Eli Lilly and Co. reported a loss for the first quarter of 2017 compared to profit in the prior year, primarily hurt by lower operating income, partially offset by higher other income.
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But, quarterly revenue increased 7 percent, driven by 9 percent pharmaceutical volume growth from Trulicity, Taltz and other new products.
Both adjusted earnings per share and quarterly revenues topped analysts' expectations.
The company cuts its 2017 GAAP earnings per share outlook due to severance costs incurred as a result of actions taken to reduce the company's cost structure. But it reaffirmed its Non-GAAP earnings per share and revenue guidance for fiscal year 2017.
Net loss for the the first quarter of 2017 were $110.8 million and $0.10 per share, compared to net income $440.1 million and $0.41 per share in the first quarter of 2016.
Operating expenses in the first quarter of 2017, defined as the sum of research and development, and marketing, selling and administrative expenses, were $2.783 billion, an increase of 3 percent compared with the first quarter of 2016.
Research and development expenses increased 1 percent, to $1.238 billion, or 23.7 percent of revenue. Marketing, selling and administrative expenses increased 5 percent, to $1.545 billion, due to increased expenses related to new pharmaceutical products, partially offset by decreased expenses related to late life-cycle products.
In the first quarter of 2017, the company recognized an acquired in-process research and development charge of $857.6 million associated with the acquisition of CoLucid Pharmaceuticals. There were no acquired in-process research and development charges in the first quarter of 2016.
In the first quarter of 2017, the company recognized asset impairment, restructuring and other special charges of $213.9 million, primarily related to severance costs incurred as a result of actions taken to reduce the company's cost structure, as well as integration costs related to the acquisition of Novartis Animal Health.
In the first quarter of 2016, the company recognized asset impairment, restructuring and other special charges of $131.4 million, composed of asset impairments related to the closure of an animal health manufacturing facility in Ireland and integration costs related to the acquisition of Novartis Animal Health.
Operating income in the first quarter of 2017 was $46.1 million, a decrease of $669.7 million compared with the first quarter of 2016, primarily driven by an acquired in-process research and development charge for the acquisition of CoLucid Pharmaceuticals, partially offset by revenue growth.
Non-GAAP net income for the quarter increased 18 percent to $1.040 billion and $0.98 per share from $882.3 million and $0.83 per share in the first quarter of 2016.
The increases in net income and earnings per share were primarily driven by higher adjused operating income, partially offset by a higher effective tax rate and lower other income.
Adjusted operating income increased $284.4 million, or 28 percent, to $1.304 billion in the first quarter of 2017, due to revenue growth, partially offset by higher operating costs related to new products.
In the first quarter of 2017, worldwide revenue was $5.228 billion, an increase of 7 percent compared with the first quarter of 2016. Analysts expected revenue of $5.22 billion for the quarter.
The revenue increase was driven by an 8 percent increase due to volume, partially offset by a 1 percent decrease due to the unfavorable impact of foreign exchange rates.
The increase in worldwide volume was largely due to 9 percent pharmaceutical growth driven by Trulicity, Taltz and other new products including Cyramza, Lartruvo, Basaglar and Jardiance.
To a lesser extent, the increase in volume was also driven by companion animal products due to the inclusion of $40.8 million in revenue from the acquisition of Boehringer Ingelheim Vetmedica's U.S. feline, canine and rabies vaccine portfolio. These total volume increases were partially offset by decreased volumes for Zyprexa and Alimta.
Revenue in the U.S. increased 15 percent, to $2.934 billion, driven primarily by increased volumes for Trulicity, Taltz, Lartruvo and companion animal products due to the inclusion of revenue from the acquisition of Boehringer Ingelheim Vetmedica's U.S. feline, canine and rabies vaccine portfolio, partially offset by decreased volume for Alimta. Realized prices increased U.S. revenue by 3 percent, primarily driven by Humalog, which had significant unfavorable changes to rebates and discounts in the first quarter of 2016 that did not recur in the first quarter of 2017.
Revenue outside the U.S. decreased 1 percent, to $2.295 billion, due to lower realized prices and volume from the loss of exclusivity for several products including Cymbalta in Canada and Europe, Zyprexa in Japan and Alimta in numerous countries, as well as the unfavorable impact of foreign exchange rates.
These were largely offset by increased volume for several newly launched pharmaceutical products, including Trulicity and Cyramza.
Earnings per share for 2017 are being revised to be in the range of $2.60 to $2.70 on a reported basis, due to severance costs incurred as a result of actions taken to reduce the company's cost structure. Previously, the company had expected reported earnings per share for 2017 to be in the range of $2.69 to $2.79.
Earnings per share for 2017 are being reaffirmed to be $4.05 to $4.15 on a non-GAAP basis. Analysts expect annual earnings of $4.11 per share.
The company still anticipates 2017 revenue between $21.8 billion and $22.3 billion.
Excluding the impact of foreign exchange rates, the company expects revenue growth from animal health products and a number of established pharmaceutical products including Trajenta, Forteo and Humalog, as well as higher revenue from new products including Trulicity, Taltz, Basaglar, Cyramza, Jardiance and Lartruvo.
Wall Street analysts have a consensus revenue estimate of $22.11 billion for 2017. ■