UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report UnderPursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 2017For the quarterly period ended March 31, 2021
COMMISSION FILE NUMBER 001-6351
ELI LILLY AND COMPANY
(Exact name of Registrant as specified in its charter)
|
| | | | | | | |
INDIANAIndiana | | 35-0470950 |
| (State or other jurisdiction of | | (I.R.S. Employer |
| incorporation or organization) | | Identification No.) |
LILLY CORPORATE CENTER, INDIANAPOLIS, INDIANALilly Corporate Center, Indianapolis, Indiana 46285
(Address and zip code of principal executive offices)
Registrant’s telephone number, including area code (317) 276-2000
Securities registered pursuant to Section 12(b) of the Exchange Act:
| | | | | | | | |
| Title of Each Class | Trading Symbols | Name of Each Exchange On Which Registered |
| Common Stock (no par value) | LLY | New York Stock Exchange |
| 1.000% Notes due 2022 | LLY22 | New York Stock Exchange |
| 7 1/8% Notes due 2025 | LLY25 | New York Stock Exchange |
| 1.625% Notes due 2026 | LLY26 | New York Stock Exchange |
| 2.125% Notes due 2030 | LLY30 | New York Stock Exchange |
| 0.625% Notes due 2031 | LLY31 | New York Stock Exchange |
| 6.77% Notes due 2036 | LLY36 | New York Stock Exchange |
| 1.700% Notes due 2049 | LLY49A | New York Stock Exchange |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes ý☒ No o☐
Indicate by check mark whether the registrantRegistrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to submit and post such files).
Yes ý☒ No o☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of a “large accelerated filer,” “accelerated filer” andfiler,” “smaller reporting company”company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
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| | | | | | | | | | | | | | | | | | | | | | |
Large accelerated filerý | ☒ | | | | | Accelerated filero | ☐ |
Non-accelerated filero | ☐ | (Do not check if a smaller reporting company) | | Smaller reporting companyo | ☐ |
| | | | | | Emerging growth companyo | ☐ |
If an emerging growth company, indicate by check mark if the registrantRegistrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐
Indicate by check mark whether the registrantRegistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o☐ No ý☒
The number of shares of common stock outstanding as of October 23, 2017April 27, 2021:
|
| | | | | | | |
| Class | | Number of Shares Outstanding |
| Common | | 1,101,094,711959,025,446 |
|
Eli Lilly and Company
Form 10-Q
For the Quarter Ended September 30, 2017March 31, 2021
Table of Contents
Forward-Looking Statements
ThisThis Quarterly Report on Form 10-Q includesand our other publicly available documents include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act)., and are subject to the safe harbor created thereby under the Private Securities Litigation Reform Act of 1995. In particular, information appearing under “Management's Discussion and Analysis of Results of Operations and Financial Condition” includes forward-looking statements. Forward-looking statements include all statements that do not relate solely to historical or current facts, and generally can generally be identified by the use of words such as “may,” “believe,” “will,” “expect,” “project,” “estimate,” “intend,” “anticipate,” “plan,” “continue”“continue,” or similar expressions.expressions or future or conditional verbs.
In particular, information appearing under “Management's Discussion and Analysis of Financial Condition and Results of Operations” includes forward-looking statements. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projectedexpressed in theseforward-looking statements. Where, in any forward-looking statement, we ("Lilly" or the "company") express an expectation or belief as to future results or events, it is based on management's current plans and expectations, expressed in good faith and believed to have a reasonable basis. However, we can give no assurance that any such expectation or belief will result or will be achieved or accomplished. Investors therefore should not place undue reliance on forward-looking statements. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:
•the impact of the evolving COVID-19 pandemic and the global response thereto;
•uncertainties related to our efforts to develop potential treatments for COVID-19;
•the significant costs and uncertainties in the pharmaceutical research and development process, including with respect to the timing and process of obtaining regulatory approvals;
•the impact of acquisitions and business development transactions and related integration costs;
•the expiration of intellectual property protection for certain of our products and competition from generic and/or biosimilar products;
•our ability to protect and enforce patents and other intellectual property;
•changes in patent law or regulations related to data package exclusivity;
•competitive developments affecting current products and our pipeline;
•market uptake of recently launched products;
•information technology system inadequacies, breaches, or operating failures;
•unauthorized access, disclosure, misappropriation, or compromise of confidential information or other data stored in our IT systems, networks, and facilities, or those of third parties with whom we share our data;
•unexpected safety or efficacy concerns associated with our products;
•litigation, investigations, or other similar proceedings involving past, current, or future products or commercial activities as we are largely self-insured;
•issues with product supply and regulatory approvals stemming from manufacturing difficulties or disruptions, including as a result of regulatory actions relating to our facilities;
•reliance on third-party relationships and outsourcing arrangements;
•regulatory changes or other developments;
•regulatory actions regarding currently marketed products;
•continued pricing pressures and the impact of actions of governmental and private payers affecting pricing of, reimbursement for, and access to pharmaceuticals;
•devaluations in foreign currency exchange rates or changes in interest rates, and inflation;
•changes in tax law, tax rates, or events that differ from our assumptions related to tax positions;
•asset impairments and restructuring charges;
•the impact of global macroeconomic conditions and trade disruptions or disputes;
•changes in accounting and reporting standards promulgated by the Financial Accounting Standards Board and the Securities and Exchange Commission (SEC); and
•regulatory compliance problems or government investigations.
More information on factors that could cause actual results or events to differ materially from those anticipated is included from time to time in our reports filed with the Securities and Exchange Commission (SEC),SEC, including in our Annual Report on Form 10-K for the year ended December 31, 2016,2020, particularly under the captions “Forward-Looking Statements” andcaption “Risk Factors.”Factors”.
All forward-looking statements herein speak only as of the date of this reportQuarterly Report on Form 10-Q and are expressly qualified in their entirety by the cautionary statements included in or incorporated by reference into this report.Quarterly Report on Form 10-Q. Except as is required by law, we expressly disclaim any obligation to publicly release any revisions to forward-looking statements to reflect events after the date of this report.
Quarterly Report on Form 10-Q.
PART I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Statements of Operations
(Unaudited)
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars and shares in millions, except per-share data)
| | | | | | | | | | | | Three Months Ended March 31, | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | 2021 | | 2020 | |
| | 2017 | | 2016 | | 2017 | | 2016 | |
| Revenue | $ | 5,658.0 |
| | $ | 5,191.7 |
| | $ | 16,710.6 |
| | $ | 15,461.6 |
| |
| Revenue (Note 2) | | Revenue (Note 2) | $ | 6,805.6 | | | $ | 5,859.8 | | |
| Costs, expenses, and other: | | | | | | | | Costs, expenses, and other: | | |
| Cost of sales | 1,566.1 |
| | 1,400.9 |
| | 4,445.4 |
| | 4,188.9 |
| Cost of sales | 1,878.6 | | | 1,215.1 | | |
| Research and development | 1,319.4 |
| | 1,236.4 |
| | 3,808.6 |
| | 3,793.3 |
| Research and development | 1,684.8 | | | 1,392.1 | | |
| Marketing, selling, and administrative | 1,555.5 |
| | 1,565.4 |
| | 4,807.6 |
| | 4,661.9 |
| Marketing, selling, and administrative | 1,576.0 | | | 1,549.6 | | |
| Acquired in-process research and development (Note 3) | 205.0 |
| | — |
| | 1,062.6 |
| | — |
| Acquired in-process research and development (Note 3) | 299.3 | | | 52.3 | | |
| Asset impairment, restructuring, and other special charges (Note 5) | 406.5 |
| | 45.5 |
| | 670.4 |
| | 234.9 |
| Asset impairment, restructuring, and other special charges (Note 5) | 211.6 | | | 59.9 | | |
| Other–net, (income) expense (Note 12) | 13.9 |
| | (27.2 | ) | | 2.7 |
| | 100.6 |
| |
| Other–net, (income) expense (Note 11) | | Other–net, (income) expense (Note 11) | (321.1) | | | (89.1) | | |
| | 5,066.4 |
|
| 4,221.0 |
|
| 14,797.3 |
|
| 12,979.6 |
| | 5,329.2 | | | 4,179.9 | | |
| Income before income taxes | 591.6 |
|
| 970.7 |
|
| 1,913.3 |
|
| 2,482.0 |
| Income before income taxes | 1,476.4 | | | 1,679.9 | | |
| Income taxes (Note 8) | 36.0 |
| | 192.7 |
| | 460.5 |
| | 516.2 |
| |
| Income taxes (Note 7) | | Income taxes (Note 7) | 121.1 | | | 223.4 | | |
| Net income | $ | 555.6 |
|
| $ | 778.0 |
|
| $ | 1,452.8 |
|
| $ | 1,965.8 |
| Net income | $ | 1,355.3 | | | $ | 1,456.5 | | |
| | | | | | | | | | | | |
| Earnings per share: | | | | | | | | Earnings per share: | | |
| Basic | $ | 0.53 |
| | $ | 0.74 |
| | $ | 1.38 |
| | $ | 1.86 |
| Basic | $ | 1.49 | | | $ | 1.60 | | |
| | Diluted | $ | 0.53 |
| | $ | 0.73 |
| | $ | 1.37 |
| | $ | 1.85 |
| Diluted | $ | 1.49 | | | $ | 1.60 | | |
| | | Shares used in calculation of earnings per share: | | | | | | | | Shares used in calculation of earnings per share: | | |
| Basic | 1,053.4 |
| | 1,057.7 |
| | 1,054.8 |
| | 1,058.4 |
| Basic | 908.8 | | 908.2 | |
| Diluted | 1,056.0 |
| | 1,060.8 |
| | 1,057.0 |
| | 1,061.1 |
| Diluted | 912.4 | | 911.7 | |
| | | | | | | | | |
| Dividends paid per share | $ | 0.52 |
| | $ | 0.51 |
| | $ | 1.56 |
| | $ | 1.53 |
| |
See notes to consolidated condensed financial statements.
Consolidated Condensed Statements of Comprehensive Income (Loss)
(Unaudited)
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Net income | $ | 555.6 |
| | $ | 778.0 |
| | $ | 1,452.8 |
| | $ | 1,965.8 |
|
Other comprehensive income, net of tax (Note 11) (1) | 167.7 |
| | 113.5 |
| | 651.2 |
| | 323.0 |
|
| Comprehensive income | $ | 723.3 |
|
| $ | 891.5 |
|
| $ | 2,104.0 |
|
| $ | 2,288.8 |
|
(1) Other comprehensive income (loss) for the three and nine months ended September 30, 2017 consisted of $165.5 million and $664.6 million of other comprehensive income attributable to controlling interest, respectively, and $2.2 million and $(13.4) million of other comprehensive income (loss) attributable to non-controlling interest, respectively. Other comprehensive income (loss) for the three and nine months ended September 30, 2016 attributable to non-controlling interest is immaterial. | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2021 | | 2020 | | | | |
| Net income | $ | 1,355.3 | | | $ | 1,456.5 | | | | | |
| Other comprehensive income (loss), net of tax (Note 10) | 100.8 | | | (362.3) | | | | | |
| Comprehensive income | $ | 1,456.1 | | | $ | 1,094.2 | | | | | |
See notes to consolidated condensed financial statements.
Consolidated Condensed Balance Sheets
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions)
| | | | September 30, 2017 | | December 31, 2016 | | March 31, 2021 | | December 31, 2020 |
| Assets | (Unaudited) | | | Assets | (Unaudited) | | |
| Current Assets | | | | Current Assets | |
| Cash and cash equivalents (Note 6) | $ | 3,724.3 |
| | $ | 4,582.1 |
| Cash and cash equivalents (Note 6) | $ | 3,002.4 | | | $ | 3,657.1 | |
| Short-term investments (Note 6) | 3,218.8 |
| | 1,456.5 |
| Short-term investments (Note 6) | 49.0 | | | 24.2 | |
Accounts receivable, net of allowances of $42.1 (2017) and $40.3 (2016) | 4,401.3 |
| | 4,029.4 |
| |
Accounts receivable, net of allowances of $23.9 (2021) and $25.9 (2020) | | Accounts receivable, net of allowances of $23.9 (2021) and $25.9 (2020) | 5,592.8 | | | 5,875.3 | |
| Other receivables | 613.2 |
| | 736.9 |
| Other receivables | 1,065.8 | | | 1,053.7 | |
| Inventories | 4,406.9 |
| | 3,561.9 |
| Inventories | 3,660.8 | | | 3,980.3 | |
| Prepaid expenses and other | 1,063.9 |
| | 734.6 |
| Prepaid expenses and other | 3,233.7 | | | 2,871.5 | |
| Total current assets | 17,428.4 |
| | 15,101.4 |
| Total current assets | 16,604.5 | | | 17,462.1 | |
| Other Assets | | | | |
| Investments (Note 6) | 6,148.7 |
| | 5,207.5 |
| Investments (Note 6) | 3,232.4 | | | 2,966.8 | |
| Goodwill | 4,365.6 |
| | 3,972.7 |
| Goodwill | 3,877.4 | | | 3,766.5 | |
| Other intangibles | 4,271.6 |
| | 4,357.9 |
| |
| Sundry | 2,197.6 |
| | 1,913.8 |
| |
| Total other assets | 16,983.5 |
| | 15,451.9 |
| |
| Property and Equipment | | | | |
| Land, buildings, equipment, and construction in progress | 17,730.7 |
| | 16,777.6 |
| |
| Accumulated depreciation | (9,132.2 | ) | | (8,525.0 | ) | |
| Property and equipment, net | 8,598.5 |
| | 8,252.6 |
| |
| Other intangibles, net | | Other intangibles, net | 8,087.8 | | | 7,450.0 | |
| Deferred tax assets | | Deferred tax assets | 2,649.9 | | | 2,830.4 | |
Property and equipment, net of accumulated depreciation of $9,643.4 (2021) and $9,570.7 (2020) | | Property and equipment, net of accumulated depreciation of $9,643.4 (2021) and $9,570.7 (2020) | 8,630.1 | | | 8,681.9 | |
| Other noncurrent assets | | Other noncurrent assets | 3,756.2 | | | 3,475.4 | |
| Total assets | $ | 43,010.4 |
| | $ | 38,805.9 |
| Total assets | $ | 46,838.3 | | | $ | 46,633.1 | |
| Liabilities and Equity | | | | Liabilities and Equity | |
| Current Liabilities | | | | Current Liabilities | |
| Short-term borrowings and current maturities of long-term debt | $ | 3,538.1 |
| | $ | 1,937.4 |
| Short-term borrowings and current maturities of long-term debt | $ | 4.9 | | | $ | 8.7 | |
| Accounts payable | 1,200.1 |
| | 1,349.3 |
| Accounts payable | 1,639.6 | | | 1,606.7 | |
| Employee compensation | 821.1 |
| | 896.9 |
| Employee compensation | 649.9 | | | 997.2 | |
| Sales rebates and discounts | 4,332.7 |
| | 3,914.9 |
| Sales rebates and discounts | 5,821.4 | | | 5,853.0 | |
| Dividends payable | — |
| | 548.1 |
| Dividends payable | 0 | | | 770.6 | |
| Income taxes payable | 414.4 |
| | 119.1 |
| Income taxes payable | 791.6 | | | 495.1 | |
| Other current liabilities | 2,360.1 |
| | 2,220.9 |
| Other current liabilities | 2,806.8 | | | 2,750.3 | |
| Total current liabilities | 12,666.5 |
| | 10,986.6 |
| Total current liabilities | 11,714.2 | | | 12,481.6 | |
| Other Liabilities | | | | Other Liabilities | |
| Long-term debt | 9,926.6 |
| | 8,367.8 |
| Long-term debt | 16,199.6 | | | 16,586.6 | |
| Accrued retirement benefits (Note 9) | 2,458.1 |
| | 2,453.9 |
| |
| Accrued retirement benefits (Note 8) | | Accrued retirement benefits (Note 8) | 3,969.8 | | | 4,094.5 | |
| Long-term income taxes payable | 710.0 |
| | 688.9 |
| Long-term income taxes payable | 3,917.5 | | | 3,837.8 | |
| Deferred tax liabilities | | Deferred tax liabilities | 2,200.6 | | | 2,099.9 | |
| Other noncurrent liabilities | 2,288.6 |
| | 2,228.2 |
| Other noncurrent liabilities | 1,737.3 | | | 1,707.5 | |
| Total other liabilities | 15,383.3 |
| | 13,738.8 |
| Total other liabilities | 28,024.8 | | | 28,326.3 | |
| Commitments and Contingencies (Note 10) | | | | |
| Eli Lilly and Company Shareholders’ Equity (Note 7) | | | | |
| Commitments and Contingencies (Note 9) | | Commitments and Contingencies (Note 9) | 0 | | 0 |
| Eli Lilly and Company Shareholders’ Equity | | Eli Lilly and Company Shareholders’ Equity | |
| Common stock | 688.5 |
| | 688.5 |
| Common stock | 599.7 | | | 598.2 | |
| Additional paid-in capital | 5,754.7 |
| | 5,640.6 |
| Additional paid-in capital | 6,579.2 | | | 6,778.5 | |
| Retained earnings | 16,145.5 |
| | 16,046.3 |
| Retained earnings | 9,181.3 | | | 7,830.2 | |
| Employee benefit trust | (3,013.2 | ) | | (3,013.2 | ) | Employee benefit trust | (3,013.2) | | | (3,013.2) | |
| Accumulated other comprehensive loss (Note 11) | (4,609.4 | ) | | (5,274.0 | ) | |
| Accumulated other comprehensive loss (Note 10) | | Accumulated other comprehensive loss (Note 10) | (6,395.6) | | | (6,496.4) | |
| Cost of common stock in treasury | (75.8 | ) | | (80.5 | ) | Cost of common stock in treasury | (52.7) | | | (55.7) | |
| Total Eli Lilly and Company shareholders’ equity | 14,890.3 |
| | 14,007.7 |
| Total Eli Lilly and Company shareholders’ equity | 6,898.7 | | | 5,641.6 | |
| Noncontrolling interests | 70.3 |
| | 72.8 |
| Noncontrolling interests | 200.6 | | | 183.6 | |
| Total equity | 14,960.6 |
| | 14,080.5 |
| Total equity | 7,099.3 | | | 5,825.2 | |
| Total liabilities and equity | $ | 43,010.4 |
| | $ | 38,805.9 |
| Total liabilities and equity | $ | 46,838.3 | | | $ | 46,633.1 | |
See notes to consolidated condensed financial statements.
Consolidated Condensed Statements of Equity
(Unaudited)
ELI LILLY AND COMPANY AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Equity of Eli Lilly and Company Shareholders | | |
(Dollars in millions and shares in thousands) | Common Stock | | Additional
Paid-in
Capital | | Retained
Earnings | | Employee Benefit Trust | | Accumulated Other Comprehensive Loss | | Common Stock in Treasury(1) | | Noncontrolling Interests |
| Shares | | Amount | Shares | | Amount |
| Balance at January 1, 2020 | 958,056 | | | $ | 598.8 | | | $ | 6,685.3 | | | $ | 4,920.4 | | | $ | (3,013.2) | | | $ | (6,523.6) | | | 530 | | | $ | (60.8) | | | $ | 92.2 | |
| Net income | | | | | | | 1,456.5 | | | | | | | | | | | 26.2 | |
| Other comprehensive loss, net of tax | | | | | | | | | | | (362.3) | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Retirement of treasury shares | (3,627) | | | (2.3) | | | | | (497.7) | | | | | | | (3,627) | | | 500.0 | | | |
| Purchase of treasury shares | | | | | | | | | | | | | 3,627 | | | (500.0) | | | |
| Issuance of stock under employee stock plans, net | 2,500 | | | 1.6 | | | (201.0) | | | | | | | | | (43) | | | 5.1 | | | |
| Stock-based compensation | | | | | 71.8 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Other | | | | | | | 0.2 | | | | | | | | | | | 0 |
| Balance at March 31, 2020 | 956,929 | | | $ | 598.1 | | | $ | 6,556.1 | | | $ | 5,879.4 | | | $ | (3,013.2) | | | $ | (6,885.9) | | | 487 | | | $ | (55.7) | | | $ | 118.4 | |
| | | | | | | | | | | | | | | | | |
| Balance at January 1, 2021 | 957,077 | | | $ | 598.2 | | | $ | 6,778.5 | | | $ | 7,830.2 | | | $ | (3,013.2) | | | $ | (6,496.4) | | | 487 | | | $ | (55.7) | | | $ | 183.6 | |
| Net income | | | | | | | 1,355.3 | | | | | | | | | | | 16.4 | |
| Other comprehensive income, net of tax | | | | | | | | | | | 100.8 | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Issuance of stock under employee stock plans, net | 2,405 | | | 1.5 | | | (283.9) | | | | | | | | | (24) | | | 3.0 | | | |
| Stock-based compensation | | | | | 85.5 | | | | | | | | | | | | | |
| Other | | | | | (0.9) | | | (4.2) | | | | | | | | | | | 0.6 | |
| Balance at March 31, 2021 | 959,482 | | | $ | 599.7 | | | $ | 6,579.2 | | | $ | 9,181.3 | | | $ | (3,013.2) | | | $ | (6,395.6) | | | 463 | | | $ | (52.7) | | | $ | 200.6 | |
(1) As of March 31, 2021, there was $1.00 billion remaining under our $8.00 billion share repurchase program authorized in June 2018.
See notes to consolidated condensed financial statements.
