984.9 1,272.7 (23)%
—– —– —– ——-

Net income $1,253.8 $1,341.4 (7)% $3,944.6 $4,005.9 (2)%
======== ======== ======== ========

Earnings
per share
– basic
and
diluted $1.13 $1.21 (7)% $3.54 $3.63 (2)%
===== ===== ===== =====

Dividends
paid per
share $.49 $.49 0% $1.47 $1.47 0%
Weighted-
average
shares 1,113,820 1,105,173 1,113,324 1,104,265
outstanding
(thousands)
– basic
Weighted-
average
shares 1,113,841 1,105,198 1,113,347 1,104,290
outstanding
(thousands)
– diluted

(a.) The third quarter 2011 has been adjusted to eliminate a
restructuring charge of $25.2 million (pretax), or $0.02 (after-
tax). The year-to-date 2011 financial statements have been
adjusted to eliminate total restructuring charges of $233.8 million
(pretax), or $0.18 (after-tax). These charges are related to
severance costs from previously announced strategic actions that the
company is taking to reduce its cost structure and global workforce.
In addition, the year-to-date 2011 financial statements have been
adjusted to eliminate a charge of $388.0 million (pretax), or $0.23
per share (after-tax), for acquired in-process research and
development associated with the collaboration with Boehringer
Ingelheim.

(b.) The third quarter 2010 has been adjusted to eliminate a
restructuring charge of $59.5 million (pretax), or $0.03 (after-
tax). The year-to-date 2010 financial statements have been
adjusted to eliminate total restructuring charges of $113.0 million
(pretax), or $0.07 (after-tax). These charges are primarily
related to severance costs from previously announced strategic
actions that the company is taking to reduce its cost structure and
global workforce. In addition, the year-to-date 2010 financial
statements have been adjusted to eliminate a charge of $50.0 million
(pretax), or $0.03 per share (after-tax), for acquired in-process
research and development associated with the in-licensing agreement
with Acrux Ltd.

(Logo: http://photos.prnewswire.com/prnh/20031219/LLYLOGO )

SOURCE Eli Lilly and Company