Lilly Provides Update on Strategy

Eli Lilly and Company has outlined plans to grow revenue and expand margins through the balance of the decade. The company's refined strategy will provide greater focus for research and commercial activities and help maintain a sustainable flow of innovative medicines.

"We are successfully moving from a challenging period of patent expirations to a period of resumed growth, led by diabetes, oncology and animal health," said John C. Lechleiter, Lilly's chairman, president and EOr. "We are launching new products and competing more effectively. We also retain one of the strongest pipelines in our history. Our refined strategic direction gives us a blueprint that will provide greater focus for our research and commercial activities and help Lilly respond to an ever more challenging environment. In these ways and more, we'll continue to create value for all our stakeholders while improving the lives of patients."

The company expects to grow revenue with a first wave of product launches in diabetes, oncology and immunology followed by a second wave of potential launches in cardiovascular disease, Alzheimer's disease, pain and oncology. The company will focus on key geographies including the US, Japan, China and other select markets.

Lilly will focus its internal R&D on the core areas of diabetes, oncology, neurodegeneration, immunology and pain. Lilly is also progressing with an ambitious effort to reduce significantly the development time required to bring new medicines to patients.

The company aims to turn revenue growth into even greater earnings growth by controlling costs and leveraging existing infrastructure. By driving productivity improvements across the value chain, Lilly expects to reduce total operating expenses as a percent of revenue to 50% or less by the end of 2018. Total operating costs are defined as the sum of marketing, selling and administrative expenses and R&D expenses. Lilly also expects to increase gross margin as a percent of revenue through greater utilization of existing capacity in areas including insulin and its biotech portfolio, as well as ongoing productivity efforts.

"We will balance opportunities and risks for our near-, medium- and long-term objectives," said Derica Rice, Lilly's executive vice president for global services and chief financial officer. "Our objectives through the remainder of this decade are to grow revenue, expand margins and maintain the flow of innovative medicines through our pipeline. We also aim to deploy capital to create shareholder value including returning cash to shareholders via both the dividend and share repurchases."  

Lilly also said 2014 earnings per share are now expected to be in the range of $2.15–$2.23 on a reported basis. Prior reported expectations were $2.36–$2.44. This revision is due to fourth-quarter global restructuring charges in an effort to reduce the company's cost structure and acquired in-process research and development charges associated with the Adocia collaboration. Expected 2014 Non-GAAP earnings per share have been confirmed at $2.72–$2.80. Fourth quarter and full-year 2014 financial results will be announced on 30 January 2015.