Consolidated Condensed Statements of Cash Flows
(Unaudited)
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions)
| | | | Nine Months Ended
September 30, | | Three Months Ended March 31, |
| | 2017 | | 2016 | | 2021 | | 2020 |
| Cash Flows from Operating Activities | | Cash Flows from Operating Activities | |
| Net income | $ | 1,452.8 |
| | $ | 1,965.8 |
| Net income | $ | 1,355.3 | | | $ | 1,456.5 | |
| Adjustments to Reconcile Net Income to Cash Flows from Operating Activities: | | | | Adjustments to Reconcile Net Income to Cash Flows from Operating Activities: | |
| | Depreciation and amortization | 1,155.4 |
| | 1,152.0 |
| Depreciation and amortization | 350.3 | | | 273.6 | |
| Change in deferred income taxes | 151.7 |
| | 350.8 |
| Change in deferred income taxes | (119.1) | | | 11.2 | |
| | Stock-based compensation expense | 209.1 |
| | 188.5 |
| Stock-based compensation expense | 85.5 | | | 71.8 | |
| Acquired in-process research and development | 1,062.6 |
| | — |
| |
| Other changes in operating assets and liabilities, net of acquisitions | (525.2 | ) | | (1,110.8 | ) | |
| | Net investment gains | | Net investment gains | (302.2) | | | (186.7) | |
| Acquired in-process research and development (Note 3) | | Acquired in-process research and development (Note 3) | 299.3 | | | 52.3 | |
| Other changes in operating assets and liabilities, net of acquisitions and divestitures | | Other changes in operating assets and liabilities, net of acquisitions and divestitures | (102.8) | | | (1,408.1) | |
| Other non-cash operating activities, net | 365.7 |
| | 298.2 |
| Other non-cash operating activities, net | 131.1 | | | 111.8 | |
| Net Cash Provided by Operating Activities | 3,872.1 |
| | 2,844.5 |
| Net Cash Provided by Operating Activities | 1,697.4 | | | 382.4 | |
| Cash Flows from Investing Activities | | | | Cash Flows from Investing Activities | |
| Net purchases of property and equipment | (633.3 | ) | | (627.2 | ) | Net purchases of property and equipment | (300.3) | | | (258.3) | |
| Proceeds from sales and maturities of short-term investments | 2,320.2 |
| | 1,245.9 |
| Proceeds from sales and maturities of short-term investments | 4.0 | | | 36.8 | |
| Purchases of short-term investments | (2,973.8 | ) | | (425.7 | ) | Purchases of short-term investments | (19.4) | | | 0 | |
| Proceeds from sales of noncurrent investments | 1,686.9 |
| | 1,606.8 |
| Proceeds from sales of noncurrent investments | 284.8 | | | 54.5 | |
| Purchases of noncurrent investments | (3,739.6 | ) | | (3,640.7 | ) | Purchases of noncurrent investments | (291.5) | | | (83.0) | |
| Cash paid for acquisitions, net of cash acquired (Note 3) | (882.1 | ) | | (45.0 | ) | Cash paid for acquisitions, net of cash acquired (Note 3) | (747.4) | | | (849.3) | |
| Purchase of in-process research and development (Note 3) | (1,036.8 | ) | | — |
| |
| | Purchases of in-process research and development | | Purchases of in-process research and development | (191.8) | | | (13.0) | |
| Other investing activities, net | (178.0 | ) | | (75.1 | ) | Other investing activities, net | (21.9) | | | 51.4 | |
| Net Cash Used for Investing Activities | (5,436.5 | ) | | (1,961.0 | ) | Net Cash Used for Investing Activities | (1,283.5) | | | (1,060.9) | |
| Cash Flows from Financing Activities | | | | Cash Flows from Financing Activities | |
| Dividends paid | (1,643.8 | ) | | (1,617.4 | ) | Dividends paid | (774.8) | | | (671.3) | |
| Net change in short-term borrowings | 1,226.8 |
| | (1.7 | ) | Net change in short-term borrowings | (3.7) | | | 1,748.7 | |
| Proceeds from issuance of long-term debt | 2,232.0 |
| | 1,206.6 |
| |
| | Repayments of long-term debt | (630.6 | ) | | (0.2 | ) | Repayments of long-term debt | 0 | | | (276.3) | |
| Purchases of common stock | (199.9 | ) | | (300.1 | ) | Purchases of common stock | 0 | | | (500.0) | |
| | Other financing activities, net | (299.6 | ) | | (232.2 | ) | Other financing activities, net | (279.9) | | | (194.4) | |
| Net Cash Provided by (Used for) Financing Activities | 684.9 |
| | (945.0 | ) | |
| Net Cash (Used for) Provided by Financing Activities | | Net Cash (Used for) Provided by Financing Activities | (1,058.4) | | | 106.7 | |
| Effect of exchange rate changes on cash and cash equivalents | 21.7 |
| | (115.9 | ) | Effect of exchange rate changes on cash and cash equivalents | (10.2) | | | (66.7) | |
| | | | | | |
| Net decrease in cash and cash equivalents | (857.8 | ) | | (177.4 | ) | Net decrease in cash and cash equivalents | (654.7) | | | (638.5) | |
| Cash and cash equivalents at January 1 | 4,582.1 |
| | 3,666.4 |
| Cash and cash equivalents at January 1 | 3,657.1 | | | 2,337.5 | |
| Cash and Cash Equivalents at September 30 | $ | 3,724.3 |
| | $ | 3,489.0 |
| |
| Cash and Cash Equivalents at March 31 | | Cash and Cash Equivalents at March 31 | $ | 3,002.4 | | | $ | 1,699.0 | |
See notes to consolidated condensed financial statements.
Notes to Consolidated Condensed Financial Statements
(Tables present dollars in millions, except per-share data)
Note 1: Basis of Presentation
We have prepared the accompanying unaudited consolidated condensed financial statements in accordance with the requirements of Form 10-Q and, therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States (GAAP). In our opinion, the consolidated condensed financial statements reflect all adjustments (including those that are normal and recurring) that are necessary for a fair presentation of the results of operations for the periods shown. In preparing financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from those estimates.
The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2016.2020. We issue our financial statements by filing them with the Securities and Exchange Commission and have evaluated subsequent events up to the time of the filing. Certain reclassifications have been made to prior periods in the consolidated condensed financial statements and accompanying notes to conform with the current presentation. These reclassifications include $110.4 million that increased net cash provided by operating activities and increased net cash used for financing activities on the consolidated condensed statementsfiling of cash flows as a result of our adoption in the fourth quarter of 2016 of Accounting Standards Update 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting as discussed in our Annualthis Quarterly Report on Form 10-K for the year ended December 31, 2016.10-Q.
All per-share amounts, unless otherwise noted in the footnotes, are presented on a diluted basis, that is, based on the weighted-average number of outstanding common shares outstanding plus the effect of incremental shares from our stock-based compensation programs.
We operate as a single operating segment engaged in the discovery, development, manufacturing, marketing, and sales of pharmaceutical products worldwide. A global research and development organization and a supply chain organization are responsible for the discovery, development, manufacturing, and supply of our products. Regional commercial organizations market, distribute, and sell the products. The business is also supported by global corporate staff functions. Our determination that we operate as a single segment is consistent with the financial information regularly reviewed by the chief operating decision maker for purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting for future periods.
Note 2: Implementation of New Financial Accounting PronouncementsRevenue
The following table providessummarizes our revenue recognized in our consolidated condensed statements of operations:
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| | 2021 | | 2020 | | | | |
| Net product revenue | $ | 6,320.0 | | | $ | 5,403.5 | | | | | |
Collaboration and other revenue (1) | 485.6 | | | 456.3 | | | | | |
| Revenue | $ | 6,805.6 | | | $ | 5,859.8 | | | | | |
(1) Collaboration and other revenue associated with prior period transfers of intellectual property was $43.0 million and $35.4 million during the three months ended March 31, 2021 and 2020, respectively.
We recognize revenue primarily from two different types of contracts, product sales to customers (net product revenue) and collaborations and other arrangements. Revenue recognized from collaborations and other arrangements includes our share of profits from the collaboration, as well as royalties, upfront and milestone payments we receive under these types of contracts. See Note 4 for additional information related to certain of our collaborations and other arrangements. Collaboration and other revenue disclosed above includes the revenue from the Jardiance® andTrajenta® families of products resulting from our collaboration with Boehringer Ingelheim discussed in Note 4. Substantially all of the remainder of collaboration and other revenue is related to contracts accounted for as contracts with customers.
Adjustments to Revenue
Adjustments to increase revenue recognized as a brief descriptionresult of accounting standards thatchanges in estimates for our most significant United States (U.S.) sales returns, rebates, and discounts liability balances for products shipped in previous periods were less than 2 percent of U.S. revenue during the three months ended March 31, 2021 and 2020.
Contract Liabilities
Our contract liabilities result from arrangements where we have received payment in advance of performance under the contract and do not yet been adoptedinclude sales returns, rebates, and could have adiscounts. Changes in contract liabilities are generally due to either receipt of additional advance payments or our performance under the contract.
The following table summarizes contract liability balances:
| | | | | | | | | | | |
| | March 31, 2021 | | December 31, 2020 |
| Contract liabilities | $ | 346.6 | | | $ | 276.8 | |
During the three months ended March 31, 2021 and 2020, revenue recognized from contract liabilities as of the beginning of the respective year was not material. Revenue expected to be recognized in the future from contract liabilities as the related performance obligations are satisfied is not expected to be material effect on our financial statements:in any one year.
|
| | | | | | |
Standard | | Description | | Effective Date | | Effect on the financial statements or other significant matters |
Accounting Standards Update 2014-09 and various other related updates, Disaggregation of Revenue from Contracts with Customers
| | This standard will replace existing revenue recognition standards and will require entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity can apply the new revenue standard retrospectively to each prior reporting period presented or with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings. We plan to use the latter approach. | | This standard is effective January 1, 2018, and we will adopt on that date. | | We are in the process of completing our evaluation of the impact of adopting the standard. We have identified two revenue streams from our contracts with customers: 1) product sales, which represented 96 percent of our 2016 consolidated revenue and 2) licensing and other arrangements, which represented 4 percent of our 2016 consolidated revenue.
Our evaluation of our contracts for product sales is substantially complete and, based upon the results of our work to date we currently do not expect the application of the new standard to these contracts to have a material impact to our consolidated statements of operations or balance sheets either at initial implementation or on an ongoing basis.
While we have completed most of our reviews of arrangements in which we have licensed or sold intellectual property, we are not yet able to estimate the anticipated impact to our consolidated financial statements from the application of the new standard to these arrangements as we continue to interpret and apply the principles in the new standard to our arrangements.
We are also evaluating the new disclosures required by the standard to determine what additional information will need to be disclosed.
|
Accounting Standards Update 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities
| | This standard will require entities to recognize changes in the fair value of equity investments with readily determinable fair values in net income (except for investments accounted for under the equity method of accounting or those that result in consolidation of the investee). An entity should apply the new standard through a cumulative effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. | | This standard is effective January 1, 2018, and we will adopt on that date.
| | We are unable to estimate the impact of adopting this standard as the significance of the impact will depend upon our equity investments as of the date of adoption. |
The following table summarizes revenue by product for the three months ended March 31, 2021 and 2020:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| | 2021 | | 2020 |
| U.S. | Outside U.S. | Total | | U.S. | Outside U.S. | Total |
| Revenue—to unaffiliated customers: | | | | | | | |
| Diabetes: | | | | | | | |
Trulicity® | $ | 1,116.8 | | $ | 335.7 | | $ | 1,452.4 | | | $ | 929.5 | | $ | 299.9 | | $ | 1,229.4 | |
Humalog® (1) | 332.7 | | 284.4 | | 617.0 | | | 398.6 | | 297.2 | | 695.8 | |
Humulin® | 219.0 | | 102.7 | | 321.7 | | | 214.1 | | 101.5 | | 315.7 | |
Jardiance (2) | 151.2 | | 160.8 | | 312.0�� | | | 144.6 | | 122.9 | | 267.5 | |
Basaglar® | 175.2 | | 71.4 | | 246.6 | | | 230.4 | | 73.3 | | 303.7 | |
| Other Diabetes | 66.3 | | 94.9 | | 161.4 | | | 74.0 | | 82.9 | | 156.8 | |
| Total Diabetes | 2,061.2 | | 1,049.9 | | 3,111.1 | | | 1,991.2 | | 977.7 | | 2,968.9 | |
| | | | | | | |
| Oncology: | | | | | | | |
Alimta® | 261.1 | | 297.8 | | 559.0 | | | 324.2 | | 235.8 | | 560.1 | |
Verzenio® | 172.8 | | 96.2 | | 269.0 | | | 129.4 | | 58.6 | | 188.0 | |
Cyramza® | 80.2 | | 160.3 | | 240.5 | | | 89.1 | | 149.9 | | 239.0 | |
Erbitux® | 107.9 | | 14.4 | | 122.4 | | | 117.8 | | 13.0 | | 130.8 | |
Tyvyt® | 0 | | 109.7 | | 109.7 | | | 0 | | 57.4 | | 57.4 | |
| Other Oncology | 20.5 | | 51.3 | | 71.6 | | | (2.6) | | 28.9 | | 26.2 | |
| Total Oncology | 642.5 | | 729.7 | | 1,372.2 | | | 657.9 | | 543.6 | | 1,201.5 | |
| | | | | | | |
| Immunology: | | | | | | | |
Taltz® | 249.6 | | 153.6 | | 403.2 | | | 327.5 | | 116.0 | | 443.5 | |
Olumiant® | 24.7 | | 169.1 | | 193.8 | | | 11.3 | | 128.4 | | 139.7 | |
| Other Immunology | 10.5 | | 6.4 | | 16.9 | | | 2.6 | | 0 | | 2.6 | |
| Total Immunology | 284.8 | | 329.1 | | 613.9 | | | 341.4 | | 244.4 | | 585.8 | |
| | | | | | | |
| Neuroscience: | | | | | | | |
Cymbalta® | 11.0 | | 165.7 | | 176.6 | | | 11.6 | | 198.8 | | 210.4 | |
Emgality® | 101.5 | | 18.0 | | 119.5 | | | 67.3 | | 6.7 | | 74.0 | |
Zyprexa® | 6.9 | | 88.9 | | 95.8 | | | 11.2 | | 87.2 | | 98.4 | |
| | | | | | | |
| Other Neuroscience | 22.3 | | 51.1 | | 73.5 | | | 20.2 | | 60.5 | | 80.7 | |
| Total Neuroscience | 141.7 | | 323.7 | | 465.4 | | | 110.3 | | 353.2 | | 463.5 | |
| | | | | | | |
| | | | | | | |
| Other: | | | | | | | |
COVID-19 Antibodies (3) | 650.6 | | 159.5 | | 810.1 | | | 0 | | 0 | | 0 | |
Forteo® | 97.7 | | 100.8 | | 198.5 | | | 122.5 | | 149.8 | | 272.4 | |
Cialis® | 8.6 | | 118.1 | | 126.8 | | | 26.1 | | 167.0 | | 193.0 | |
| Other | 54.2 | | 53.4 | | 107.5 | | | 79.4 | | 95.3 | | 174.7 | |
| Total Other | 811.1 | | 431.8 | | 1,242.9 | | | 228.0 | | 412.1 | | 640.1 | |
| Revenue | $ | 3,941.3 | | $ | 2,864.3 | | $ | 6,805.6 | | | $ | 3,328.8 | | $ | 2,531.0 | | $ | 5,859.8 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Numbers may not add due to rounding.
(1) Humalog revenue includes insulin lispro.
(2) Jardiance revenue includes Glyxambi®,Synjardy®,and Trijardy® XR.
(3) COVID-19 antibodies include sales for bamlanivimab administered alone as well as sales for bamlanivimab and etesevimab administered together and were made pursuant to Emergency Use Authorizations (EUAs).
|
| | | | | | |
Standard | | Description | | Effective Date | | Effect on the financial statements or other significant matters |
Accounting Standards Update 2016-02, Leases
| | This standard was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities, including leases classified as operating leases under current GAAP, on the balance sheet and requiring additional disclosures about leasing arrangements. This standard requires a modified retrospective approach to adoption. | | This standard is effective January 1, 2019, with early adoption permitted. We intend to adopt this standard on January 1, 2019. | | We are in the process of determining the impact on our consolidated financial statements. |
Accounting Standards Update 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory
| | This standard will require entities to recognize the income tax consequences of intra-entity transfers of assets other than inventory at the time of transfer. This standard requires a modified
retrospective approach to adoption.
| | This standard is effective January 1, 2018, and we will adopt on that date. | | We are continuing to assess the potential impact of this standard on our consolidated financial statements and currently estimate that the cumulative effect of initially applying the standard would result in an increase to deferred tax assets and the opening balance of retained earnings of approximately $2 billion on January 1, 2018. This estimate is subject to change based upon intra-entity transfers of assets other than inventory over the remainder of 2017 and ongoing assessments of the future deductibility and realizability of the deferred tax assets that would result from implementation. |
Accounting Standards Update 2017-07, Compensation-Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
| | This standard was issued to improve the transparency and comparability among organizations by requiring entities to separate their net periodic pension cost and net periodic postretirement benefit cost into a service cost component and other components. Currently, the costs of the other components along with the service cost component are classified based upon the function of the employee. This standard will require entities to classify the service cost component in the same financial statement line item or items as other compensation costs arising from services rendered by pertinent employees. The other components of net benefit cost will be presented separately from the line items that include the service cost component. When applicable, the service cost component will be the only component eligible for capitalization. An entity should apply the new standard retrospectively for the classification of the service cost and other components and prospectively for the capitalization of the service cost component. | | This standard is effective January 1, 2018, and we will adopt this standard on that date. | | Upon adoption of this standard, pension and postretirement benefit cost components other than service costs will be presented in other–net, (income) expense. We do not expect the application of the new standard to have a material impact on consolidated net income either at initial implementation or on an ongoing basis.The following table summarizes revenue by geographical area:
| | | | | | | | | | | | | | | Three Months Ended March 31, | | | | 2021 | | 2020 | | | | | Revenue—to unaffiliated customers (1): | | | | | | | | | U.S. | $ | 3,941.3 | | | $ | 3,328.8 | | | | | | | Europe | 1,321.2 | | | 1,061.0 | | | | | | | Japan | 571.8 | | | 592.3 | | | | | | | China | 362.2 | | | 267.3 | | | | | | | Other foreign countries | 609.1 | | | 610.4 | | | | | | | Revenue | $ | 6,805.6 | | | $ | 5,859.8 | | | | | |
Numbers may not add due to rounding. (1) Revenue is attributed to the countries based on the location of the customer.
|
Note 3: Acquisitions
OnIn January 3, 2017,2021 and February 2020, we completed the acquisitionacquisitions of Boehringer Ingelheim Vetmedica,Prevail Therapeutics Inc.'s United States (U.S.) feline, canine, (Prevail) and rabies vaccine portfolio and other related assets (BIVIVP). This transaction,Dermira, Inc. (Dermira), respectively. These transactions, as further discussed in this note below in AcquisitionAcquisitions of a Business, wasBusinesses, were accounted for as a business combinationcombinations under the acquisition method of accounting. Under this method, the assets acquired and liabilities assumed were recorded at their respective fair values as of the acquisition date in our consolidated condensed financial statements. The determination of estimated fair value required management to make significant estimates and assumptions. The excess of the purchase price over the fair value of the acquired net assets, where applicable, has been recorded as goodwill. The results of operations of this acquisitionthese acquisitions are included in our consolidated condensed financial statements from the date of acquisition.
In addition to the acquisition of a business, weWe also acquired assets in development in the nine months ended September 30, 2017, which are further discussed in this note below in Asset Acquisitions. Upon each acquisition, the cost allocated to acquired in-process research and development (IPR&D) charges related to these products werewas immediately expensed because the productscompound had no alternative future use. There were acquired IPR&D charges of $205.0We recognized $299.3 million and $1.06 billion for the three and nine months ended September 30, 2017, respectively. There were no$52.3 million of acquired IPR&D charges for the three and nine months ended September 30, 2016.March 31, 2021 and 2020, respectively.
In October 2017, we entered into a global immuno-oncology collaboration agreement with CureVac AG (CureVac), to develop and commercialize up to five potential cancer vaccine products based on CureVac's proprietary RNActive® technology. This transaction is subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions. Subject to the closingAcquisitions of this transaction, CureVac will receive from us an initial payment of $50.0 million. CureVac will also be eligible to receive potential development and commercialization milestones, as well as tiered royalty payments based on future sales. We anticipate recording an acquired IPR&D charge of approximately $50 million upon the closing of the transaction.Businesses
Acquisition of a Business
Boehringer Ingelheim Vetmedica, Inc. Vaccine PortfolioPrevail Acquisition
Overview of Transaction
WeIn January 2021, we acquired BIVIVPall shares of Prevail for a purchase price that included $22.50 per share in cash (or an all-cash transaction for $882.1 million. Underaggregate of $747.4 million, net of cash acquired) plus 1 non-tradable contingent value right (CVR) per share. The CVR entitles Prevail stockholders to up to an additional $4.00 per share in cash (or an aggregate of approximately $160 million) payable, subject to certain terms and conditions, upon the termsfirst regulatory approval of a Prevail product in one of the agreement, we acquiredfollowing countries: U.S., Japan, United Kingdom, Germany, France, Italy or Spain. To achieve the full value of the CVR, such regulatory approval must occur by December 31, 2024. If such regulatory approval occurs after December 31, 2024, the value of the CVR will be reduced by approximately 8.3 cents per month until December 1, 2028, at which point the CVR will expire.
Prevail is a manufacturing and researchbiotechnology company developing potentially disease-modifying AAV9-based gene therapies for patients with neurodegenerative diseases. The acquisition establishes a new modality for drug discovery and development, site,extending our research efforts through the creation of a gene therapy program that will be anchored by Prevail’s portfolio of assets. Prevail’s lead gene therapies in clinical development are PR001 for patients with Parkinson’s disease with GBA1 mutations and neuronopathic Gaucher disease and PR006 for patients with frontotemporal dementia with GRN mutations. Both PR001 and PR006 were granted Fast Track designation from the U.S. vaccine portfolio, including vaccines used for the treatment of bordetella, Lyme disease, rabies,Food and parvovirus, among others.Drug Administration (FDA).
