Eli Lilly Pharmaceutical Company

Eli Lilly and Co. is a pharmaceutical company that was founded in 1876 by Colonel Eli Lilly.4 Its first major breakthrough was the development of gelatin coating for pills, which later turned into the gelatin capsules. Since 1876 Eli Lilly and Co. has been a pioneer in the pharmaceutical industry.5 The main focus of Lilly is the research and development of neuroscience and endocrinology drugs. They have expanded their operations over time into over 60 nations worldwide. The pharmaceutical sector brings in sales of $1 trillion every year.10

Products While Eli Lilly makes and sells numerous drugs their 5 biggest sellers are Zyprexa, Gemzar, Humalog, Evista, and Humulin, in that order. These five drugs account for 60% of Lilly's net
sales for 2005. Zyprexa is a drug for schizophrenia and bipolar disorder. Gemzar is a cancer drug useful in the treatment of many different forms of the disease. Evista is an osteoporosis drug. Finally, Humalog and Humulin are insulin products used by diabetics. Two other drugs produced by Lilly that are well know are: Cialis, an erectile dysfunction drug, and Prozac, the first drug of its kind to treat clinical depression. These drugs are well known by the general public but only account for about 4% of Lilly's total net sales for 2005. 3

All Eli Lilly Products
Cancer Growth Disorders Alimta Humatrope Gemzar Osteoporosis
Diabetes Evista Actos Sepsis Byetta Xigris Humulin Neuroscience Humalog Cymbalta Humalog Mix 75/25 Prozac Humalog Mix 50/50 Strattera Humulin Pen Symbyax Humalog Pen Zyprexa Erectile Dysfunction Cialis http://www.lilly.com/products/index.html1 Financial
Eli Lilly's worldwide sales for 2005 increased 6 percent, to $14.65 billion, due to the sales growth of Cymbalta, Alimta, Forteo, and Gemzar. As a result Lilly's restructuring of arrangements with U.S. wholesalers in 2005, wholesaler inventory levels for certain products decreased (primarily Strattera, Prozac, and Gemzar) reducing sales by approximately $170 million. Another factor in sales growth was decreased U.S. demand for Zyprexa, Strattera, and Prozac. Even considering these two factors U.S. sales increased to $7.8 billion, up 2 percent, due to sales increases of Cymbalta and Alimta. Outside the U.S. sales increased 11 percent, $6.85 billion, due to increased sales of Zyprexa, Alimta, and Gemzar. This represents a 3 percent volume increase in worldwide sales, partially due to global selling prices and partially due to changing exchange rate.3

In 2005 gross margins decreased 0.4 percent to 76.3 percent of sales. This decrease is due to higher manufacturing expenses. Operating expenses increased 8 percent. Research and development expenses increased 12 percent, to $3.03 billion. The R&D increase represents about 21 percent of total sales, which is a leader in the industry. Marketing and administrative expenses increased 5 percent, to $4.5 billion because of stock options, increased benefits, and incentive compensation.3

Net income in 2005 was up $89.4 million, total $419.4 million. Eli Lilly employed 42,600 people full time in 2005.3

Current News Solomon Steiner, owner of Biodel Inc. in Danbury, Ct. is in the last phase of clinical testing of new injectable insulin. Steiner says that this new insulin has performed faster and better than any other insulin on the market today. His goal with this new insulin is to market it through a larger partner, such as Johnson and Johnson or Bristol-Myer Squibb, and severely cut into Eli Lilly's 80% market share of mealtime insulin.6 Lilly Endowment Inc.
has indicated its intent to reduce its stock in Eli Lilly and Co. by $2 Billion. The endowment is the largest shareholder in Eli Lilly. The sell off is intended to diversify the endowments assets and decrease the risk to its assets. This sell off adversely affects Eli Lilly's main anti-takeover provision. The endowment stake in Eli Lilly will decrease to 10.6% after the sell off.7 Eli Lilly and their partner Amylin Pharmaceuticals Inc. have announced that they are having difficulty meeting manufacturing capability for their diabetes drug Byetta. Medical representatives for the company have stopped giving out free samples to the doctors they serve. Advertising for Byetta had ceased and will not resume until production can be brought up to acceptable levels. Byetta generated $68 million in sales for Q1 2006.8 Lilly is planning on reorganizing its approach to selling drugs in the US. It will decrease the number of sales reps it employs and shift its focus towards building deeper relationships with individual physicians. It is expected that this reorganization will help Eli Lilly's sales
performance.9

2006 Predictions
Eli Lilly is expecting earnings per share to increase between $3.10 and $3.20. Sales growth is expected to increase from 7 to 9 percent and gross margins are expected to improve compared to 2005. They expect marketing and administrative expenses to grow and research and development expenses to remain similar to 2005 levels, as a percentage of sales.3

1.
http://www.lilly.com/products/index.html
This site is an official Eli Lilly website. It lays out all of Lilly's products and their uses.

2. http://investor.lilly.com/pipeline.cfm
This is an official Eli Lilly website. It lays out all of Eli Lilly's current drug submissions to the FDA and all drugs currently going through different FDA testing.

3. Eli Lilly. (2005). 2005 Annual Report to Shareholders. Retrieved October 20, 2005.
This is Eli Lilly's annual stockholders report. It reports on the financial data of the company for 2005, and gives predictions of its performance in 2006.

4. Quick, Amanda C., ed. Company Profiles for Students. Michigan: Gale, 2002.
This source gives financial information on Eli Lilly for 2002. It was useful in compiling a history of the company.

5. Sutton, George, ed. Hoover's Handbook of American Businesses 2002. Texas: Hoover's Business Press, 2002.
This source gives financial information on Eli Lilly for 2002. It was useful in compiling a history of the company.

6. Chuvala, Bob. (2006, August 14). Blockbuster for Biodel. Fairfield County Business Journal (Indiana). Vol. 45 No. 33 pp 1-2. Retrieved October 20, 2006 fromEBSCO Host Research
Database.
This article describes a possible drug that is successful would compete aggressively with Eli Lilly's current insulin drugs.

7. Schnitzier, Peter. (2006, July 31). A Chink In Lilly's Armor. Indianapolis Business Journal (Indiana). Vol. 27 Issue 21 p3A. Retrieved October 20, 2006 fromEBSCO Host Research Database.
This article describes how the Lilly Endowment, Eli Lilly's charitable foundation, is selling off $2 billion in Eli Lilly stock to diversify its holdings.

8. Lilly Partnership Struggling to Meet Diabetics' Demands. (2006, June 26). Indianapolis Business Journal (Indiana). Vol. 27 Issue 16 p3A. Retrieved October 20, 2006 fromEBSCO Host Research Database.
This article described Eli Lilly's difficulty in maintaining the manufacturing capabilities of its diabetes drug Byetta.

9. Murphy, Tom. Selling Change at Lilly. (2006, May 15). Indianapolis Business Journal (Indiana). Vol. 27 Issue 10 p1. Retrieved October 20, 2006 fromEBSCO Host Research Database.
This article reports on Eli Lilly's new strategy of selling drugs to physicians.

10. Bredis, David; Olofson, Hayes; Olson, Zachary. Eli Lilly (April 2006). Krause Fund Research. (2006).
This company analysis gave helpful financial data on Eli Lilly and Co.