Eli Lilly realizes $790 million in income from Amylin Pharmaceuticals

The early payment of the revenue sharing obligation by Amylin allows Lilly 'to recognize the obligation's value in the near-term, receive significant income in both 2012 and 2013' and further strengthen its balance sheet

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Written byJeffrey Bouley

INDIANAPOLIS—Eli Lilly and Co. has revised certainelements of its 2012 reported financial guidance to reflect additional incomethe company will recognize as a result of the early payment of financialobligations from Amylin Pharmaceuticals.

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Jeffrey Bouley
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Following the completion of its acquisition byBristol-Myers Squibb, Amylin has paid to Lilly roughly $1.26 billion insatisfaction of its revenue sharing obligation with respect to its drug exenatide,a medication approved in April 2005 for the treatment of type 2 diabetesand going under the brand names Byetta and Bydureon.

As a result, Lillywill recognize pre-tax income in the third quarter of 2012 of approximately$790 million, or approximately $0.43 per share after tax. In addition to incomepreviously deferred pursuant to this arrangement, Lilly also expects torecognize pre-tax income in 2013 related to this payment of approximately $425million, or approximately $0.25 per share after-tax, contingent upon transferof exenatide commercial rights outside the United States to Amylin.

Currently,Lilly anticipates these rights will be transferred to Amylin over the course of2013. In addition, Amylin has also repaid in full to Lilly a $165 million loanand accrued interest.

"The early payment of the revenue sharingobligation by Amylin allows Lilly to recognize the obligation's value in thenear-term, receive significant income in both 2012 and 2013, and furtherstrengthen our balance sheet," said Derica Rice, Lilly's executive vicepresident of global services and chief financial officer. "With thisadditional cash, we will continue to advance our pipeline of more than 60potential new medicines in development, as well as fund capital expenditures,business development activity, our dividend and share repurchases.

"At the same time, we still expect to meet orexceed our mid-term minimum financial goals, despite not receiving 15 percentof net exenatide sales on an ongoing basis. From now through 2014, on an annualbasis we still expect revenue to be at least $20 billion, net income to be atleast $3 billion, and operating cash flow to be at least $4 billion."

In accordance with generally accepted accountingprinciples (GAAP), the recognition of the income from the early payment of therevenue sharing obligation has caused Lilly to revise certain elements of its2012 reported financial guidance. The income has been excluded, however, from thecompany's 2012 non-GAAP financial guidance.

On a non-GAAP basis—financial guidance isintended to provide additional insights into the underlying trends in thecompany's business—Lilly still expectsfull-year 2012 earnings per share to be in the range of $3.30 to $3.40, but nowexpects full-year 2012 earnings per share to be in the range of $3.72 to $3.82on a reported basis.

Eli Lilly realizes $790 million in income from Amylin Pharmaceuticals

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Jeffrey Bouley

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