Assets Acquired and Liabilities Assumed
Our access to BIVIVPPrevail information was limited prior to the acquisition. As a consequence, we are in the process of determining the fair values and tax bases of a significant portion of the assets acquired and liabilities assumed, including the identification and valuation of intangible assets inventory, property and equipment, accrued expenses, and tax exposures. The final determination of these amounts will be completed as soon as possible but no later than one year from the acquisition date. The final determination may result in asset and liability fair values and tax bases that differ from the preliminary estimates and require changes to the preliminary amounts recognized.
The following table summarizes the preliminary amounts recognized for assets acquired and liabilities assumed as of the acquisition date: |
| | | |
| Estimated Fair Value at January 3, 2017 |
| Inventories | $ | 108.6 |
|
Marketed products (1) | 298.0 |
|
| Property and equipment | 148.2 |
|
| Other assets and liabilities - net | 5.2 |
|
| Total identifiable net assets | 560.0 |
|
Goodwill (2) | 322.1 |
|
| Total consideration transferred - net of cash acquired | $ | 882.1 |
|
| | | | | |
| Estimated Fair Value at January 22, 2021 | |
| Cash | $ | 90.5 | |
Acquired IPR&D(1) | 834.0 |
Goodwill(2) | 111.0 |
| Deferred tax liabilities | (100.2) | |
| Other assets and liabilities, net | (31.5) | |
| Acquisition date fair value of consideration transferred | 903.8 |
| Less: | |
| Cash acquired | (90.5) | |
Fair value of CVR liability(3) | (65.9) | |
| Cash paid, net of cash acquired | $ | 747.4 | |
(1) These intangible assets, which are being amortizedAcquired IPR&D intangibles primarily relate to cost of sales on a straight-line basis over their estimated useful lives, were expected to have a weighted average useful life of 10 years.PR001.
(2) The goodwill recognized from this acquisition is attributable primarily to expected synergies from combining the operations of BIVIVP with our legacy animal health business, future unidentified projects and products, and the assembled workforce of BIVIVP. We anticipate that the goodwill associated with this acquisition will benot deductible for tax purposes.
Our(3) See Note 6 for a discussion on the estimation of the CVR liability.
Pro forma information has not been included as this acquisition did not have a material impact on our consolidated condensed statementstatements of operations for the three and nine months ended September 30, 2017, includes BIVIVP revenueMarch 31, 2021 and 2020.
Dermira Acquisition
Overview of $61.2Transaction
In February 2020, we acquired all shares of Dermira for a purchase price of approximately $849.3 million, net of cash acquired. Under the terms of the agreement, we acquired lebrikizumab, a novel, investigational, monoclonal antibody being evaluated for the treatment of moderate-to-severe atopic dermatitis. Lebrikizumab was granted Fast Track designation from the FDA. We also acquired Qbrexza® (glycopyrronium) cloth, a medicated cloth approved by the FDA for the topical treatment of primary axillary hyperhidrosis (uncontrolled excessive underarm sweating). During the three months ended March 31, 2021, we decided to sell the rights to Qbrexza. See Note 5 for additional information.
Assets Acquired and Liabilities Assumed
The fair values recognized related to the assets acquired and liabilities assumed in this acquisition included goodwill of $86.8 million, other intangibles of $1.20 billion primarily related to lebrikizumab, deferred income tax liabilities of $49.5 million, and $180.2long-term debt of $375.5 million. After the acquisition, we repaid $276.2 million respectively. BIVIVP has been integrated intoof long-term debt assumed as part of our animal health products segment and, as a resultacquisition of these integration efforts, certain parts of the animal health business were operating on a combined basis during these periods, and we could not distinguish the operations between BIVIVP and our legacy animal health products business.Dermira.
Asset Acquisitions
The following table and narrative summarizes our asset acquisitions during the ninethree months ended September 30, 2017. There was no asset acquisition which resulted in acquired IPR&D expense during the nine months ended September 30, 2016.March 31, 2021 and 2020: |
| | | | | | | | |
| Counterparty | Compound(s) or Therapy | Acquisition Month | | Phase of Development (1) | | Acquired IPR&D Expense |
| CoLucid Pharmaceuticals, Inc. (CoLucid) | Oral therapy for the acute treatment of migraine - lasmiditan | March 2017 | | Phase III | | $ | 857.6 |
|
| KeyBioscience AG (KeyBioscience) | Multiple molecules for treatment of metabolic disorders | July 2017 | | Phase II | | $ | 55.0 |
|
| Nektar Therapeutics (Nektar) | Immunological therapy - NKTR-358 | August 2017 | | Phase I | | $ | 150.0 |
|
| | | | | | | | | | | | | | | | | | | | |
| Counterparty | Compound(s) or Therapy | Acquisition Month | | Phase of Development (1) | | Acquired IPR&D Expense |
| Precision Biosciences, Inc. | Research and development of potential in vivo therapies for genetic disorders | January 2021 | | Pre-clinical | | $ | 107.8 | |
| Merus N.V. | CD3-engaging T-cell re-directing bispecific antibodies for the potential treatment of cancer | January 2021 | | Pre-clinical | | 46.5 | |
| Asahi Kasei Pharma Corporation | AK1780, an orally bioavailable P2X7 receptor antagonist for the potential treatment of chronic pain conditions | January 2021 | | Phase I | | 20.0 | |
| Rigel Pharmaceuticals, Inc. | R552, a receptor-interacting serine/threonine-protein kinase 1 (RIPK1) inhibitor, for the potential treatment of autoimmune and inflammatory diseases | March 2021 | | Phase I | | 125.0 | |
| | | | | | |
| Sitryx Therapeutics Limited | Pre-clinical targets that could lead to potential new medicines for autoimmune diseases | March 2020 | | Pre-clinical | | 52.3 | |
AbCellera Biologics Inc. (AbCellera)(2) | Neutralizing antibodies for the treatment and prevention of COVID-19 | March 2020 | | Pre-clinical | | 25.0 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
(1)The phase of development presented is as of the date of the arrangement and represents the phase of development of the most advanced asset acquired, where applicable.
(2) We recognized an acquired IPR&D expense of $25.0 million in May 2020 upon closing of the transaction.
In connection with thethese arrangements, described herein, our partners may be entitled to future royalties and/or commercial milestones based on sales should these products be approved for commercialization and/or milestones based on the successful progress of the compounds through the development process.
We acquired lasmiditan by acquiring CoLucid. Under the terms of the agreement, we acquired all shares of CoLucid for a cash purchase price of $831.8 million, net of cash acquired, plus net accrued liabilities assumed of $25.8 million. Substantially all of the value of CoLucid was related to lasmiditan, its only significant asset. The acquired IPR&D expense is not tax deductible.
Our collaboration agreement with KeyBioscience provides us with access to KeyBioscience's Dual Amylin Calcitonin Receptor Agonists (DACRAs), a potential new class of treatments for metabolic disorders such as type 2 diabetes, along with multiple molecules. Prior to entering into the agreement, KeyBioscience had initiated Phase II development of the lead molecule. The other assets included in the collaboration range from pre-clinical to Phase I development. Under the terms of the agreement, we receive worldwide rights to develop and commercialize these molecules.
Our collaboration with Nektar is to co-develop Nektar's compound which has the potential to treat a number of autoimmune and other chronic inflammatory conditions. Under the terms of the agreement, we are responsible for all costs of global commercialization. Nektar will have an option to co-promote in the U.S. under certain conditions.
Note 4: Collaborations and Other Arrangements
We often enter into collaborative and other similar arrangements to develop and commercialize drug candidates. Collaborative activities may include research and development, marketing and selling (including promotional activities and physician detailing), manufacturing, and distribution. These arrangements often require milestone andas well as royalty or profit-share payments, contingent upon the occurrence of certain future events linked to the success of the asset in development, as well as expense reimbursements from or payments to the collaboration partner. Elements within a collaboration are separated into individual unitsSee Note 2 for amounts of accounting if they have standalone value from other elements within the arrangement. In these situations, the arrangement consideration is allocated to the elements on a relative selling price basis. Revenue related to products we sell pursuant to these arrangements are included in net product revenue, while other sources of revenue (e.g., royalties and profit-sharing due from our partner) are included in collaboration and other revenue.
The following table summarizes our collaboration and other revenue which is included in revenue in the consolidated condensed statementsrecognized from these types of operations: |
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Collaboration and other revenue | $ | 334.2 |
| | $ | 216.5 |
| | $ | 869.1 |
| | $ | 607.3 |
|
Operating expenses for costs incurred pursuant to these arrangements are reported in their respective expense line item, net of any payments due to or reimbursements due from our collaboration partners, with such reimbursements being recognized at the time the party becomes obligated to pay. Each collaboration is unique in nature, and our more significant arrangements are discussed below.
Boehringer Ingelheim Diabetes Collaboration
We and Boehringer Ingelheim have a global agreement to jointly develop and commercialize a portfolio of diabetes compounds. Currently included in the collaboration are Boehringer Ingelheim’s oral diabetes products: Jardiance, Glyxambi, Synjardy, Trijardy® XR, Trajenta,™, Jentadueto®, Jardiance®, Glyxambi®, and SynjardyJentadueto®, as well as our basal insulin: Basaglar®.insulin, Basaglar. Glyxambi, Synjardy, and Trijardy XR are included in the Jardiance product family. Jentadueto is included in the Trajenta product family.
The table below summarizes
the net amount of significant
regulatory and commercialization events and milestones (deferred) capitalized
at March 31, 2021 and December 31, 2020 for the compounds included in this collaboration:
| | | | | Year Launched | | Milestones (Deferred) Capitalized (1) | | Net Milestones (Deferred) Capitalized (1) as of: |
| Product Family | | U.S. | | Europe | | Japan | | Year | Amount | Product Family | March 31, 2021 | December 31, 2020 |
Jardiance (2) | | Jardiance (2) | $ | 151.2 | | $ | 156.2 | |
Trajenta (2)(3) | | 2011 | | 2011 | | 2011 | | Cumulative (4) - all prior to 2016 | $ | 446.4 |
| 108.1 | | 114.6 | |
Jardiance (3) | | 2014 | | 2014 | | 2015 | | Cumulative (4) - all prior to 2016 | 299.5 |
| |
| Basaglar | | 2016 | | 2015 | | 2015 | | 2017 | — |
| Basaglar | (163.3) | | (168.0) | |
| | | 2016 | (187.5 | ) | |
| | | Cumulative (4) | (250.0 | ) | |
(1) In connection with the regulatory approvals of Basaglar in the U.S., Europe, and Japan, milestone payments received were recorded as deferred revenuecontract liabilities and are being amortized through the term of the collaboration (2029) to collaboration and other revenue. In connection with the regulatory approvals of TrajentaJardiance and Jardiance,Trajenta, milestone payments made were capitalized as intangible assets and are being amortized to cost of sales.
(2) Jentadueto is included insales through the Trajenta familyterm of product results.
(3) Glyxambi and Synjardyare included in the Jardiance family of product results.
(4) The cumulative amountcollaboration. This represents the total initial amounts that werehave been (deferred) or capitalized from the start of this collaboration through the end of the reporting period.period, net of amount amortized.
(2) The collaboration agreement with Boehringer Ingelheim for Jardiance ends upon expiration of the compound patent and any supplementary protection certificates or extensions thereto.
(3) The collaboration agreement with Boehringer Ingelheim for Trajenta ends upon expiration of the compound patent and any supplementary protection certificates or extensions thereto.
InFor the most significant markets,Jardiance product family, we and Boehringer Ingelheim share equally the ongoing development costs,and commercialization costs and agreed upon gross margin for any product resulting fromin the collaboration. We record our portion of the gross margin associated with Boehringer Ingelheim's compounds as collaborationmost significant markets, and other revenue. We record our sales of Basaglar to third parties as net product revenue with the payments made to Boehringer Ingelheim for their portion of the gross margin recorded as cost of sales. For all compounds under this collaboration, we record our portion of the development and commercialization costs as research and development expense and marketing, selling, and administrative expense, respectively. Each companyWe receive a royalty on net sales of Boehringer Ingelheim's products in the most significant markets and recognize the royalty as collaboration and other revenue. Boehringer Ingelheim is entitled to potential performance payments depending on the net sales of the molecules it contributes to the collaboration. These performance payments result in the owner of the molecule retaining a greater share of the agreed upon gross margin of that product. Subject to achieving these thresholds, in a given period,Jardiance product family; therefore, our reported revenue for Trajenta and Jardiance may be reduced by any potential performance payments we make related to these products. Similarly, performance payments we may receivethis product family. Beginning January 1, 2021, the royalty received by us related to the Jardiance product family may also be increased or decreased depending on whether net sales for this product family exceed or fall below certain thresholds. We pay to Boehringer Ingelheim a royalty on net sales for Basaglar effectively reducein the U.S. We record our sales of Basaglar to third parties as net product revenue with the royalty payments made to Boehringer Ingelheim's share of the gross margin, which reduces ourIngelheim recorded as cost of sales.
The following table summarizes our net product revenue recognized with respect to Basaglar and collaboration and other revenue recognized with respect to the TrajentaJardiance and JardianceTrajenta families of products and net product revenue recognized with respect to Basaglar:products: | | | | | | | | | | | | Three Months Ended March 31, | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
| | 2017 | | 2016 | | 2017 | | 2016 | |
| Trajenta | $ | 153.3 |
| | $ | 115.4 |
| | $ | 408.2 |
| | $ | 330.8 |
| |
| Product Family | | Product Family | 2021 | | 2020 | |
| Jardiance | 127.2 |
| | 47.5 |
| | 304.3 |
| | 125.8 |
| Jardiance | $ | 312.0 | | | $ | 267.5 | | |
| Basaglar | 145.7 |
| | 19.4 |
| | 278.3 |
| | 46.6 |
| Basaglar | 246.6 | | | 303.7 | | |
| Trajenta | | Trajenta | 94.6 | | | 93.2 | | |
Erbitux®
We have several collaborations with respect to Erbitux. The most significant collaborations are or, where applicable, were in Japan, and prior to the transfer of commercialization rights in the fourth quarter of 2015, the U.S. and Canada (Bristol-Myers Squibb Company); and worldwide except the U.S. and Canada (Merck KGaA). Certain rights to Erbitux outside the U.S. and Canada (collectively, North America) will remain with Merck KGaA (Merck) upon expiration of that agreement.
The following table summarizes our revenue recognized with respect to Erbitux: |
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Net product revenue | $ | 137.6 |
| | $ | 155.9 |
| | $ | 403.3 |
| | $ | 455.8 |
|
| Collaboration and other revenue | 25.9 |
| | 28.7 |
| | 73.7 |
| | 77.5 |
|
| Revenue | $ | 163.5 |
|
| $ | 184.6 |
|
| $ | 477.0 |
|
| $ | 533.3 |
|
Bristol-Myers Squibb Company
Pursuant to commercial agreements with Bristol-Myers Squibb Company and E.R. Squibb (collectively, BMS), we had been co-developing Erbitux in North America exclusively with BMS. On October 1, 2015, BMS transferred their commercialization rights to us with respect to Erbitux in North America pursuant to a modification of our existing arrangement, and we began selling Erbitux at that time. This modification did not affect our rights with respect to Erbitux in other jurisdictions. In connection with the modification of terms, we provide consideration to BMS based upon a tiered percentage of net sales of Erbitux in North America estimated to average 38 percent through September 2018. The transfer of the commercialization rights was accounted for as an acquisition of a business. The consideration to be paid to BMS was accounted for as contingent consideration liability. See Note 6 for discussion regarding the estimation of this liability.
Merck KGaA
A development and license agreement grants Merck exclusive rights to market Erbitux outside of North America until December 2018. A separate agreement grants co-exclusive rights among Merck, BMS, and us in Japan and expires in 2032. This agreement was amended in 2015 to grant Merck exclusive commercialization rights in Japan but did not result in any changes to our rights.
Merck manufactures Erbitux for supply in its territory as well as for Japan. We receive a royalty on the sales of Erbitux outside of North America, which is included in collaboration and other revenue as the underlying sales occur. Royalties due to third parties are recorded as a reduction of collaboration and other revenue, net of any royalty reimbursements due from third parties.
Effient®
We are in a collaborative arrangement with Daiichi Sankyo Co., Ltd. (Daiichi Sankyo) to develop, market, and promote Effient. Marketing rights for major territories are shown below. We and Daiichi Sankyo each have exclusive marketing rights in certain other territories.
|
| | | | |
Territory | | Marketing Rights | | Selling Party |
U.S. | | Co-promotion | | Lilly |
Major European markets | | Co-promotion | | Pre-January 1, 2016, Lilly
Post-January 1, 2016, Daiichi Sankyo
|
Japan | | Exclusive | | Daiichi Sankyo |
Beginning January 1, 2016, while major European markets continue to be a co-promotion territory under the terms of our arrangement, Daiichi Sankyo exclusively promotes Effient in these markets. The economic results for the major European markets continue to be shared in the same proportion as they were previously.
The parties share approximately 50/50 in the profits, as well as in the costs of development and marketing in the co-promotion territories. A third party manufactures bulk product, and we continue to produce the finished product for our exclusive and co-promotion territories, including the major European markets.
We record net product revenue in our exclusive and co-promotion territories where we are the selling party. Profit-share payments due to Daiichi Sankyo for co-promotion countries where we are the selling party are recorded as marketing, selling, and administrative expenses. Beginning January 1, 2016, any profit-share payments due to us from Daiichi Sankyo for the major European markets are recorded as collaboration and other revenue. We also record our share of the expenses in these co-promotion territories as marketing, selling, and administrative expenses. In our exclusive territories, we pay Daiichi Sankyo a royalty specific to these territories. All royalties due to Daiichi Sankyo and the third-party manufacturer are recorded in cost of sales. Generic versions of Effient launched in the U.S. in the third quarter of 2017.
The following table summarizes our revenue recognized with respect to Effient: |
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Revenue | $ | 55.9 |
| | $ | 127.7 |
| | $ | 326.6 |
| | $ | 394.3 |
|
Olumiant®
We have a worldwide license and collaboration agreement with Incyte Corporation (Incyte), which provides us the development and commercialization rights to its Janus tyrosine kinase (JAK) inhibitor compound, now known as baricitinib (trade name Olumiant)Olumiant (baricitinib), and certain follow-on compounds, for the treatment of inflammatory and autoimmune diseases. Incyte has the right to receive tiered, double-digitdouble digit royalty payments on future global net sales with rates ranging up to 20 percent if the product is successfully commercialized. The agreement provides Incyte with options to co-develop these compounds on an indication-by-indication basis by funding 30 percent of the associated development costs from the initiation of a Phase IIb trial through regulatory approval in exchange for increased tiered royalties ranging up to percentages in the high twenties. Incyte exercised its option to co-develop Olumiant in rheumatoid arthritis in 2010 and psoriatic arthritis and atopic dermatitis in 2017.percent. The agreement calls for payments by us to Incyte associated with certain development, success-based regulatory, and sales-based milestones. In 2020, the first quarteragreement was amended to include the treatment of 2016, we incurred milestone-related expensesCOVID-19, with Incyte obtaining the right to receive an additional royalty ranging up to the low teens on global net sales for the treatment of $55.0 million inCOVID-19 that exceed a specified aggregate global net sales threshold.
In connection with the regulatory submissionsapprovals of Olumiant in the U.S., Europe, and Europe, whichJapan, milestone payments of $210.0 million were recorded as research and development expense. We capitalized as intangible assets $65.0 million in the first quarteras of 2017March 31, 2021 and $15.0 million in the third quarter of 2017 of milestones in connection with regulatory approvals in EuropeDecember 31, 2020 and Japan, respectively, which are being amortized to cost of sales overthrough the term of the collaboration. This represents the cumulative amounts that have been capitalized from the start of this collaboration through the end of each reporting period.
As of September 30, 2017,March 31, 2021, Incyte is eligible to receive up to $280.0$100.0 million of additional payments from us contingent upon certain development and success-based regulatory milestones, of which $100.0 million relates to the U.S. regulatory decision for a first indication.milestones. Incyte is also eligible to receive up to $150.0 million of potential sales-based milestones.
We record our sales of Olumiant to third parties as net product revenue with the royalty payments made to Incyte recorded as cost of sales. The following table summarizes our net product revenue recognized with respect to Olumiant:
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2021 | | 2020 | | | | |
| Olumiant | $ | 193.8 | | | $ | 139.7 | | | | | |
COVID-19 antibodies
In 2020, we entered into a worldwide license and collaboration agreement with AbCellera to co-develop therapeutic antibodies for the potential prevention and treatment of COVID-19, including bamlanivimab, for which we hold development and commercialization rights. AbCellera has the right to receive tiered royalty payments on global net sales of bamlanivimab with percentages ranging in the mid-teens to mid-twenties. Royalty payments made to AbCellera are recorded as cost of sales.
In 2020, we entered into a license and collaboration agreement with Shanghai Junshi Biosciences Co., Ltd. (Junshi Biosciences) to co-develop therapeutic antibodies for the potential prevention and treatment of COVID-19, including etesevimab, for which we hold development and commercialization rights outside of Greater China (which includes mainland China, Hong Kong and Macau Special Administrative Regions and Taiwan) and for which Junshi Biosciences maintains all rights in Greater China. Junshi Biosciences has the right to receive royalty payments in the mid-teens on our net sales of etesevimab. Junshi Biosciences also has the right to receive certain development, success-based regulatory and sales-based milestones. In connection with the regulatory authorizations of etesevimab (for administration with bamlanivimab) in the U.S. and Europe, milestone payments of $60.0 million were capitalized as intangible assets as of March 31, 2021 and are being amortized to cost of sales over the estimated useful life of etesevimab. As of March 31, 2021, Junshi Biosciences is eligible to receive up to $15.0 million of additional payments contingent upon certain success-based regulatory milestones and up to $120.0 million of potential sales-based milestones.
Pursuant to EUAs, we recognized $810.1 million of net product revenue associated with our sales of our COVID-19 antibodies during the three months ended March 31, 2021.
Tyvyt
We have a collaboration agreement with Innovent Biologics, Inc. (Innovent) to jointly develop and commercialize Tyvyt (sintilimab injection) in China. In 2019, we and Innovent began co-commercializing Tyvyt in China. We record our sales of Tyvyt to third parties as revenue, with payments made to Innovent for its portion of the gross margin reported as cost of sales. We also report as revenue our portion of the gross margin for Tyvyt sales made by Innovent to third parties. Our Tyvyt revenue in China, which is primarily recorded as net product revenue, was $109.7 million and $57.4 million during the three months ended March 31, 2021 and 2020, respectively.
In 2020, we obtained an exclusive license for Tyvyt from Innovent for geographies outside of China. Innovent, with collaboration from us, will pursue the initial registration of Tyvyt in the U.S., and we will pursue initial registration of Tyvyt in other markets and all other subsequent registrations of Tyvyt. We have exclusive commercialization rights outside of China.
As of March 31, 2021, Innovent is eligible to receive up to $825.0 million for geographies outside of China and up to $235.0 million in China in success-based regulatory and sales-based milestones. Innovent is also eligible to receive tiered double digit royalties on net sales for geographies outside of China.
Tanezumab
We have a collaboration agreement with Pfizer Inc. (Pfizer) to jointly develop and globally commercialize tanezumab for the treatment of osteoarthritis pain chronic low back pain and cancer pain. Under the agreement, theThe companies equally share equally the ongoing development costs and, if successful, in the U.S. will co-commercialize and equally share in gross marginsmargin and certain commercialization expenses. FollowingAs a result of an amendment to the agreement in 2020, Pfizer will be responsible for commercialization activities and costs outside the U.S., and we have the right to receive tiered royalties in percentages from the high teens to mid-twenties for net sales in Japan as well as low double digit royalties on annual net sales greater than $150.0 million in all other territories outside of the U.S. Food and Drug Administration's (FDA's) decision in March 2015 to lift the partial clinical hold on tanezumab, certain Phase III trials resumed in July 2015. Upon the FDA's lifting of the partial clinical hold and the decision to continue the collaboration with Pfizer, we paid an upfront fee of $200.0 million, which was expensed as acquired IPR&D.Japan. As of September 30, 2017,March 31, 2021, Pfizer is eligible to receive up to $350.0$147.5 million in success-based regulatory milestones based on current development plans and up to $1.23 billion in a series of sales-based milestones, contingent upon the commercial success of tanezumab.
We have a collaboration agreement with AstraZeneca for the worldwide co-development and co-commercialization of AstraZeneca’s lanabecestat, an oral beta-secretase cleaving enzyme (BACE) inhibitor being investigated for the potential treatment of Alzheimer’s disease. We are responsible for leading development efforts, while AstraZeneca will be responsible for manufacturing efforts. If successful, both parties will take joint responsibility for commercialization. Under the agreement, both parties share equally in the ongoing development costs and, if successful, in gross margins and certain other costs associated with commercialization of the molecule. Lebrikizumab
As a result of our acquisition of Dermira, we have a worldwide licensing agreement with F. Hoffmann-La Roche Ltd and Genentech, Inc. (collectively Roche), which provides us the molecule moving into Phase III testingglobal development and commercialization rights to lebrikizumab. Roche has the right to receive tiered royalty payments on future global net sales ranging in April 2016, we incurred a $100.0 million developmental milestone, which was recorded as research and development expense inpercentages from high single digits to high teens if the second quarter of 2016. In July 2017, as a result of the outcome of an interim analysis, we incurred a $50.0 million developmental milestone, which was recorded as research and development expense in the third quarter of 2017.product is successfully commercialized. As of September 30, 2017, AstraZenecaMarch 31, 2021, Roche is eligible to receive up to $300.0$180.0 million of additional payments from us contingent upon the achievement of certain development and success-based regulatory milestones.milestones and up to $1.03 billion in a series of sales-based milestones, contingent upon the commercial success of lebrikizumab.
As a result of our acquisition of Dermira, we have a license agreement with Almirall, S.A. (Almirall), under which Almirall licensed the rights to develop and commercialize lebrikizumab for the treatment or prevention of dermatology indications, including, but not limited to, atopic dermatitis in Europe. We have the right to receive tiered royalty payments on future net sales in Europe ranging in percentages from low double digits to low twenties if the product is successfully commercialized. As of March 31, 2021, we are eligible to receive additional payments of $85.0 million from Almirall contingent upon the achievement of success-based regulatory milestones and up to $1.25 billion in a series of sales-based milestones, contingent upon the commercial success of lebrikizumab. As of March 31, 2021 and December 31, 2020, $23.3 million and $29.7 million, respectively, were recorded as contract liabilities on the consolidated condensed balance sheet and are expected to be recognized as collaboration and other revenue over the remaining Phase III development period. During the three months ended March 31, 2021 and 2020, milestones received and collaboration and other revenue recognized were not material.
Note 5: Asset Impairment, Restructuring, and Other Special Charges
The components of the charges included in asset impairment, restructuring, and other special charges in our consolidated condensed statements of operations are described below. |
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Severance: | | | | | | | |
| Human pharmaceutical products | $ | 165.7 |
| | $ | — |
| | $ | 277.1 |
| | $ | — |
|
| Animal health products | 5.8 |
| | 8.3 |
| | 62.1 |
| | 37.0 |
|
| Total severance | 171.5 |
| | 8.3 |
| | 339.2 |
| | 37.0 |
|
| Asset impairment and other special charges: | | | | | | | |
| Human pharmaceutical products | 25.0 |
| | — |
| | 25.0 |
| | — |
|
| Animal health products | 210.0 |
| | 37.2 |
| | 306.2 |
| | 197.9 |
|
| Total asset impairment and other special charges | 235.0 |
| | 37.2 |
| | 331.2 |
| | 197.9 |
|
| Total asset impairment, restructuring, and other special charges | $ | 406.5 |
| | $ | 45.5 |
| | $ | 670.4 |
| | $ | 234.9 |
|
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2021 | | 2020 | | | | |
| Severance | $ | 11.5 | | | $ | 9.8 | | | | | |
| Asset impairment and other special charges | 200.1 | | | 50.1 | | | | | |
| Total asset impairment, restructuring, and other special charges | $ | 211.6 | | | $ | 59.9 | | | | | |
Severance costs
Asset impairment, restructuring, and other special charges recognized during the three months ended September 30, 2017March 31, 2021 were incurred as a resultprimarily related to an intangible asset impairment of actions taken$108.1 million resulting from the decision to reduce our cost structure. Severance costs recognized duringsell the nine months ended September 30, 2017 were incurred as a result of actions takenrights to reduce our cost structure,Qbrexza, as well as acquisition and integration costs associated with the integrationacquisition of Novartis Animal Health (Novartis AH). Severance costs recognized duringPrevail. During the three and nine months ended September 30, 2016 related primarilyMarch 31, 2021, we entered into an agreement to the integration of Novartis AH. Severance costs recognized during the nine months ended September 30, 2016 also relatedsell our rights to our decisionQbrexza, subject to close an animal health manufacturing plant in Ireland. Substantially all of the severance costs incurred during the three and nine months ended September 30, 2017closing conditions which are expected to be paidcompleted in the next 12 months.
Substantially allsecond quarter of the asset impairment and other special charges related to animal health products recognized during the three months ended September 30, 2017 related to lower projected revenue for Posilac® (rbST). The company is exploring strategic options for Posilac, including seeking a buyer for the molecule and its Augusta manufacturing site.2021. The assets associated with PosilacQbrexza were written down to their fair values,value less cost to sell, which were determined based upon a discounted cash flow valuation. The remaining book value of assets associated with PosilacQbrexza subsequent to the impairment charge areis not material. Other asset
Asset impairment, restructuring, and other special charges recognized during the three months ended September 30, 2017March 31, 2020 were primarily related to exitacquisition and integration costs associated with site closures. Asset impairment and other special charges recognized during the nine months ended September 30, 2017 resulted primarily from charges associated with the Posilac impairment, integration costs of Novartis AH, as well as asset impairments due to site closures. Asset impairment and other special charges recognized during the three months ended September 30, 2016 related primarily to integration costs related to our acquisition of Novartis AH. Asset impairment and other special charges recognized during the nine months ended September 30, 2016 resulted primarily from $87.2 million of asset impairment and other charges related to our decision to close an animal health manufacturing plant in Ireland. The manufacturing plant was written down to its estimated fair value, which was based primarily on recent sales of similar assets. The remaining asset impairment and other special charges recognized during the nine months ended September 30, 2016 consisted of integration costs related to our acquisition of Novartis AH.Dermira.
In September 2017, we announced plans to reduce our cost structure by streamlining our operations, including a U.S. voluntary early retirement program. In addition to the asset impairment, restructuring, and other special charges discussed above that were incurred during the three months ended September 30, 2017, we expect to incur additional charges of approximately $800 million in the fourth quarter of 2017 related to these plans. The fourth quarter charge could vary depending on the composition of participants within the U.S. voluntary early retirement program, as well as other actions taken to improve our cost structure.
Note 6: Financial Instruments
Financial instruments that potentially subject us to credit risk consist principally of trade receivables and interest-bearing investments. Wholesale distributors of life-sciencelife science products account for a substantial portion of our trade receivables; collateral is generally not required. TheWe seek to mitigate the risk associated with this concentration is mitigated bythrough our ongoing credit-review procedures and insurance. A large portion of our cash is held by a few major financial institutions. We monitor our exposures with these institutions and do not expect any of these institutions to fail to meet their obligations. Major financial institutions represent the largest component of our investments in corporate debt securities. In accordance with documented corporate risk-management policies, we monitor the amount of credit exposure to any one financial institution or corporate issuer. We are exposed to credit-related losses in the event of nonperformance by counterparties to risk-management instruments but do not expect any counterparties to fail to meet their obligations given their high credit ratings.
We consider all highly liquid investments with a maturity of three months or less from the date of purchase to be cash equivalents. The cost of these investments approximates fair value.
Our equity investments are accounted for using three different methods depending on the type of equity investment:
•Investments in companies over which we have significant influence but not a controlling interest are accounted for using the equity method, with our share of earnings or losses reported in other-net, (income) expense.
•For equity investments that do not have readily determinable fair values, we measure these investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. Any change in recorded value is recorded in other-net, (income) expense.
•Our public equity investments are measured and carried at fair value. Any change in fair value is recognized in other-net, (income) expense.
We review equity investments other than public equity investments for indications of impairment and observable price changes on a regular basis.
Our derivative activities are initiated within the guidelines of documented corporate risk-management policies and are intended to offset losses and gains on the assets, liabilities, and transactions being hedged. Management reviews the correlation and effectiveness of our derivatives on a quarterly basis.
For derivative instruments that are designated and qualify as fair value hedges, the derivative instrument is marked to market, with gains and losses recognized currently in income to offset the respective losses and gains recognized on the underlying exposure. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of gains and losses isare reported as a component of accumulated other comprehensive loss and reclassified into earnings in the same period the hedged transaction affects earnings. For derivative and non-derivative instruments that are designated and qualify as net investment hedges, the effective portion of foreign currency translation gains or losses due to spot rate fluctuations are reported as a component of accumulated other comprehensive loss. Hedge ineffectiveness is immediately recognized in earnings. Derivative contracts that are not designated as hedging instruments are recorded at fair value with the gain or loss recognized in current earnings during the period of change.
We may enter into foreign currency forward or option contracts to reduce the effect of fluctuating currency exchange rates (principally the euro, British pound, and the Japanese yen). Foreign currency derivatives used for hedging are put in place using the same or like currencies and duration as the underlying exposures. Forward and option contracts are principally used to manage exposures arising from subsidiary trade and loan payables and receivables denominated in foreign currencies. These contracts are recorded at fair value with the gain or loss recognized in other–net, (income) expense. We may enter into foreign currency forward and option contracts and currency swaps as fair value hedges of firm commitments. Forward contracts generally have maturities not exceeding 12 months. At September 30, 2017,March 31, 2021, we had outstanding foreign currency forward commitments to purchase 502.91.11 billion U.S. dollars and sell 941.7 million euro, commitments to purchase 4.19 billion euro and sell 4.98 billion U.S. dollars, commitments to purchase 140.7 million U.S. dollars and sell 422.1 million euro,15.47 billion Japanese yen, and commitments to purchase 735.7 million euro and sell 878.1 million U.S. dollars, commitments to purchase 428.4 million U.S. dollars and sell 47.90 billion Japanese yen, commitments to purchase 295.9285.2 million British pounds and sell 334.8 million euro, and commitments to purchase 287.3396.5 million U.S. dollars, and sell 212.2 million British pounds, which will all settlesettled within 30 days.
Foreign currency exchange risk is also managed through the use of foreign currency debt and cross-currency interest rate swaps. Our foreign currency-denominated notes had carrying amounts of $3.67$5.72 billion and $3.34$6.02 billion as of September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively, of which $4.30 billion and $4.50 billion have been designated as, and are effective as, economic hedges of net investments in certain of our euro-denominated foreign operations as of March 31, 2021 and December 31, 2020, respectively. At March 31, 2021, we had outstanding cross currency swaps with notional amounts of $3.79 billion swapping U.S. dollars to euro and $1.00 billion swapping Swiss franc-denominated foreign operations.francs to U.S. dollars which have settlement dates ranging through 2028. Our cross-currency interest rate swaps, thatfor which a majority convert a portion of our U.S. dollar-denominated floating ratefixed-rate debt to euro-denominated floating rateforeign-denominated fixed-rate debt, have also been designated as, and are effective as, economic hedges of net investments in certain of our euro-denominated foreign operations.investments.
In the normal course of business, our operations are exposed to fluctuations in interest rates which can vary the costs of financing, investing, and operating. We seek to address a portion of these risks through a controlled program of risk management that includes the use of derivative financial instruments. The objective of controlling these risks is to limit the impact of fluctuations in interest rates on earnings. Our primary interest-rate risk exposure results from changes in short-term U.S. dollar interest rates. In an effort to manage interest-rate exposures, we strive to achieve an acceptable balance between fixed- and floating-rate debt and investment positions and may enter into interest rate swaps or collars to help maintain that balance.
Interest rate swaps or collars that convert our fixed-rate debt to a floating rate are designated as fair value hedges of the underlying instruments. Interest rate swaps or collars that convert floating-rate debt to a fixed rate are designated as cash flow hedges. Interest expense on the debt is adjusted to include the payments made or received under the swap agreements. Cash proceeds from or payments to counterparties resulting from the termination of interest rate swaps are classified as operating activities in our consolidated condensed statements of cash flows. At September 30, 2017,March 31, 2021, substantially all of our total long-term debt is at a fixed rate. We have converted approximately 3013 percent of our long-term fixed-rate notes to floating rates through the use of interest rate swaps.
We may enter into forward contracts and designate them as cash flow hedges to limit the potential volatility of earnings and cash flow associated with forecasted sales of available-for-sale securities.
We also may enter into forward-starting interest rate swaps, which we designate as cash flow hedges, as part of any anticipated future debt issuances in order to reduce the risk of cash flow volatility from future changes in interest rates. Upon completion of a debt issuance and termination of the swap, theThe change in fair value of these instruments is recorded as part of other comprehensive income (loss), and upon completion of a debt issuance and termination of the swap, is amortized to interest expense over the life of the underlying debt.
In May 2017, we issued $750.0 million As of 2.35 percent fixed-rate notes dueMarch 31, 2021, the total notional amounts of forward-starting interest rate contracts in May 2022, $750.0 million of 3.10 percent fixed-rate notes due in May 2027,designated cash flow hedging instruments were $1.75 billion, which have settlement dates ranging between 2023 and $750.0 million of 3.95 percent fixed-rate notes due in May 2047, with interest to be paid semi-annually. We are using the net proceeds of $2.23 billion from the sale of these notes for general corporate purposes, which may include the repayment of notes due in 2018 and 2019. Prior to such uses, we may temporarily invest the net proceeds in investment securities.
In May 2016, we issued Swiss franc-denominated notes consisting of Fr.200.0 million of 0.00 percent fixed-rate notes due in May 2018, Fr.600.0 million of 0.15 percent fixed-rate notes due in May 2024, and Fr.400.0 million of 0.45 percent fixed-rate notes due in May 2028, with interest to be paid annually. We are using the net cash proceeds of the offering of $1.21 billion for general corporate purposes, which included the repayment at maturity of certain of our U.S. dollar denominated fixed-rate notes due March 2017.
2025.
The Effect of Risk-Management Instruments on the Consolidated Condensed Statements of Operations
The following effects of risk-management instruments were recognized in other–net, (income) expense: | | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three Months Ended March 31, | |
| | 2017 | | 2016 | | 2017 | | 2016 | | 2021 | | 2020 | |
| Fair value hedges: | | | | | | | | Fair value hedges: | | |
| Effect from hedged fixed-rate debt | $ | (4.0 | ) | | $ | (18.8 | ) | | $ | 3.6 |
| | $ | 92.4 |
| Effect from hedged fixed-rate debt | $ | (81.5) | | | $ | 117.3 | | |
| Effect from interest rate contracts | 4.0 |
| | 18.8 |
| | (3.6 | ) | | (92.4 | ) | Effect from interest rate contracts | 81.5 | | | (117.3) | | |
| Cash flow hedges: | | | | | | | | Cash flow hedges: | | |
| Effective portion of losses on interest rate contracts reclassified from accumulated other comprehensive loss | 3.7 |
| | 3.8 |
| | 11.1 |
| | 11.2 |
| Effective portion of losses on interest rate contracts reclassified from accumulated other comprehensive loss | 4.1 | | | 4.0 | | |
| Net losses on foreign currency exchange contracts not designated as hedging instruments | 16.3 |
| | 1.4 |
| | 79.2 |
| | 105.6 |
| |
| Cross-currency interest rate swaps | | Cross-currency interest rate swaps | 71.5 | | | (12.9) | | |
| Net (gains) losses on foreign currency exchange contracts not designated as hedging instruments | | Net (gains) losses on foreign currency exchange contracts not designated as hedging instruments | 133.0 | | | (5.7) | | |
| Total | | Total | $ | 208.6 | | | $ | (14.6) | | |
During the ninethree months ended September 30, 2017March 31, 2021 and 2016, net losses related to ineffectiveness, as well as net2020, the amortization of losses related to the portion of our risk-managementrisk management hedging instruments, fair value hedges, and cash flow hedges that werewas excluded from the assessment of effectiveness werewas not material.
The Effect of Risk-Management Instruments on Other Comprehensive Income (Loss)
The effective portion of risk-management instruments that was recognized in other comprehensive income (loss) is as follows: | | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three Months Ended March 31, | |
| | 2017 | | 2016 | | 2017 | | 2016 | | 2021 | | 2020 | |
| Net investment hedges: | | | | | | | | Net investment hedges: | | |
| Foreign currency-denominated notes | $ | (58.7 | ) | | $ | (37.0 | ) | | $ | (332.0 | ) | | $ | (80.0 | ) | Foreign currency-denominated notes | $ | 207.7 | | | $ | 67.4 | | |
| Cross-currency interest rate swaps | (38.2 | ) | | (4.1 | ) | | (95.8 | ) | | 2.2 |
| Cross-currency interest rate swaps | 150.6 | | | 115.8 | | |
| Foreign currency exchange contracts | — |
| | — |
| | — |
| | 31.9 |
| |
| | Cash flow hedges: | | | | | | | | Cash flow hedges: | | |
| Forward-starting interest rate swaps | — |
| | — |
| | 13.0 |
| | (3.4 | ) | Forward-starting interest rate swaps | 295.1 | | | (369.8) | | |
| Cross-currency interest rate swaps | | Cross-currency interest rate swaps | 26.3 | | | (69.8) | | |
|
During the next 12 months, we expect to reclassify $14.7$16.9 million of pretax net losses on cash flow hedges from accumulated other comprehensive loss to other–net, (income) expense. During the three months ended March 31, 2021 and 2020, the amounts excluded from the assessment of hedge effectiveness recognized in other comprehensive income (loss) were not material.
Fair Value of Financial Instruments
The following tables summarize certain fair value information at September 30, 2017March 31, 2021 and December 31, 20162020 for assets and liabilities measured at fair value on a recurring basis, as well as the carrying amount and amortized cost of certain other investments:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Fair Value Measurements Using | | |
| Carrying
Amount | | Cost (1) | | Quoted Prices in Active Markets for Identical Assets
(Level 1) | | Significant Other
Observable Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) | | Fair
Value |
| March 31, 2021 | | | | | | | | | | | |
| Cash equivalents | $ | 1,554.5 | | | $ | 1,554.5 | | | $ | 1,554.5 | | | $ | 0 | | | $ | 0 | | | $ | 1,554.5 | |
| | | | | | | | | | | |
| Short-term investments: | | | | | | | | | | | |
| U.S. government and agency securities | $ | 20.9 | | | $ | 20.8 | | | $ | 20.9 | | | $ | 0 | | | $ | 0 | | | $ | 20.9 | |
| | | | | | | | | | | |
| Corporate debt securities | 7.6 | | | 7.5 | | | 0 | | | 7.6 | | | 0 | | | 7.6 | |
| Asset-backed securities | 2.3 | | | 2.2 | | | 0 | | | 2.3 | | | 0 | | | 2.3 | |
| Other securities | 18.2 | | | 18.2 | | | 18.2 | | | 0 | | | 0 | | | 18.2 | |
| | | | | | | | | | | |
| Short-term investments | $ | 49.0 | | | | | | | | | | | |
| | | | | | | | | | | |
| Noncurrent investments: | | | | | | | | | | | |
| U.S. government and agency securities | $ | 109.1 | | | $ | 108.8 | | | $ | 109.1 | | | $ | 0 | | | $ | 0 | | | $ | 109.1 | |
| | | | | | | | | | | |
| Corporate debt securities | 177.8 | | | 175.5 | | | 0 | | | 177.8 | | | 0 | | | 177.8 | |
| Mortgage-backed securities | 102.3 | | | 99.7 | | | 0 | | | 102.3 | | | 0 | | | 102.3 | |
| Asset-backed securities | 23.8 | | | 23.5 | | | 0 | | | 23.8 | | | 0 | | | 23.8 | |
| Other securities | 110.3 | | | 30.1 | | | 0 | | | 0 | | | 110.3 | | | 110.3 | |
| Marketable equity securities | 1,645.5 | | | 386.1 | | | 1,645.5 | | | 0 | | | 0 | | | 1,645.5 | |
Equity investments without readily determinable fair values (2) | 384.3 | | | | | | | | | | | |
Equity method investments (2) | 679.3 | | | | | | | | | | | |
| Noncurrent investments | $ | 3,232.4 | | | | | | | | | | | |
| | | | | | | | | | | |
| December 31, 2020 | | | | | | | | | | | |
| Cash equivalents | $ | 2,097.9 | | | $ | 2,097.9 | | | $ | 2,097.9 | | | $ | 0 | | | $ | 0 | | | $ | 2,097.9 | |
| | | | | | | | | | | |
| Short-term investments: | | | | | | | | | | | |
| U.S. government and agency securities | $ | 9.9 | | | $ | 9.9 | | | $ | 9.9 | | | $ | 0 | | | $ | 0 | | | $ | 9.9 | |
| Corporate debt securities | 2.8 | | | 2.8 | | | 0 | | | 2.8 | | | 0 | | | 2.8 | |
| Asset-backed securities | 1.2 | | | 1.2 | | | 0 | | | 1.2 | | | 0 | | | 1.2 | |
| Other securities | 10.3 | | | 10.3 | | | 0 | | | 0 | | | 10.3 | | | 10.3 | |
| | | | | | | | | | | |
| Short-term investments | $ | 24.2 | | | | | | | | | | | |
| | | | | | | | | | | |
| Noncurrent investments: | | | | | | | | | | | |
| U.S. government and agency securities | $ | 78.7 | | | $ | 74.3 | | | $ | 78.7 | | | $ | 0 | | | $ | 0 | | | $ | 78.7 | |
| Corporate debt securities | 137.0 | | | 126.8 | | | 0 | | | 137.0 | | | 0 | | | 137.0 | |
| Mortgage-backed securities | 106.4 | | | 101.4 | | | 0 | | | 106.4 | | | 0 | | | 106.4 | |
| Asset-backed securities | 24.3 | | | 23.7 | | | 0 | | | 24.3 | | | 0 | | | 24.3 | |
| Other securities | 110.5 | | | 31.8 | | | 0 | | | 0 | | | 110.5 | | | 110.5 | |
| Marketable equity securities | 1,664.2 | | | 311.6 | | | 1,664.2 | | | 0 | | | 0 | | | 1,664.2 | |
Equity investments without readily determinable fair values (2) | 373.9 | | | | | | | | | | | |
Equity method investments (2) | 471.8 | | | | | | | | | | | |
| Noncurrent investments | $ | 2,966.8 | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Fair Value Measurements Using | | |
| | Carrying Amount | | Cost (1) | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Fair Value |
| September 30, 2017 | | | | | | | | | | | |
| Cash equivalents | $ | 2,066.7 |
| | $ | 2,066.7 |
| | $ | 1,611.0 |
| | $ | 455.7 |
| | $ | — |
| | $ | 2,066.7 |
|
| | | | | | | | | | | | |
| Short-term investments: | | | | | | | | | | | |
| U.S. government and agency securities | $ | 742.2 |
| | $ | 742.7 |
| | $ | 742.2 |
| | $ | — |
| | $ | — |
| | $ | 742.2 |
|
| Corporate debt securities | 2,322.9 |
| | 2,322.4 |
| | — |
| | 2,322.9 |
| | — |
| | 2,322.9 |
|
| Asset-backed securities | 149.8 |
| | 149.8 |
| | — |
| | 149.8 |
| | — |
| | 149.8 |
|
| Other securities | 3.9 |
| | 3.9 |
| | — |
| | 3.9 |
| | — |
| | 3.9 |
|
| Short-term investments | $ | 3,218.8 |
| | | | | | | | | | |
| | | | | | | | | | | | |
| Noncurrent investments: | | | | | | | | | | | |
| U.S. government and agency securities | $ | 411.7 |
| | $ | 415.3 |
| | $ | 411.7 |
| | $ | — |
| | $ | — |
| | $ | 411.7 |
|
| Corporate debt securities | 3,913.2 |
| | 3,903.8 |
| | — |
| | 3,913.2 |
| | — |
| | 3,913.2 |
|
| Mortgage-backed securities | 165.1 |
| | 166.0 |
| | — |
| | 165.1 |
| | — |
| | 165.1 |
|
| Asset-backed securities | 638.8 |
| | 639.2 |
| | — |
| | 638.8 |
| | — |
| | 638.8 |
|
| Other securities | 130.7 |
| | 75.5 |
| | — |
| | — |
| | 130.7 |
| | 130.7 |
|
| Marketable equity securities | 344.7 |
| | 127.5 |
| | 344.7 |
| | — |
| | — |
| | 344.7 |
|
Cost and equity method investments (2) | 544.5 |
| | | | | | | | | | |
| Noncurrent investments | $ | 6,148.7 |
| | | | | | | | | | |
| | | | | | | | | | | | |
| December 31, 2016 | | | | | | | | | | | |
| Cash equivalents | $ | 2,986.8 |
| | $ | 2,986.8 |
| | $ | 2,699.4 |
| | $ | 287.4 |
| | $ | — |
| | $ | 2,986.8 |
|
| | | | | | | | | | | | |
| Short-term investments: | | | | | | | | | | | |
| U.S. government and agency securities | $ | 232.5 |
| | $ | 232.6 |
| | $ | 232.5 |
| | $ | — |
| | $ | — |
| | $ | 232.5 |
|
| Corporate debt securities | 1,219.2 |
| | 1,219.1 |
| | — |
| | 1,219.2 |
| | — |
| | 1,219.2 |
|
| Asset-backed securities | 4.3 |
| | 4.3 |
| | — |
| | 4.3 |
| | — |
| | 4.3 |
|
| Other securities | 0.5 |
| | 0.5 |
| | — |
| | 0.5 |
| | — |
| | 0.5 |
|
| Short-term investments | $ | 1,456.5 |
| | | | | | | | | | |
| | | | | | | | | | | | |
| Noncurrent investments: | | | | | | | | | | | |
| U.S. government and agency securities | $ | 318.9 |
| | $ | 323.8 |
| | $ | 318.9 |
| | $ | — |
| | $ | — |
| | $ | 318.9 |
|
| Corporate debt securities | 3,062.2 |
| | 3,074.3 |
| | — |
| | 3,062.2 |
| | — |
| | 3,062.2 |
|
| Mortgage-backed securities | 183.1 |
| | 185.4 |
| | — |
| | 183.1 |
| | — |
| | 183.1 |
|
| Asset-backed securities | 502.7 |
| | 503.5 |
| | — |
| | 502.7 |
| | — |
| | 502.7 |
|
| Other securities | 153.7 |
| | 77.6 |
| | — |
| | — |
| | 153.7 |
| | 153.7 |
|
| Marketable equity securities | 418.2 |
| | 91.9 |
| | 418.2 |
| | — |
| | — |
| | 418.2 |
|
Cost and equity method investments (2) | 568.7 |
| | | | | | | | | | |
| Noncurrent investments | $ | 5,207.5 |
| | | | | | | | | | |
(1) For available-for-sale debt securities, amounts disclosed represent the securities' amortized cost.
(2) Fair value disclosures are not applicable for cost method and equity method investments and investments accounted for under the measurement alternative for equity investments.
|
| | | | | | | | | | | | | | | | | | | |
| | | | Fair Value Measurements Using | | |
| | Carrying Amount | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Fair Value |
| Short-term commercial paper borrowings | | | | | | | | | |
| September 30, 2017 | $ | (2,526.0 | ) | | $ | — |
| | $ | (2,523.7 | ) | | $ | — |
| | $ | (2,523.7 | ) |
| December 31, 2016 | (1,299.3 | ) | | — |
| | (1,299.3 | ) | | — |
| | (1,299.3 | ) |
| Long-term debt, including current portion | | | | | | | | | |
| September 30, 2017 | $ | (10,938.7 | ) | | $ | — |
| | $ | (11,448.4 | ) | | $ | — |
| | $ | (11,448.4 | ) |
| December 31, 2016 | (9,005.9 | ) | | — |
| | (9,419.1 | ) | | — |
| | (9,419.1 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Fair Value Measurements Using | | |
| Carrying
Amount | | Quoted Prices in Active Markets for Identical Assets
(Level 1) | | Significant
Other Observable Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) | | Fair
Value |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Long-term debt, including current portion | | | | | | | | | |
| March 31, 2021 | $ | (16,204.5) | | | $ | 0 | | | $ | (17,462.6) | | | $ | 0 | | | $ | (17,462.6) | |
| December 31, 2020 | (16,595.3) | | | 0 | | | (19,038.9) | | | 0 | | | (19,038.9) | |
| | | | | | | Fair Value Measurements Using | | | |
| | | Carrying
Amount | | Quoted Prices in Active Markets for Identical Assets
(Level 1) | | Significant
Other Observable Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) | | Fair
Value | |
| March 31, 2021 | | March 31, 2021 | | |
| Risk-management instruments: | | Risk-management instruments: | | |
| Interest rate contracts designated as fair value hedges: | | Interest rate contracts designated as fair value hedges: | | |
| | Other noncurrent assets | | Other noncurrent assets | $ | 87.2 | | | $ | 0 | | | $ | 87.2 | | | $ | 0 | | | $ | 87.2 | | |
| | Other noncurrent liabilities | | Other noncurrent liabilities | (9.9) | | | 0 | | | (9.9) | | | 0 | | | (9.9) | | |
| | Interest rate contracts designated as cash flow hedges: | | Interest rate contracts designated as cash flow hedges: | | |
| Other noncurrent assets | | Other noncurrent assets | 235.4 | | | 0 | | | 235.4 | | | 0 | | | 235.4 | | |
| | Cross-currency interest rate contracts designated as net investment hedges: | | Cross-currency interest rate contracts designated as net investment hedges: | | |
| Other receivables | | Other receivables | 12.7 | | | 0 | | | 12.7 | | | 0 | | | 12.7 | | |
| Other noncurrent assets | | Other noncurrent assets | 39.4 | | | 0 | | | 39.4 | | | 0 | | | 39.4 | | |
| Other current liabilities | | Other current liabilities | (45.5) | | | 0 | | | (45.5) | | | 0 | | | (45.5) | | |
| Other noncurrent liabilities | | Other noncurrent liabilities | (19.1) | | | 0 | | | (19.1) | | | 0 | | | (19.1) | | |
| Cross-currency interest rate contracts designated as cash flow hedges: | | Cross-currency interest rate contracts designated as cash flow hedges: | | |
| Other noncurrent assets | | Other noncurrent assets | 3.0 | | | 0 | | | 3.0 | | | 0 | | | 3.0 | | |
| Other noncurrent liabilities | | Other noncurrent liabilities | (16.8) | | | 0 | | | (16.8) | | | 0 | | | (16.8) | | |
| Foreign exchange contracts not designated as hedging instruments: | | Foreign exchange contracts not designated as hedging instruments: | | |
| Other receivables | | Other receivables | 14.8 | | | 0 | | | 14.8 | | | 0 | | | 14.8 | | |
| Other current liabilities | | Other current liabilities | (66.2) | | | 0 | | | (66.2) | | | 0 | | | (66.2) | | |
| | Contingent consideration liability: | | Contingent consideration liability: | | |
| | Other noncurrent liabilities | | Other noncurrent liabilities | (71.1) | | | 0 | | | 0 | | | (71.1) | | | (71.1) | | |
| | December 31, 2020 | | December 31, 2020 | | |
| Risk-management instruments: | | Risk-management instruments: | | |
| Interest rate contracts designated as fair value hedges: | | Interest rate contracts designated as fair value hedges: | | |
| | Other noncurrent assets | | Other noncurrent assets | 158.9 | | | 0 | | | 158.9 | | | 0 | | | 158.9 | | |
| | Interest rate contracts designated as cash flow hedges: | | Interest rate contracts designated as cash flow hedges: | | |
| Other noncurrent assets | | Other noncurrent assets | 38.1 | | | 0 | | | 38.1 | | | 0 | | | 38.1 | | |
| Other noncurrent liabilities | | Other noncurrent liabilities | (97.8) | | | 0 | | | (97.8) | | | 0 | | | (97.8) | | |
| Cross-currency interest rate contracts designated as net investment hedges: | | Cross-currency interest rate contracts designated as net investment hedges: | | |
| | Other current liabilities | | Other current liabilities | (92.6) | | | 0 | | | (92.6) | | | 0 | | | (92.6) | | |
| Other noncurrent liabilities | | Other noncurrent liabilities | (97.2) | | | 0 | | | (97.2) | | | 0 | | | (97.2) | | |
| Cross-currency interest rate contracts designated as cash flow hedges: | | Cross-currency interest rate contracts designated as cash flow hedges: | | |
| Other noncurrent assets | | Other noncurrent assets | 34.4 | | | 0 | | | 34.4 | | | 0 | | | 34.4 | | |
| Other noncurrent liabilities | | Other noncurrent liabilities | (2.9) | | | 0 | | | (2.9) | | | 0 | | | (2.9) | | |
| Foreign exchange contracts not designated as hedging instruments: | | Foreign exchange contracts not designated as hedging instruments: | | |
| Other receivables | | Other receivables | 41.1 | | | 0 | | | 41.1 | | | 0 | | | 41.1 | | |
| Other current liabilities | | Other current liabilities | (15.2) | | | 0 | | | (15.2) | | | 0 | | | (15.2) | | |
| | | | | | Fair Value Measurements Using | | | |
| | Carrying Amount | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Fair Value | |
| September 30, 2017 | | | | | | | | | | |
| Risk-management instruments: | | | | | | | | | | |
| Interest rate contracts designated as fair value hedges: | | | | | | | | | | |
| Other receivables | $ | 2.0 |
| | $ | — |
| | $ | 2.0 |
| | $ | — |
| | $ | 2.0 |
| |
| Sundry | 43.0 |
| | — |
| | 43.0 |
| | — |
| | 43.0 |
| |
| Other current liabilities | (0.4 | ) | | — |
| | (0.4 | ) | | — |
| | (0.4 | ) | |
| Other noncurrent liabilities | (1.8 | ) | | — |
| | (1.8 | ) | | — |
| | (1.8 | ) | |
| Cross-currency interest rate contracts designated as net investment hedges: | | | | | | | | | | |
| Other current liabilities | (43.4 | ) | | — |
| | (43.4 | ) | | — |
| | (43.4 | ) | |
| Other noncurrent liabilities | (20.5 | ) | | — |
| | (20.5 | ) | | — |
| | (20.5 | ) | |
| Foreign exchange contracts not designated as hedging instruments: | | | | | | | | | | |
| Other receivables | 21.0 |
| | — |
| | 21.0 |
| | — |
| | 21.0 |
| |
| Other current liabilities | (13.9 | ) | | — |
| | (13.9 | ) | | — |
| | (13.9 | ) | |
Contingent consideration liabilities (1): | | | | | | | | | | |
| Other current liabilities | (201.8 | ) | | — |
| | — |
| | (201.8 | ) | | (201.8 | ) | |
| Other noncurrent liabilities | (92.2 | ) | | — |
| | — |
| | (92.2 | ) | | (92.2 | ) | |
| | | | | | | | | | | |
| December 31, 2016 | | | | | | | | | | |
| Risk-management instruments: | | | | | | | | | | |
| Interest rate contracts designated as fair value hedges: | | | | | | | | | | |
| Other receivables | $ | 2.4 |
| | $ | — |
| | $ | 2.4 |
| | $ | — |
| | $ | 2.4 |
| |
| Sundry | 37.0 |
| | — |
| | 37.0 |
| | — |
| | 37.0 |
| |
| Other noncurrent liabilities | (0.5 | ) | | — |
| | (0.5 | ) | | — |
| | (0.5 | ) | |
| Cross-currency interest rate contracts designated as net investment hedges: | | | | | | | | | | |
| Sundry | 31.4 |
| | — |
| | 31.4 |
| | — |
| | 31.4 |
| |
| Foreign exchange contracts not designated as hedging instruments: | | | | | | | | | | |
| Other receivables | 31.8 |
| | — |
| | 31.8 |
| | — |
| | 31.8 |
| |
| Other current liabilities | (21.7 | ) | | — |
| | (21.7 | ) | | — |
| | (21.7 | ) | |
Contingent consideration liabilities (1): | | | | | | | | | | |
| Other current liabilities | (215.9 | ) | | — |
| | — |
| | (215.9 | ) | | (215.9 | ) | |
| Other noncurrent liabilities | (242.6 | ) | | — |
| | — |
| | (242.6 | ) | | (242.6 | ) | |
(1) Contingent consideration liabilities primarily relate to the Erbitux arrangement with BMS discussed in Note 4.
Risk-management instruments above are disclosed on a gross basis. There are various rights of setoff associated with certain of the risk-management instruments above that are subject to an enforceable master netting arrangementarrangements or similar agreements. Although various rights of setoff and master netting arrangements or similar agreements may exist with the individual counterparties to the risk-management instruments above, individually, these financial rights are not material.
We determine our Level 1 and Level 2 fair value measurements based on a market approach using quoted market values, significant other observable inputs for identical or comparable assets or liabilities, or discounted cash flow analyses. Level 3 fair value measurements for other investment securities are determined using unobservable inputs, including the investments' cost adjusted for impairments and price changes from orderly transactions. The fair values of cost and equity method investments and investments measured under the measurement alternative for equity investments that do not have readily determinable fair values are not readily available. As of March 31, 2021, we had approximately $736 million of unfunded commitments to invest in venture capital funds, which we anticipate will be paid over a period of up to 10 years.
Contingent consideration liabilities primarily include contingent consideration relatedliability relates to Erbitux, for whichour liability arising in connection with the CVR issued as a result of the Prevail acquisition. The fair value of the CVR liability was estimated using a discounted cash flow analysis and Level 3 inputs, including projections representative of a market participantparticipant's view of the expected cash payment associated with the first potential regulatory approval of a Prevail compound in the applicable countries based on probabilities of technical success, timing of the potential approval events for net sales in North America through September 2018the compounds, and an estimated discount rate. The amount to be paid is calculated as a tiered percentage of net sales (seeSee Note 4) and will, therefore, vary directly with increases and decreases in net sales of Erbitux in North America. There is no cap on the amount that may be paid pursuant to this arrangement. The decrease in the fair value of the contingent consideration liabilities during the nine months ended September 30, 2017 was due primarily to cash payments of $151.3 million3 for additional information related to Erbitux. The change in the fair value of the contingent consideration liabilities recognized in earnings during the three and nine months ended September 30, 2017 and 2016 due to changes in time value of money was not material.CVR arrangement.
The table below summarizes the contractual maturities of our investments in debt securities measured at fair value as of September 30, 2017:March 31, 2021: |
| | | | | | | | | | | | | | | | | | | |
| | Maturities by Period |
| | Total | | Less Than 1 Year | | 1-5 Years | | 6-10 Years | | More Than 10 Years |
| Fair value of debt securities | $ | 8,343.7 |
| | $ | 3,214.9 |
| | $ | 4,795.2 |
| | $ | 122.4 |
| | $ | 211.2 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Maturities by Period |
| | Total | | Less Than
1 Year | | 1-5
Years | | 6-10
Years | | More Than
10 Years |
| Fair value of debt securities | $ | 443.7 | | | $ | 30.8 | | | $ | 147.8 | | | $ | 125.2 | | | $ | 139.9 | |
The net gains recognized in our consolidated condensed statements of operations for equity securities were $301.5 million and $186.6 million for the three months ended March 31, 2021 and 2020, respectively. The net gains/losses recognized during the three months ended March 31, 2021 and 2020 on equity securities sold during the respective periods were not material.
We adjust our equity investments without readily determinable fair values based upon changes in the equity instruments' values resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. Downward adjustments resulting from an impairment are recorded based upon impairment considerations, including the financial condition and near term prospects of the issuer, general market conditions, and industry specific factors. Adjustments recorded during the three months ended March 31, 2021 and 2020 were not material.
A summary of the fair value of available-for-sale securities in an unrealized gain or loss position and the amount of unrealized gains and losses (pretax) in accumulated other comprehensive loss follows:
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| Unrealized gross gains | $ | 12.0 | | | $ | 20.9 | |
| Unrealized gross losses | 6.3 | | | 0.5 | |
| Fair value of securities in an unrealized gain position | 273.6 | | | 348.9 | |
| Fair value of securities in an unrealized loss position | 170.1 | | | 11.4 | |
|
| | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| Unrealized gross gains | $ | 259.7 |
| | $ | 352.6 |
|
| Unrealized gross losses | 27.2 |
| | 34.1 |
|
| Fair value of securities in an unrealized gain position | 3,400.7 |
| | 1,869.7 |
|
| Fair value of securities in an unrealized loss position | 4,013.9 |
| | 3,262.3 |
|
We periodically assess our investment in available-for-sale securities for other-than-temporary impairment losses. There were no other-than-temporary impairment losses in the three and nine months ended September 30, 2017. Other-than-temporary impairment losses recognized during the three and nine months ended September 30, 2016were $11.4 million and $53.0 million, respectively.
For fixed-income securities, thecredit losses. The amount of credit losses are determined by comparing the difference between the present value of future cash flows expected to be collected on these securities and the amortized cost. Factors considered in assessing credit losses include the position in the capital structure, vintage and amount of collateral, delinquency rates, current credit support, and geographic concentration. Impairment and credit losses related to available-for-sale securities were not material in the three months ended March 31, 2021 and 2020.
For equity securities, factors considered in assessing other-than-temporary impairment losses include the length of time and the extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer, our intent and ability to retain the securities for a period of time sufficient to allow for recovery in fair value, and general market conditions and industry specific factors.
As of September 30, 2017,March 31, 2021, the available-for-sale securities in an unrealized loss position include primarily fixed-rate debt securities of varying maturities, which are sensitive to changes in the yield curve and other market conditions. Approximately 9594 percent of the fixed-rate debt securities in a loss position are investment-grade debt securities. As of September 30, 2017,March 31, 2021, we do not intend to sell, and it is not more likely than not that we will be required to sell, the securities in a loss position before the market values recover or the underlying cash flows have been received, and there is no indication of default on interest or principal payments for any of our debt securities.
Activity related to our investment portfolio, substantially all of which related to available-for-sale securities was as follows: | | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three Months Ended March 31, | |
| | 2017 | | 2016 | | 2017 | | 2016 | | 2021 | | 2020 | |
| Proceeds from sales | $ | 951.5 |
| | $ | 926.3 |
| | $ | 3,003.0 |
| | $ | 2,503.4 |
| Proceeds from sales | $ | 43.3 | | | $ | 38.0 | | |
| Realized gross gains on sales | 9.0 |
| | 12.8 |
| | 82.9 |
| | 18.0 |
| Realized gross gains on sales | 1.1 | | | 0.9 | | |
| Realized gross losses on sales | 0.8 |
| | 1.3 |
| | 3.2 |
| | 11.7 |
| Realized gross losses on sales | 0.4 | | | 0.8 | | |
Realized gains and losses on sales of available-for-sale investments are computed based upon specific identification of the initial cost adjusted for any other-than-temporary declines in fair value that were recorded in earnings.
Accounts Receivable Factoring Arrangements
We have entered into accounts receivable factoring agreements with financial institutions to sell certain of our non-U.S. accounts receivable. These transactions are accounted for as sales and result in a reduction in accounts receivable because the agreements transfer effective control over and, risk related to, the receivables to the buyers. Our factoring agreements do not allow for recourse in the event of uncollectibility, and we do not retain any interest in the underlying accounts receivable once sold. We derecognized $678.9$637.8 million and $661.6$754.9 million of accounts receivable as of September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively, under these factoring arrangements. The costcosts of factoring such accounts receivable on our consolidated condensed results of operations for the ninethree months ended September 30, 2017March 31, 2021 and 2016 was2020 were not material.
Note 7: Shareholders’ Equity
During the nine months ended September 30, 2017 and 2016, we repurchased $259.9 million and $300.1 million of shares, respectively, associated with our $5.00 billion share repurchase program announced in October 2013. A payment of $60.0 million was made in the fourth quarter of 2016 for shares repurchased in 2017. As of September 30, 2017, there were $2.15 billion of shares remaining in that program.
Note 8: Income Taxes
The effective tax rates were 6.1 percent and 24.1rate was 8.2 percent for the three and nine months ended September 30, 2017, respectively,March 31, 2021, compared with 19.9 percent and 20.813.3 percent for the same respective periods of 2016.three months ended March 31, 2020. The decrease in the effective tax raterates for the third quarter of 2017 is primarily due to the income tax benefit of acquired IPR&D charges and asset impairment, restructuring, and other special charges. The increase in the effective tax rate for the first nine months of 2017 is primarily due to the non-tax deductible $857.6 million acquired IPR&D charge for the acquisition of CoLucid, partially offset by the income tax benefit of acquired IPR&D charges and asset impairment, restructuring, and other special charges.
During the first quarter of 2016, we completed and effectively settled the U.S. examination of tax years 2010-2012. As a result of this resolution, our gross uncertain tax positionsboth periods were reduced by approximately $140 million, and our consolidated condensed results of operations benefited from an immaterial reduction in incomenet discrete tax expense. During 2016, we made cash payments of approximately $150 million related tobenefits, with a larger net discrete tax years 2010-2012 after application of available tax credit carryforwards and carrybacks. benefit reflected for the three months ended March 31, 2021.
The U.S. examination of tax years 2013-20152016-2018 began in 2016the fourth quarter of 2019 and is ongoing. Theremains ongoing; therefore, the resolution of matters in this audit period will likely extend beyond the next 12 months.
Note 9:8: Retirement Benefits
Net pension and retiree health benefit (income) cost included the following components: | | | | Defined Benefit Pension Plans | | Defined Benefit Pension Plans |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three Months Ended March 31, | |
| | 2017 | | 2016 | | 2017 | | 2016 | | 2021 | | 2020 | |
| Components of net periodic benefit cost: | | | | | | | | Components of net periodic benefit cost: | | |
| Service cost | $ | 86.0 |
| | $ | 70.2 |
| | $ | 251.6 |
| | $ | 212.2 |
| Service cost | $ | 92.0 | | | $ | 78.7 | | |
| Interest cost | 103.6 |
| | 104.2 |
| | 309.2 |
| | 314.4 |
| Interest cost | 84.3 | | | 105.0 | | |
| Expected return on plan assets | (196.4 | ) | | (187.6 | ) | | (585.7 | ) | | (566.7 | ) | Expected return on plan assets | (238.0) | | | (221.2) | | |
| Amortization of prior service cost | 1.4 |
| | 2.9 |
| | 4.3 |
| | 8.6 |
| Amortization of prior service cost | 1.1 | | | 1.1 | | |
| Recognized actuarial loss | 72.5 |
| | 71.0 |
| | 215.6 |
| | 213.4 |
| Recognized actuarial loss | 121.8 | | | 111.0 | | |
| | Net periodic benefit cost | $ | 67.1 |
| | $ | 60.7 |
| | $ | 195.0 |
| | $ | 181.9 |
| Net periodic benefit cost | $ | 61.2 | | | $ | 74.6 | | |
| | | | Retiree Health Benefit Plans | | Retiree Health Benefit Plans |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three Months Ended March 31, | |
| | 2017 | | 2016 | | 2017 | | 2016 | | 2021 | | 2020 | |
| Components of net periodic benefit income: | | | | | | | | Components of net periodic benefit income: | | |
| Service cost | $ | 11.6 |
| | $ | 9.7 |
| | $ | 34.8 |
| | $ | 29.3 |
| Service cost | $ | 11.7 | | | $ | 9.8 | | |
| Interest cost | 13.2 |
| | 13.0 |
| | 39.6 |
| | 39.0 |
| Interest cost | 8.1 | | | 11.0 | | |
| Expected return on plan assets | (40.2 | ) | | (37.6 | ) | | (120.6 | ) | | (112.7 | ) | Expected return on plan assets | (36.6) | | | (37.4) | | |
| Amortization of prior service benefit | (22.5 | ) | | (21.5 | ) | | (67.5 | ) | | (64.3 | ) | Amortization of prior service benefit | (14.9) | | | (14.9) | | |
| Recognized actuarial loss | 4.6 |
| | 5.2 |
| | 13.8 |
| | 15.5 |
| Recognized actuarial loss | 0.8 | | | 0.8 | | |
| | Net periodic benefit income | $ | (33.3 | ) | | $ | (31.2 | ) | | $ | (99.9 | ) | | $ | (93.2 | ) | Net periodic benefit income | $ | (30.9) | | | $ | (30.7) | | |
We have contributed approximately $30$15 million required to satisfy minimum funding requirements to our defined benefit pension and retiree health benefit plans during the ninethree months ended September 30, 2017. AdditionalMarch 31, 2021. We contributed approximately $10 million in discretionary funding in the aggregate was not material during the ninethree months ended September 30, 2017.March 31, 2021. During the remainder of 2017,2021, we expect to make contributions of approximately $20 million to our defined benefit pension and retiree health benefit plans of approximately $10 million to satisfy minimum funding requirements. No additional discretionary funding for the remainder of 2017 has been approved at this time.
Note 10:9: Contingencies
We are a party toinvolved in various lawsuits, claims, government investigations and other legal actionsproceedings that arise in the ordinary course of business. These claims or proceedings can involve various types of parties, including governments, competitors, customers, suppliers, service providers, licensees, employees, or shareholders, among others. These matters may involve patent infringement, antitrust, securities, pricing, sales and government investigations.marketing practices, environmental, commercial, contractual rights, licensing obligations, health and safety matters, consumer fraud, employment matters, product liability and insurance coverage, among others. The most significantresolution of these matters often develops over a long period of time and expectations can change as a result of new findings, rulings, appeals or settlement arrangements. Legal proceedings that are significant or that we believe could become significant or material are described below.
We believe the legal proceedings in which we are named as defendants are without merit and we are defending against them vigorously. It is not possible to determine the outcome of these matters, and we cannot reasonably estimate the maximum potential exposure or the range of possible loss in excess of amounts accrued for any of these matters;
however, we believe that except as noted below with respect to the Alimta® patent litigation and administrative proceedings, the resolution of all such matters will not have a material adverse effect on our consolidated financial position or liquidity, but could possibly be material to our consolidated results of operations in any one accounting period.
Litigation accruals, environmental liabilities, and the related estimated insurance recoverables are reflected on a gross basis as liabilities and assets, respectively, on our consolidated condensed balance sheets. With respect to the product liability claims currently asserted against us, we have accrued for our estimated exposures to the extent they are both probable and reasonably estimable based on the information available to us. We accrue for certain product liability claims incurred but not filed to the extent we can formulate a reasonable estimate of their costs. We estimate these expenses based primarily on historical claims experience and data regarding product usage. Legal defense costs expected to be incurred in connection with significant product liability loss contingencies are accrued when both probable and reasonably estimable.
Because of the nature of pharmaceutical products, it is possible that we could become subject to large numbers of additional product liability and related claims in the future. Due to a very restrictive market for product liability insurance, we are self-insured for product liability losses for all our currently and previously marketed products.
Patent Litigation
Alimta Patent Litigation and Administrative Proceedings
A number of generic manufacturers are seeking approvals in variousthe U.S. and a number of countries in Europe to market generic forms of Alimta prior to the expiration of our vitamin regimen patents, alleging that those patents are invalid, not infringed, or both. We believe our Alimta vitamin regimen patents are valid and enforceable against these generic manufacturers. However, it is not possible to determine the ultimate outcome of the proceedings, and accordingly, we can provide no assurance that we will prevail. An unfavorable outcomeThe loss of exclusivity in the U.S. could have a material adverse impact on our future consolidated results of operations liquidity, and financial position. We expect that a loss of exclusivity for Alimtacash flows and would result in a rapid and severe decline in future revenue for the product in the relevant market.product.
U.S. Patent Litigation
Alimta (pemetrexed) is protected by a vitamin regimen patent until 2021, plus pediatric exclusivity through May 2022.
In August 2017, we filed a lawsuit in the U.S. District Court for the Southern District of Indiana against Apotex Inc. (Apotex) alleging infringement of Alimta's vitamin regimen patent for its application to market a pemetrexed product. In December 2019, the U.S. District Court for the Southern District of Indiana granted our motion for summary judgment of infringement, and Administrative Proceedingsin December 2020, the U.S. Court of Appeals for the Federal Circuit affirmed that ruling. Apotex did not request reconsideration or a rehearing of that ruling. However, Apotex could petition the U.S. Supreme Court to review the case.
WeIn December 2019, we settled a lawsuit we filed against Eagle Pharmaceuticals, Inc. (Eagle) in response to its application to market a product using an alternative form of pemetrexed. Per the settlement agreement, Eagle has a limited initial entry into the market with its product starting February 2022 (up to an approximate three-week supply) and subsequent unlimited entry starting April 2022.
European Patent Litigation
In Europe, Alimta (pemetrexed) is protected by the vitamin regimen patent through June of 2021. Notwithstanding the existence of our vitamin regimen patent, several companies launched generic pemetrexed products at risk in France, Germany, and the Netherlands but those products were subsequently removed from those markets as a consequence of patent infringement actions brought by us. In many cases, those patent infringement actions are engagedsubject to appeals filed by the generic manufacturer. In March 2021, we entered into a settlement agreement with Fresenius Kabi Aktienngesellschaft that discontinued all pending European patent litigation involving the Fresenius Kabi group of companies including that between us and Fresenius Kabi France and Fresenius Kabi Groupe France.
Legal proceedings are ongoing regarding our Alimta patents in various national courts throughout Europe. We will continue to seek to remove any generic pemetrexed products launched at risk in other European markets, seek damages with respect to such launches, and defend our patents against validity challenges.
Emgality Patent Litigation
In September 2018, we were named as a defendant in litigation filed by Teva Pharmaceuticals International GMBH and Teva Pharmaceuticals USA, Inc. (collectively, Teva) in the U.S. District Court for the District of Massachusetts seeking a ruling that various claims in 9 different Teva patents would be infringed by our launch and continued sales of Emgality for the prevention of migraine in adults. Trial is expected in February 2022. Separately, the U.S. Patent and Trademark Office (USPTO) granted our request to initiate an inter partes review (IPR) to reexamine the validity of the 9 Teva patents asserted against us in the litigation. In February 2020, the USPTO ruled in our favor and found that the claims asserted against us in 6 of Teva's 9 patents were invalid. In March 2020, the USPTO ruled against us on the remaining 3 Teva patents, finding that we failed to show that the remaining 3 patents were unpatentable based on the subset of invalidity arguments available in an IPR proceeding. In April 2020, we appealed the USPTO’s March 2020 ruling, and Teva appealed the USPTO’s February 2020 ruling to the U.S. Court of Appeals for the Federal Circuit. The district court litigation will proceed in parallel with the IPR appeals.
Jardiance Patent Litigation
In November 2018, Boehringer Ingelheim (BI), our partner in marketing and development of Jardiance, initiated U.S. patent litigation matters involving Alimta brought pursuantin the U.S. District Court of Delaware alleging infringement arising from Alkem Laboratories Ltd.'s (Alkem) and Ascend Laboratories, LLC's (Ascend) submissions of Abbreviated New Drug Applications (ANDA) seeking approval to market generic versions of Jardiance, Glyxambi, and Synjardy in accordance with the procedures set out in the Drug Price Competition and Patent Term Restoration Act of 1984 (the Hatch-Waxman Act). More than 10 Abbreviated New Drug Applications (ANDAs) seekingParticularly with respect to Jardiance, Alkem's and Ascend's ANDAs seek approval to market generic versions of AlimtaJardiance prior to the expiration of our vitamin regimen patent (expiringthe relevant patents, and allege that certain patents, including in 2021 plus pediatric exclusivity expiring in 2022) have been filed by a number of companies, including Teva Parenteral Medicines, Inc. (Teva) and APP Pharmaceuticals, LLC (APP). These companies have also allegedsome allegations the patent is invalid.
In October 2010, we filed a lawsuit in the U.S. District Court for the Southern District of Indiana against Teva, APP and two other defendants seeking rulings that the U.S. vitamin regimen patent is valid and infringed (the Teva/APP litigation). A trial occurred in August 2013; the sole issue before the district court at that time was to determine patent validity. In March 2014, the district court ruled that the asserted claims of the vitamin regimencompound patent, are valid. The U.S. District Court for the Southern District of Indiana held a hearing on the issue of infringement in May 2015. In September 2015, the district court ruled that the vitamin regimen patent would be infringed by the generic challengers' proposed products. Teva and APP appealed all of the district court’s substantive decisions. In January 2017, the U.S. Court of Appeals for the Federal Circuit affirmed the district court’s decisions concerning validity and infringement. The defendants did not file for writ of certiorari with the U.S. Supreme Court, making the Court of Appeal's decision final.
From 2012 through 2017, we filed similar lawsuits against other ANDA defendants seeking a ruling that our patents are valid and infringed. As a result of the completion of the Teva/APP litigation, the U.S. District Court for the Southern District of Indiana has entered a judgment against five companies. Cases remain pending against an additional six ANDA defendants.
We have filed lawsuits in the U.S. District Court for the Southern District of Indiana alleging infringement against Dr. Reddy's Laboratories (Dr. Reddy's), Hospira, Inc. (Hospira), Apotex, and Actavis LLC in response to their alternative forms of pemetrexed products. In November 2017, the court is expected to hold a hearing on a motion for summary judgment filed by Dr. Reddy's. If that motion is denied, trial is expected in early 2018. We have also filed a lawsuit against Eagle Pharmaceuticals (Eagle) in the U.S. District Court for Delaware. Eagle has filed suit against us in U.S. District Court of New Jersey alleging violations of federal competition law relating to its application for an alternative salt form of pemetrexed (the active ingredient in Alimta).
In June 2016, the U.S. Patent and Trademark Office (USPTO) granted petitions by Neptune Generics, LLC and Sandoz Inc. seeking inter partesreview (IPR) of our vitamin regimen patent. Several additional generic companies filed petitions and joined these proceedings. In October 2017, the USPTO ruled in our favor, finding that the claims of the vitamin regimen patent are valid. The generic companies which filed petitions with the USPTO may appeal these rulings to the U.S. Court of Appeals for the Federal Circuit.
European Patent Litigation and Administrative Proceedings
In the United Kingdom (U.K.), Actavis Group ehf and other Actavis companies (collectively, Actavis) filed litigation asking for a declaratory judgment that commercialization of certain salt forms of pemetrexed would not infringe the vitamin regimen patents for Alimta in the U.K., Italy, France, and Spain. In trial court and court of appeal decisions, the alternative salt forms were found to indirectly infringe the Alimta vitamin regimen patent when reconstituted in saline, but not to directly infringe the patents as an equivalent. We appealed. In July 2017, the U.K. Supreme Court ruled that Actavis’s products directly infringe our vitamin regimen patents in the U.K., Italy, France, and Spain. The U.K. Supreme Court also affirmed an earlier finding by the U.K. Court of Appeal that the Alimta vitamin regimen
patent would be indirectly infringed by commercialization of Actavis’s products diluted in saline. We intend to pursue Actavis and others that launched at risk for damages.
Actavis sought a declaration of non-infringement from the U.K. High Court for a different proposed product diluted in dextrose solution. In February 2016, the trial court ruled that Actavis’ commercialization of this product would not infringe the patent in the U.K., Italy, France, and Spain. We are still seeking to appeal this ruling for procedural purposes, although it has now been superseded by the U.K. Supreme Court's recent decision.
We commenced separate infringement proceedings against certain Actavis companies in Germany. In April 2014, the German trial court ruled in our favor. The defendants appealed and the German Court of Appeal overturned the trial court and ruled that our vitamin regimen patent in Germanyinvalid or would not be infringedinfringed. We are not a party to this litigation. Trial is scheduled for September 2021.
Taltz Patent Litigation
In April 2021, we petitioned the High Court of Ireland to declare invalid the patent that Novartis Pharma AG (Novartis) purchased from Genentech, Inc. in 2020. Novartis responded by filing a dipotassium salt formclaim against us alleging patent infringement related to our commercialization of pemetrexed. In June 2016, the German Federal Supreme Court granted our appeal, vacating the prior decision denyingTaltz and seeking damages for past infringement and returned the case to the German Court of Appeal to reconsider issues relating to infringement.
In separate proceedings, in May 2016 and June 2016, the German courts confirmed preliminary injunctions against Hexal AG (Hexal), which had stated its intention to launch a generic disodium salt product diluted in saline solution, and ratiopharm GmbH (ratiopharm), a subsidiary of Teva, which had stated its intention to launch a proposed alternative salt form of pemetrexed product diluted in dextrose solution. The German Court of Appeal affirmed the preliminaryan injunction against ratiopharmfuture infringement. This matter is ongoing.
Zyprexa Canada Patent Litigation
Beginning in May 2017. The preliminary injunctions against both Hexal and ratiopharm will remainthe mid-2000’s, several generic companies in place pending the outcome of the cases on the merits.
In late 2016, the German courts issued preliminary injunctions against two other companies that had stated their intentions to launch a proposed alternative salt form of pemetrexed product diluted in dextrose solution.
Hexal and Stada Arzneimittel AG have separatelyCanada challenged the validity of our vitamin regimenZyprexa compound patent. In 2012, the Canadian Federal Court of Appeals denied our appeal of a lower court's decision that certain patent beforeclaims were invalid for lack of utility. In 2013, Apotex Inc. and Apotex Pharmachem Inc. (collectively, Apotex) brought claims against us in the German Federal Patent court. The hearing will take place in mid-2018.
We do not anticipate any generic entry intoOntario Superior Court of Justice at Toronto for damages related to our enforcement of the German market at least untilZyprexa compound patent under Canadian regulations governing patented drugs. Apotex seeks compensation based on novel legal theories under the GermanStatute of Monopolies, Trade-Mark Act, and common law. In March 2021, the Ontario Superior Court granted our motion for summary judgement, thereby dismissing Apotex’s case. Apotex appealed that ruling to the Court of Appeal considers the issues remanded by the German Federal Supreme Court in the proceedings against Actavis, or if the injunctions are lifted.
Additional legal proceedings are ongoing in various national courts of other European countries. We are aware that generic competitors have received approval to market generic versions of pemetrexed in major European markets, and that a generic product is currently on the market in at least one major European market. In light of the U.K. Supreme Court's judgment finding infringement in the U.K., Italy, France, and Spain, Actavis has withdrawn its previously launched-at-risk generic products from these markets. We will continue to seek to remove any generic pemetrexed products launched at risk in other European markets.
Japanese Administrative Proceedings
Three separate sets of demands for invalidation of our two vitamin regimen patents, involving several companies, were filed with the Japanese Patent Office (JPO). In November 2015, the JPO issued written decisions in the invalidation trials initiated by Sawai Pharmaceutical Co., Ltd. (Sawai), which had been joined by three other companies, upholding both vitamin regimen patents. In February 2017, the Japan Intellectual Property High Court confirmed the decisions of the JPO and ruled in our favor in the invalidation trials initiated by Sawai. The Japan Intellectual Property High Court’s decisions regarding the demands initiated by Sawai are now final. In May 2017, the JPO resumed one of the two remaining sets of demands, brought by Nipro Corporation. We expect a decision from the JPO on those demands in the first half of 2018. The other set of demands, brought by Hospira and Hospira Japan remain suspended. If upheld through all challenges, these patents provide intellectual property protection for Alimta until June 2021.
Notwithstanding our patents, generic versions of Alimta were approved in Japan starting in February 2016. We do not currently anticipate that generic versions of Alimta will proceed to pricing approval.
Effient Patent Litigation and Administrative Proceedings
We, along with Daiichi Sankyo, Daiichi Sankyo, Inc., and Ube Industries (Ube) are engaged in U.S. patent litigation involving Effient brought pursuant to procedures set out in the Hatch-Waxman Act. More than 10 different companies have submitted ANDAs seeking approval to market generic versions of Effient prior to the expiration of Daiichi Sankyo’s and Ube’s patents (expiring in 2023) covering methods of using Effient with aspirin, and alleging the patents are invalid. One of these ANDAs also alleged that the compound patent for Effient (which expiredOntario in April 2017) was invalid. Beginning in March 2014, we filed lawsuits in the U.S. District Court for the Southern District of Indiana against these companies, seeking a ruling that the patents are valid and infringed. Following the2021.
settlement related to the compound patent challenge, generic products launched in the U.S. in the third quarter of 2017. The remaining cases have been consolidated and stayed. The entry of generic competition has caused a rapid and severe decline in revenue for the product.
In 2015, several generic pharmaceutical companies filed petitions with the USPTO, requesting IPR of the method-of-use patents. In September 2016, the USPTO determined that the method-of-use patents are invalid. Daiichi Sankyo and Ube have appealed these decisions to the U.S. Court of Appeals for the Federal Circuit. We expect a final decision in late 2017. The consolidated lawsuit is currently stayed with respect to all parties pending the outcome of this appeal.
We believe the Effient method-of-use patents are valid and enforceable against these generic manufacturers. However, it is not possible to determine the outcome of the proceedings, and accordingly, we can provide no assurance that we will prevail.
Actos®Product Liability Litigation
Actos® Product Liability
We wereare named along with Takeda Chemical Industries, Ltd. and Takeda affiliates (collectively, Takeda) as a defendant in approximately 6,7004 purported product liability casesclass actions in the U.S.Canada related to the diabetes medication Actos, which we co-promotedcommercialized with Takeda in the U.S. from 1999Canada until 2006.2009, including 1 in Ontario filed December 2011 (Casseres et al. v. Takeda Pharmaceutical North America, Inc., et al.), 1 in Quebec filed July 2012 (Whyte et al. v. Eli Lilly et al.), 1 in Saskatchewan filed November 2017 (Weiler v. Takeda Canada Inc. et al.), and 1 in Alberta filed January 2013 (Epp v. Takeda Canada Inc. et al.). In general, plaintiffs in these actions alleged that Actos caused or contributed to their bladder cancer. Almost all of these cases were included as part of a resolution program announced by Takeda
Byetta® Product Liability
First initiated in April 2015 in which Takeda agreed to pay approximately $2.4 billion to resolve the vast majority of the U.S. product liability lawsuits involving Actos. Although the vast majority of U.S. product liability lawsuits involving ActosMarch 2009, we are included in the resolution program, there may be additional cases pending against Takeda and us following completion of the resolution program.
We are also named along with Takeda as a defendant in three purported product liability class actions in Canada related to Actos, including one in Ontario (Casseres et al. v. Takeda Pharmaceutical North America, Inc., et al. and Carrier et al. v. Eli Lilly et al.), one in Quebec (Whyte et al. v. Eli Lilly et al.), and one in Alberta (Epp v. Takeda Canada et al.). We promoted Actos in Canada until 2009.
We believe these lawsuits are without merit, and we and Takeda are prepared to defend against them vigorously.
Cymbalta® Product Liability Litigation
In October 2012, we were named as a defendant in approximately 570 Byetta product liability lawsuits in the U.S. involving approximately 810 plaintiffs. Approximately 55 of these lawsuits, covering about 285 plaintiffs, are filed in California state court and coordinated in a purported class-action lawsuitLos Angeles Superior Court. Approximately 515 of the lawsuits, covering about 515 plaintiffs, are filed in federal court, the majority of which are coordinated in a multi-district litigation (MDL) in the U.S. District Court for the CentralSouthern District of California (now called Strafford et al. v. Eli LillyCalifornia. NaN lawsuits, representing approximately 4 plaintiffs, have also been filed in various state courts. Approximately 565 of the lawsuits, involving approximately 800 plaintiffs, contain allegations that Byetta caused or contributed to the plaintiffs' cancer (primarily pancreatic cancer or thyroid cancer); while 6 plaintiffs allege Byetta caused or contributed to pancreatitis. In addition, 1 case alleges that Byetta caused or contributed to ampullary cancer. The federal and Company) involving Cymbalta.state trial courts granted summary judgment in favor of us and our co-defendants on the claims alleging pancreatic cancer. The plaintiffs purporting to represent a class of all persons within the U.S. who purchased and/or paid for Cymbalta, asserted claims under the consumer protection statutes of four states, California, Massachusetts, Missouri, and New York, and sought declaratory, injunctive, and monetary relief for various alleged economic injuries arising from discontinuing treatment with Cymbalta. appealed those rulings.
In December 2014, the district court denied the plaintiffs' motion for class certification. Plaintiffs filed a petition withNovember 2017, the U.S. Court of Appeals for the Ninth Circuit requesting permissionreversed the U.S. District Court for the Southern District of California's grant of summary judgment in the MDL based on that court's discovery rulings and remanded the cases back to file an interlocutory appeal of the denial of class certification, which was denied. PlaintiffsU.S. District Court for further proceedings. In March 2021, the U.S. District Court granted summary judgment for the defendants and in April 2021, the plaintiffs filed a second motion for certification under the consumer protection actsnotice of New York and Massachusetts. The district court denied that motion for class certification in July 2015. The district court dismissed the suits and plaintiffs appealedappeal to the U.S. Court of Appeals for the Ninth Circuit. In June 2017, we moved to dismiss the appeal for lackstate court actions, in November 2018, the California Court of jurisdictionAppeal reversed the Los Angeles County Superior Court of California’s grant of summary judgment based on that court's discovery rulings and remanded for further proceedings. In April 2021, the Los Angeles County Superior Court of California granted summary judgment for the defendants.
We are aware of approximately 20 additional claimants who have not yet filed suit. These additional claims allege damages for pancreatic cancer or thyroid cancer.
Cialis Product Liability
First initiated in August 2015, we are named as a defendant in approximately 350 Cialis product liability lawsuits in the U.S. Supreme Court's recent decisionThese cases, many of which were originally filed in Microsoft v. Bakervarious federal courts, contain allegations that Cialis caused or contributed to the plaintiffs' cancer (melanoma). In October 2017,December 2016, the Judicial Panel on Multidistrict Litigation (JPML) granted the plaintiffs' petition to have filed cases and an unspecified number of future cases coordinated into a federal multidistrict litigation (MDL) in the U.S. District Court for the Northern District of California, alongside an existing coordinated proceeding involving Viagra®. The JPML ordered the transfer of the existing cases to the now-renamed MDL In re: Viagra (Sildenafil Citrate) and Cialis (Tadalafil) Products Liability Litigation. In April 2020, the MDL court granted summary judgment to the defendants on all of the claims brought against them by the plaintiffs. In May 2020, plaintiffs filed an appeal in the U.S. Court of Appeals for the Ninth Circuit granted our motion.Circuit. The plaintiffs’ appeal has been administratively closed until August 2021 pending completion of a procedure to resolve the claims in this litigation.
We areJardiance Product Liability
First initiated in January 2019, we and Boehringer Ingelheim Pharmaceuticals, Inc., a subsidiary of BI, have been named as a defendant in approximately 14095 product liability lawsuits involving approximately 1,470 plaintiffsin the U.S., mostly in Stamford Superior Court in Connecticut, alleging that Jardiance caused or contributed to plaintiffs’ Fournier’s gangrene. Our agreement with BI calls for BI to defend and indemnify us against any damages, costs, expenses, and certain other losses with respect to product liability claims in accordance with the terms of the agreement.
Environmental Proceedings
Under the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as "Superfund," we have been designated as one of several potentially responsible parties with respect to the cleanup of fewer than 10 sites. Under Superfund, each responsible party may be jointly and severally liable for the entire amount of the cleanup.
Other Matters
340B Litigation and Investigations
We are the plaintiff in a lawsuit filed in various federalJanuary 2021 in the U.S. District Court for the Southern District of Indiana against the U.S. Department of Health and state courts alleging injuries arising from discontinuationHuman Services (HHS), the Secretary of treatmentHHS, the Health Resources and Services Administration (HRSA), and the Administrator of HRSA. The lawsuit challenges the HHS's December 30, 2020 advisory opinion stating that drug manufacturers are required to deliver discounts under the 340B program to all contract pharmacies. We seek a declaratory judgment that the defendants violated the Administrative Procedures Act and the U.S. Constitution, a preliminary injunction enjoining implementation of the administrative dispute resolution process created by defendants and, with Cymbalta. These include approximately 40 individualit, their application of the advisory opinion, and multi-plaintiff cases filed in California stateother related relief. In March 2021, the court centralizedentered an order preliminarily enjoining the government’s enforcement of the administrative dispute resolution process against Lilly. The matter is ongoing.
In January 2021, we, along with other pharmaceutical manufacturers, were named as a defendant in a California Judicial Counsel Coordination Proceedingpetition currently pending in Los Angeles. The first individual product liability cases were tried in August 2015before the HHS Administration Dispute Resolution Panel. Petitioner seeks declaratory and resulted in defense verdictsother injunctive relief related to the 340B program. As described above, the U.S. District Court for the Southern District of Indiana has entered a preliminary injunction enjoining the government’s enforcement of this administrative dispute resolution process against approximately fiveplaintiffs.us.
In February 2021, we received a civil investigative subpoena from the Office of the Attorney General for the State of Vermont relating to the sale of pharmaceutical products to Vermont covered entities under the 340B program. We believe all these Cymbalta lawsuits and claims are without merit. We have reached a settlement framework which provides for a comprehensive resolution of nearly all of these personal injury claims, filed or unfiled, alleging injuries from discontinuing treatmentcooperating with Cymbalta. There can be no assurances, however, that a final settlement will be reached.this subpoena.
Brazil–EmployeeBrazil Litigation – Cosmopolis Facility
Labor Attorney Litigation
OurFirst initiated in 2008, our subsidiary in Brazil, Eli Lilly do Brasil Limitada (Lilly Brasil), is named in a lawsuit brought by the Labor Attorney for the 15th Region in the Labor Court of Paulinia, State of Sao Paulo, Brazil, alleging possible harm to employees and former employees caused by exposure to heavy metals at a former Lilly Brasil manufacturing facility in Cosmopolis, Brazil, operated by the company between 1977 and 2003. The plaintiffs allege that some employees at the facility were
exposed to benzene and heavy metals; however, Lilly Brasil maintains that these alleged contaminants were never used in the facility. In May 2014, the labor court judge ruled against Lilly Brasil. The judge's ruling orders Lilly Brasil, ordering it to undertake several actions of unspecified financial impact, including paying lifetime medical insurancehealth coverage for the employees and contractors who worked at the Cosmopolis facility more than six months during the affected years and their children born during and after this period. While we cannot currently estimateWe appealed this decision. In July 2018, the rangeappeals court affirmed the labor court's ruling with a liquidated award of reasonably possible financial losses that could arise in300 million Brazilian real (for moral damages, donation of equipment, and creation of a foundation) which, adjusted for inflation and interest using the event we do not ultimately prevail in the litigation, the judge has estimated the total financial impactcurrent Central Bank of the ruling to beBrazil's special system of clearance and custody rate (SELIC), is approximately 1.0 billion950 million Brazilian real (approximately $315$165 million as of September 30, 2017) plus interest. We strongly disagree withMarch 31, 2021). The appeals court restricted the decision andbroad health coverage awarded by the labor court to health problems that claimants could show arose from exposure to the alleged contamination. In August 2019, Lilly Brasil filed an appeal to the superior labor court. In September 2019, the appeals court stayed a number of elements of its prior decision, including the obligation to provide health coverage for contractors, their children, and children of employees who worked at the Cosmopolis facility, pending the determination of Lilly Brasil’s appeal to the superior labor court. The cost of any such health coverage has not been determined.
In June 2019, the Labor Attorney filed an application in May 2014. We expectthe labor court for enforcement of the healthcare coverage granted by the appeals court in its July 2018 ruling and requested restrictions on Lilly Brasil’s assets in Brazil. In July 2019, the labor court issued a ruling requiring either a freeze of Lilly Brasil’s immovable property or, alternatively, a security deposit of 500 million Brazilian real. Lilly Brasil filed a writ of mandamus challenging this ruling, but the court has stayed its decision on this appeal beforewrit and instead directed the endparties to attend conciliation hearings, a process that concluded unsuccessfully in September 2020. Consequently, the partial stay of the year.proceedings relating to Lilly Brasil's application to appeal in the main proceedings has been lifted. In addition, the Labor Attorney's application for preliminary enforcement of the July 2018 healthcare coverage ruling was granted. As the conciliation hearings have been unsuccessful, we have filed a brief to strike the Labor Attorney’s application to enforce the previous healthcare coverage. Lilly Brasil is currently awaiting a determination as to whether its application seeking leave to appeal to the superior labor court has been successful.
Individual Former Employee Litigation
We are also named in approximately 4030 lawsuits filed in the same labor court by individual former employees making similar claims. These lawsuits are each at various stages in the litigation process, with judgments being handed down in approximately half of the lawsuits, nearly all of which are on appeal in the labor courts.
China NDRC Antitrust Matter
The competition authority in China has investigated our distributor pricing practices in China in connection with a broader inquiry into pharmaceutical industry pricing. We have cooperated with this investigation.
Eastern District of Pennsylvania Pricing (Average Manufacturer Price) Inquiry
In November 2014, we, along with another pharmaceutical manufacturer, are named as co-defendants in United States et al. ex rel. Streck v. Takeda Pharm. Am., Inc., et al., which was filed in November 2014 and Elanco Quimica Ltda.unsealed in the U.S. District Court for the Northern District of Illinois. The complaint alleges that the defendants should have also beentreated certain credits from distributors as retroactive price increases and included such increases in calculating average manufacturer prices. Trial is scheduled for February 2022.
Health Choice Alliance
We are named as a defendant in a lawsuit filed in 15th RegionJune 2017 in the LaborU.S. District Court for the Eastern District of Texas seeking damages under the federal anti-kickback statute and state and federal false claims acts for certain patient support programs related to our products Humalog, Humulin, and Forteo. In September 2019, the U.S. District Court granted the U.S. Department of Justice’s motion to dismiss the relator’s second amended complaint. In January 2020, the relator appealed the District Court’s dismissal to the U.S. Court of Paulinia, StateAppeals for the Fifth Circuit. We are also named as a defendant in 2 similar lawsuits filed in Texas and New Jersey state courts in October 2019 seeking damages under the Texas Medicaid Fraud Prevention Act and New Jersey Medicaid False Claims Act, respectively. In November 2020, the Texas state court action was stayed pending a decision by the U.S. Court of Sao Paulo, involving approximately 305 individuals alleging thatAppeals for the companies failedFifth Circuit on the aforementioned District Court appeal. In April 2021, the New Jersey state court action was dismissed with prejudice.
Pricing Litigation, Investigations, and Inquiries
Litigation
In December 2017, we, along with Sanofi-Aventis U.S. LLC (Sanofi) and Novo Nordisk, Inc. (Novo Nordisk) were named as defendants in a consolidated purported class action lawsuit, In re. Insulin Pricing Litigation, in the U.S. District Court for the District of New Jersey relating to provide warnings regarding exposure to heavy metals or proper equipment atinsulin pricing seeking damages under various state consumer protection laws and the former Cosmopolis facility,Federal Racketeer Influenced and that this alleged failure could resultCorrupt Organization Act (federal RICO Act). Separately, in possible harm to employees, former employees,February 2018, we, along with Sanofi and their dependents.Novo Nordisk, were named as defendants in MSP Recovery Claims, Series, LLC et al. v. Sanofi Aventis U.S. LLC et al., in the same court, seeking damages under various state consumer protection laws, common law fraud, unjust enrichment, and the federal RICO Act. In June 2017,both In re. Insulin Pricing Litigation and the court denied the plaintiffs' request for a preliminary injunction. In September 2017, MSP Recovery Claims litigation, the court dismissed all claims exceptunder the onefederal RICO Act and certain state laws. Also, filed byin the first named plaintiff. Thesame court in November 2020, we, along with Sanofi, Novo Nordisk, CVS, Express Scripts, and Optum, have been sued in a purported class action, FWK Holdings, LLC v. Novo Nordisk Inc., et al., for alleged violations of the federal RICO Act as well as the New Jersey RICO Act and anti-trust law. That same group of defendants, along with Medco Health and United Health Group, also have been sued in other plaintiffs havepurported class actions in the same court, Rochester Drug Co-Operative Inc. v. Eli Lilly & Co. et al. and Value Drug Co. v. Eli Lilly & Co. et al. both initiated in March 2020, for alleged violations of the federal RICO Act. In September 2020, the U.S. District Court for the District of New Jersey granted plaintiffs’ motion to consolidate FWK Holdings, LLC v. Novo Nordisk Inc., et al., Rochester Drug Co-Operative Inc. v. Eli Lilly & Co. et al., and Value Drug Co. v. Eli Lilly & Co. et al.
In October 2018, the Minnesota Attorney General’s Office initiated litigation against us, Sanofi, and Novo Nordisk, State of Minnesota v. Sanofi-Aventis U.S. LLC et al., in the U.S. District Court for the District of New Jersey, alleging unjust enrichment, violations of various Minnesota state consumer protection laws, and the federal RICO Act. In March 2021, the U.S. District Court for the District of New Jersey dismissed with prejudice the Minnesota Attorney General’s federal RICO claims and false advertising claims under state law; the consumer fraud and other related state law claims remain ongoing. Additionally, in May 2019, the Kentucky Attorney General’s Office filed a motion for clarification, which may leadcomplaint against us, Sanofi, and Novo Nordisk, Commonwealth of Kentucky v. Novo Nordisk, Inc. et al., in Kentucky state court, alleging violations of the Kentucky consumer protection law, false advertising, and unjust enrichment. In November 2019, Harris County in Texas initiated litigation against us, Sanofi, Novo Nordisk, Express Scripts, CVS, Optum, and Aetna, County ofHarris Texas v. Eli Lilly & Co., et al., in federal court in the Southern District of Texas alleging violations of the federal RICO Act, federal and state antitrust law, and the state deceptive trade practices-consumer protection act. Harris County also alleges common law claims such as fraud, unjust enrichment, and civil conspiracy. This lawsuit relates to our insulin products as well as Trulicity.
Investigations, Subpoenas, and Inquiries
We received a subpoena from the New York and Vermont Attorney General Offices and civil investigative demands from the Washington, New Mexico, and Colorado Attorney General Offices relating to the filingpricing and sale of an appeal.
our insulin products. The Offices of the Attorney General in Mississippi, Washington D.C., California, Florida, Hawaii, and Nevada have requested information relating to the pricing and sale of our insulin products. We believealso received interrogatories and a subpoena from the California Attorney General's Office regarding our competition in the long-acting insulin market. We received 2 requests from the House of Representatives’ Committee on Energy and Commerce and a request from the Senate’s Committee on Health, Education, Labor, and Pensions seeking certain information related to the pricing of insulin products, among other issues. We also received requests from the House of Representatives’ Committee on Oversight and Reform and the Senate’s Committee on Finance, which seek detailed commercial information and business records. In January 2021, the Senate’s Committee on Finance released a report summarizing the findings of its investigation. We are cooperating with all of these lawsuits are without meritaforementioned investigations, subpoenas, and are prepared to defend against them vigorously.inquiries.
Product Liability InsuranceResearch Corporation Technologies, Inc.
Because of the nature of pharmaceutical products, it is possible thatIn April 2016, we could become subject to large numbers of product liability and related claimswere named as a defendant in litigation filed by Research Corporation Technologies, Inc. (RCT) in the future. DueU.S. District Court for the District of Arizona. RCT is seeking damages for breach of contract, unjust enrichment, and conversion related to a very restrictive market for product liability insurance, we are self-insured for product liability losses for all our currently marketed products.
processes used to manufacture certain products, including Humalog and Humulin. A trial date has not been set.
Note 11:10: Other Comprehensive Income (Loss)
The following tables summarize the activity related to each component of other comprehensive income (loss) during the three months ended September 30, 2017March 31, 2021 and 2016:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| (Amounts presented net of taxes) | Foreign Currency Translation Gains (Losses) | | Unrealized Net Gains (Losses) on Securities | | Defined Benefit Pension and Retiree Health Benefit Plans | | Effective Portion of Cash Flow Hedges | | | | Accumulated Other Comprehensive Loss |
| Balance at January 1, 2021 | $ | (1,427.5) | | | $ | 14.8 | | | $ | (4,751.0) | | | $ | (332.7) | | | | | $ | (6,496.4) | |
| | | | | | | | | | | |
| Other comprehensive income (loss) before reclassifications | (249.7) | | | (10.8) | | | 18.8 | | | 252.8 | | | | | 11.1 | |
| Net amount reclassified from accumulated other comprehensive loss | 0 | | | 0.5 | | | 85.9 | | | 3.3 | | | | | 89.7 | |
| Net other comprehensive income (loss) | (249.7) | | | (10.3) | | | 104.7 | | | 256.1 | | | | | 100.8 | |
| | | | | | | | | | | |
| Balance at March 31, 2021 | $ | (1,677.2) | | | $ | 4.5 | | | $ | (4,646.3) | | | $ | (76.6) | | | | | $ | (6,395.6) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| (Amounts presented net of taxes) | Foreign Currency Translation Gains (Losses) | | Unrealized Net Gains (Losses) on Securities | | Defined Benefit Pension and Retiree Health Benefit Plans | | Effective Portion of Cash Flow Hedges | | | | Accumulated Other Comprehensive Loss |
| Balance at January 1, 2020 | $ | (1,678.0) | | | $ | 4.9 | | | $ | (4,638.6) | | | $ | (211.9) | | | | | $ | (6,523.6) | |
| | | | | | | | | | | |
| Other comprehensive income (loss) before reclassifications | (126.5) | | | 1.0 | | | 30.9 | | | (348.2) | | | | | (442.8) | |
| Net amount reclassified from accumulated other comprehensive loss | 0 | | | (0.1) | | | 77.4 | | | 3.2 | | | | | 80.5 | |
| Net other comprehensive income (loss) | (126.5) | | | 0.9 | | | 108.3 | | | (345.0) | | | | | (362.3) | |
| | | | | | | | | | | |
| Balance at March 31, 2020 | $ | (1,804.5) | | | $ | 5.8 | | | $ | (4,530.3) | | | $ | (556.9) | | | | | $ | (6,885.9) | |
|
| | | | | | | | | | | | | | | | | | | |
| (Amounts presented net of taxes) | Foreign Currency Translation Gains (Losses) | | Unrealized Net Gains (Losses) on Securities | | Defined Benefit Pension and Retiree Health Benefit Plans | | Effective Portion of Cash Flow Hedges | | Accumulated Other Comprehensive Loss |
| Balance at July 1, 2017 | $ | (1,349.4 | ) | | $ | 153.2 |
| | $ | (3,348.5 | ) | | $ | (197.6 | ) | | $ | (4,742.3 | ) |
| | | | | | | | | | |
| Other comprehensive income (loss) before reclassifications | 135.8 |
| | 33.9 |
| | (28.7 | ) | | — |
| | 141.0 |
|
| Net amount reclassified from accumulated other comprehensive loss | 8.1 |
| | (23.9 | ) | | 40.1 |
| | 2.4 |
| | 26.7 |
|
| Net other comprehensive income (loss) | 143.9 |
| | 10.0 |
| | 11.4 |
| | 2.4 |
| | 167.7 |
|
| | | | | | | | | | |
Balance at September 30, 2017 (2) | $ | (1,205.5 | ) | | $ | 163.2 |
| | $ | (3,337.1 | ) | | $ | (195.2 | ) | | $ | (4,574.6 | ) |
|
| | | | | | | | | | | | | | | | | | | |
| (Amounts presented net of taxes) | Foreign Currency Translation Gains (Losses) | | Unrealized Net Gains (Losses) on Securities | | Defined Benefit Pension and Retiree Health Benefit Plans | | Effective Portion of Cash Flow Hedges | | Accumulated Other Comprehensive Loss |
| Balance at July 1, 2016 | $ | (1,273.0 | ) | | $ | 36.8 |
| | $ | (2,919.1 | ) | | $ | (215.9 | ) | | $ | (4,371.2 | ) |
| | | | | | | | | | |
| Other comprehensive income (loss) before reclassifications | 5.8 |
| | 48.9 |
| | 18.7 |
| | — |
| | 73.4 |
|
| Net amount reclassified from accumulated other comprehensive loss | — |
| | (0.4 | ) | | 38.0 |
| | 2.5 |
| | 40.1 |
|
| Net other comprehensive income (loss) | 5.8 |
| | 48.5 |
| | 56.7 |
| | 2.5 |
| | 113.5 |
|
| | | | | | | | | | |
Balance at September 30, 2016 (2) | $ | (1,267.2 | ) | | $ | 85.3 |
| | $ | (2,862.4 | ) | | $ | (213.4 | ) | | $ | (4,257.7 | ) |
The following tables summarize the activity related to each component of other comprehensive income (loss) during the nine months endedSeptember 30, 2017 and 2016:
|
| | | | | | | | | | | | | | | | | | | |
| (Amounts presented net of taxes) | Foreign Currency Translation Gains (Losses) | | Unrealized Net Gains (Losses) on Securities | | Defined Benefit Pension and Retiree Health Benefit Plans | | Effective Portion of Cash Flow Hedges | | Accumulated Other Comprehensive Loss |
Balance at January 1, 2017 (1) | $ | (1,867.3 | ) | | $ | 224.0 |
| | $ | (3,371.6 | ) | | $ | (210.9 | ) | | $ | (5,225.8 | ) |
| | | | | | | | | | |
| Other comprehensive income (loss) before reclassifications | 653.7 |
| | 9.6 |
| | (83.3 | ) | | 8.4 |
| | 588.4 |
|
| Net amount reclassified from accumulated other comprehensive loss | 8.1 |
| | (70.4 | ) | | 117.8 |
| | 7.3 |
| | 62.8 |
|
| Net other comprehensive income (loss) | 661.8 |
| | (60.8 | ) | | 34.5 |
| | 15.7 |
| | 651.2 |
|
| | | | | | | | | | |
Balance at September 30, 2017 (2) | $ | (1,205.5 | ) | | $ | 163.2 |
| | $ | (3,337.1 | ) | | $ | (195.2 | ) | | $ | (4,574.6 | ) |
|
| | | | | | | | | | | | | | | | | | | |
| (Amounts presented net of taxes) | Foreign Currency Translation Gains (Losses) | | Unrealized Net Gains (Losses) on Securities | | Defined Benefit Pension and Retiree Health Benefit Plans | | Effective Portion of Cash Flow Hedges | | Accumulated Other Comprehensive Loss |
Balance at January 1, 2016 (1) | $ | (1,360.2 | ) | | $ | 10.1 |
| | $ | (3,012.1 | ) | | $ | (218.5 | ) | | $ | (4,580.7 | ) |
| | | | | | | | | | |
| Other comprehensive income (loss) before reclassifications | 18.5 |
| | 61.9 |
| | 39.2 |
| | (2.2 | ) | | 117.4 |
|
| Net amount reclassified from accumulated other comprehensive loss | 74.5 |
| | 13.3 |
| | 110.5 |
| | 7.3 |
| | 205.6 |
|
| Net other comprehensive income (loss) | 93.0 |
| | 75.2 |
| | 149.7 |
| | 5.1 |
| | 323.0 |
|
| | | | | | | | | | |
Balance at September 30, 2016 (2) | $ | (1,267.2 | ) | | $ | 85.3 |
| | $ | (2,862.4 | ) | | $ | (213.4 | ) | | $ | (4,257.7 | ) |
(1) Accumulated other comprehensive loss as of January 1, 2017 consists of $5,274.0 million of accumulated other comprehensive loss attributable to controlling interest and $48.2 million of accumulated other comprehensive income attributable to non-controlling interest. The accumulated other comprehensive loss attributable to non-controlling interest as of January 1, 2016 is immaterial.
(2)Accumulated other comprehensive loss as of September 30, 2017 consists of $4,609.4 million of accumulated other comprehensive loss attributable to controlling interest and $34.8 million of accumulated other comprehensive income attributable to non-controlling interest. The accumulated other comprehensive loss attributable to non-controlling interest as of September 30, 2016 is immaterial.
The tax effects on the net activity related to each component of other comprehensive income (loss) were as follows: | | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three Months Ended March 31, | |
| Tax benefit (expense) | 2017 | | 2016 | | 2017 | | 2016 | Tax benefit (expense) | 2021 | | 2020 | |
| Foreign currency translation gains/losses | $ | 33.9 |
| | $ | 14.4 |
| | $ | 149.7 |
| | $ | 16.1 |
| Foreign currency translation gains/losses | $ | (75.3) | | | $ | (38.5) | | |
| Unrealized net gains/losses on securities | (4.2 | ) | | (26.1 | ) | | 25.4 |
| | (40.5 | ) | Unrealized net gains/losses on securities | 4.4 | | | (0.3) | | |
| Defined benefit pension and retiree health benefit plans | (9.4 | ) | | (9.5 | ) | | (24.0 | ) | | (57.0 | ) | Defined benefit pension and retiree health benefit plans | (31.3) | | | (25.7) | | |
| Effective portion of cash flow hedges | (1.3 | ) | | (1.3 | ) | | (8.4 | ) | | (2.7 | ) | Effective portion of cash flow hedges | (68.1) | | | 91.7 | | |
| Benefit/(provision) for income taxes allocated to other comprehensive income (loss) items | $ | 19.0 |
|
| $ | (22.5 | ) |
| $ | 142.7 |
|
| $ | (84.1 | ) | |
| Benefit (provision) for income taxes allocated to other comprehensive income (loss) items | | Benefit (provision) for income taxes allocated to other comprehensive income (loss) items | $ | (170.3) | | | $ | 27.2 | | |
Except for the tax effects of foreign currency translation gains and losses related to our foreign currency-denominated notes, cross-currency interest rate swaps, and other foreign currency exchange contracts designated as net investment hedges (see Note 6), income taxes were not provided for foreign currency translation. Generally, the assets and liabilities of foreign operations are translated into U.S. dollars using the current exchange rate. For those operations, changes in exchange rates generally do not affect cash flows; therefore, resulting translation adjustments are made in shareholders' equity rather than in the consolidated condensed statements of operations.
Reclassifications out of accumulated other comprehensive loss were as follows:
| | | | | | | | | | | | | | | | | | | | | |
| Details about Accumulated Other Comprehensive Loss Components | | Three Months Ended March 31, | | | Affected Line Item in the Consolidated Condensed Statements of Operations |
|
| 2021 | | 2020 | | | | |
| Amortization of retirement benefit items: | | | | | | | | | |
| Prior service benefits, net | | $ | (13.8) | | | $ | (13.8) | | | | | | Other–net, (income) expense |
| Actuarial losses, net | | 122.6 | | | 111.8 | | | | | | Other–net, (income) expense |
| Total before tax | | 108.8 | | | 98.0 | | | | | | |
| Tax benefit | | (22.9) | | | (20.6) | | | | | | Income taxes |
| Net of tax | | 85.9 | | | 77.4 | | | | | | |
| | | | | | | | | |
| Other, net of tax | | 3.8 | | | 3.1 | | | | | | Other–net, (income) expense |
| | | | | | | | | |
| Total reclassifications, net of tax | | $ | 89.7 | | | $ | 80.5 | | | | | | |
|
| | | | | | | | | | | | | | | | | | |
| | Details about Accumulated Other Comprehensive Loss Components | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | Affected Line Item in the Consolidated Condensed Statements of Operations |
| |
| | | 2017 | | 2016 | | 2017 | | 2016 |
| | Amortization of retirement benefit items: | | | | | | | | | |
| | Prior service benefits, net | | $ | (21.1 | ) | | $ | (18.6 | ) | | $ | (63.2 | ) | | $ | (55.7 | ) | (1) |
| | Actuarial losses, net | | 77.1 |
| | 76.2 |
| | 229.4 |
| | 228.9 |
| (1) |
| | Total before tax | | 56.0 |
| | 57.6 |
| | 166.2 |
| | 173.2 |
| |
| | Tax benefit | | (15.9 | ) | | (19.6 | ) | | (48.4 | ) | | (62.7 | ) | Income taxes |
| | Net of tax | | 40.1 |
| | 38.0 |
| | 117.8 |
| | 110.5 |
| |
| | | | | | | | | | | |
| | Unrealized gains/losses on available-for-sale securities: | | | | | | | | | |
| | Realized gains, net before tax | | (36.7 | ) | | (12.0 | ) | | (108.2 | ) | | (6.8 | ) | Other–net, (income) expense |
| | Impairment losses | | — |
| | 11.4 |
| | — |
| | 27.3 |
| Other–net, (income) expense |
| | Total before tax | | (36.7 | ) | | (0.6 | ) | | (108.2 | ) | | 20.5 |
| |
| | Tax (benefit) expense | | 12.8 |
| | 0.2 |
| | 37.8 |
| | (7.2 | ) | Income taxes |
| | Net of tax | | (23.9 | ) | | (0.4 | ) | | (70.4 | ) | | 13.3 |
| |
| | Other, net of tax (2) | | 10.5 |
| | 2.5 |
| | 15.4 |
| | 81.8 |
| Other–net, (income) expense |
| | Total reclassifications for the period (net of tax) | | $ | 26.7 |
| | $ | 40.1 |
| | $ | 62.8 |
| | $ | 205.6 |
| |
(1) These accumulated other comprehensive loss components are included in the computation of net periodic benefit (income) cost (see Note 9).
(2) Amount for the nine months ended September 30, 2016 included primarily $74.5 million of foreign currency translation losses.
Note 12:11: Other–Net, (Income) Expense
Other–net, (income) expense consisted of the following:
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| | 2021 | | 2020 | | | | |
| Interest expense | $ | 87.8 | | | $ | 92.5 | | | | | |
| Interest income | (5.5) | | | (14.3) | | | | | |
| Net investment gains on equity securities | (301.5) | | | (186.6) | | | | | |
| Retirement benefit plans | (73.4) | | | (44.6) | | | | | |
| Other (income) expense | (28.5) | | | 63.9 | | | | | |
| Other–net, (income) expense | $ | (321.1) | | | $ | (89.1) | | | | | |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Interest expense | $ | 61.9 |
| | $ | 47.2 |
| | $ | 162.1 |
| | $ | 133.8 |
|
| Interest income | (45.1 | ) | | (29.1 | ) | | (114.6 | ) | | (76.8 | ) |
| Venezuela charge | — |
| | — |
| | — |
| | 203.9 |
|
| Other income | (2.9 | ) | | (45.3 | ) | | (44.8 | ) | | (160.3 | ) |
| Other–net, (income) expense | $ | 13.9 |
|
| $ | (27.2 | ) |
| $ | 2.7 |
|
| $ | 100.6 |
|
Due to the financial crisis in Venezuela and the significant deterioration of the bolívar, we changed the exchange rate used to translate the assets and liabilities of our subsidiaries in Venezuela which resulted in a first quarter of 2016 charge of $203.9 million. Prior to this change, we used the Supplementary Foreign Currency Administration System (SICAD) rate; however, this official rate was discontinued in the first quarter of 2016. After considering several factors, including the future uncertainty of the Venezuelan economy, published exchange rates, and the limited amount of foreign currency exchanged, we changed to the Divisa Complementaria (DICOM) rate.
Note 13: Segment Information
We have two operating segments—human pharmaceutical products and animal health products. Our operating segments are distinguished by the ultimate end user of the product—humans or animals. Performance is evaluated based on profit or loss from operations before income taxes.
|
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Segment revenue—to unaffiliated customers: | | | | | | | |
| Human pharmaceutical products: | | | | | | | |
| Endocrinology: | | | | | | | |
Humalog® | $ | 696.2 |
| | $ | 640.8 |
| | $ | 2,083.0 |
| | $ | 1,949.0 |
|
Trulicity® | 527.7 |
| | 243.6 |
| | 1,380.8 |
| | 588.5 |
|
Forteo® | 441.7 |
| | 391.2 |
| | 1,235.8 |
| | 1,077.5 |
|
Humulin® | 300.5 |
| | 322.0 |
| | 972.8 |
| | 1,010.6 |
|
| Trajenta | 153.3 |
| | 115.4 |
| | 408.2 |
| | 330.8 |
|
| Other Endocrinology | 441.3 |
| | 262.8 |
| | 1,094.4 |
| | 734.5 |
|
| Total Endocrinology | 2,560.7 |
| | 1,975.8 |
| | 7,175.0 |
| | 5,690.9 |
|
| | | | | | | | |
| Oncology: | | | | | | | |
| Alimta | 514.5 |
| | 570.4 |
| | 1,537.3 |
| | 1,741.7 |
|
Cyramza® | 196.0 |
| | 159.0 |
| | 553.5 |
| | 437.0 |
|
| Erbitux | 163.5 |
| | 184.6 |
| | 477.0 |
| | 533.3 |
|
| Other Oncology | 83.6 |
| | 33.3 |
| | 232.7 |
| | 100.3 |
|
| Total Oncology | 957.6 |
| | 947.3 |
| | 2,800.5 |
| | 2,812.3 |
|
| | | | | | | | |
| Cardiovascular: | | | | | | | |
Cialis® | 564.9 |
| | 588.2 |
| | 1,725.7 |
| | 1,795.3 |
|
| Effient | 55.9 |
| | 127.7 |
| | 326.6 |
| | 394.3 |
|
| Other Cardiovascular | 42.1 |
| | 57.6 |
| | 120.2 |
| | 165.4 |
|
| Total Cardiovascular | 662.9 |
| | 773.5 |
| | 2,172.5 |
| | 2,355.0 |
|
| | | | | | | | |
| Neuroscience: | | | | | | | |
Cymbalta (1) | 183.2 |
| | 313.5 |
| | 564.4 |
| | 748.7 |
|
Strattera® | 137.1 |
| | 198.8 |
| | 519.9 |
| | 611.5 |
|
Zyprexa® | 140.6 |
| | 148.9 |
| | 428.9 |
| | 572.3 |
|
| Other Neuroscience | 46.8 |
| | 47.3 |
| | 160.5 |
| | 137.4 |
|
| Total Neuroscience | 507.7 |
| | 708.5 |
| | 1,673.7 |
| | 2,069.9 |
|
| | | | | | | | |
| Immunology: | | | | | | | |
Taltz® | 151.3 |
| | 32.5 |
| | 386.7 |
| | 51.9 |
|
| Other Immunology | 16.3 |
| | — |
| | 22.9 |
| | — |
|
| Total Immunology | 167.6 |
| | 32.5 |
| | 409.6 |
| | 51.9 |
|
| | | | | | | | |
| Other pharmaceuticals | 60.9 |
| | 47.9 |
| | 184.5 |
| | 161.1 |
|
| Total human pharmaceutical products | 4,917.4 |
| | 4,485.5 |
| | 14,415.8 |
| | 13,141.1 |
|
| Animal health products | 740.6 |
| | 706.2 |
| | 2,294.8 |
| | 2,320.5 |
|
| Revenue | $ | 5,658.0 |
| | $ | 5,191.7 |
| | $ | 16,710.6 |
| | $ | 15,461.6 |
|
| | | | | | | | |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Segment profits: | | | | | | | |
| Human pharmaceutical products | $ | 1,242.5 |
| | $ | 1,089.0 |
| | $ | 3,765.7 |
| | $ | 2,975.3 |
|
| Animal health products | 121.9 |
| | 104.9 |
| | 422.6 |
| | 464.3 |
|
| Total segment profits | $ | 1,364.4 |
| | $ | 1,193.9 |
| | $ | 4,188.3 |
| | $ | 3,439.6 |
|
| | | | | | | | |
| Reconciliation of total segment profits to consolidated income before taxes: | | | | | | | |
| Segment profits | $ | 1,364.4 |
| | $ | 1,193.9 |
| | $ | 4,188.3 |
| | $ | 3,439.6 |
|
| Other profits (losses): | | | | | | | |
| Acquired in-process research and development (Note 3) | (205.0 | ) | | — |
| | (1,062.6 | ) | | — |
|
| Amortization of intangible assets | (155.8 | ) | | (177.7 | ) | | (510.0 | ) | | (518.8 | ) |
| Asset impairment, restructuring, and other special charges (Note 5) | (406.5 | ) | | (45.5 | ) | | (670.4 | ) | | (234.9 | ) |
| Inventory fair value adjustment related to BIVIVP (Note 3) | (5.5 | ) | | — |
| | (32.0 | ) | | — |
|
| Venezuela charge (Note 12) | — |
| | — |
| | — |
| | (203.9 | ) |
| Consolidated income before taxes | $ | 591.6 |
| | $ | 970.7 |
| | $ | 1,913.3 |
| | $ | 2,482.0 |
|
Numbers may not add due to rounding.
(1) Cymbalta revenues include reductions to the reserve for expected product returns of approximately $145 million and $175 million during the three and nine months ended September 30, 2016, respectively.
For internal management reporting presented to the chief operating decision maker, certain costs are fully allocated to our human pharmaceutical products segment and therefore are not reflected in the animal health segment's profit. Such items include costs associated with treasury-related financing, global administrative services, certain acquisition-related transaction costs, and certain manufacturing costs.
Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
Results of Operations
(Tables present dollars in millions, except per-share data)
General
Management’s discussion and analysis of results of operations and financial condition is intended to assist the reader in understanding and assessing significant changes and trends related to the results of operations and financial position of our consolidated company. This discussion and analysis should be read in conjunction with the consolidated condensed financial statements and accompanying footnotes in Part I, Item 1 of Part I of this Quarterly Report on Form 10-Q. Certain statements in this Part I, Item 2 of Part I of this Quarterly Report on Form 10-Q constitute forward-looking statements. Various risks and uncertainties, including those discussed in "Forward-Looking Statements" in this Quarterly Report on Form 10-Q and “Risk Factors” in Part I, Item 1A “Risk Factors,” of Part I of our Annual Report on Form 10-K for the year ended December 31, 2016,2020, may cause our actual results, financial position, and cash generated from operations to differ materially from these forward-looking statements. Executive Overview
This section provides an overview of our financial results, recent product and late-stage pipeline developments, and other matters affecting our company and the pharmaceutical industry. Earnings per share (EPS) data are presented on a diluted basis.
COVID-19 Pandemic
In response to the COVID-19 pandemic, we have been focused on maintaining a reliable supply of our medicines; reducing the strain on the medical system; developing treatments for COVID-19; protecting the health, safety, and well-being of our employees; supporting our communities; and ensuring affordability of and access to our medicines, particularly insulin.
We have experienced negative impacts to our underlying business due to the COVID-19 pandemic, including decreases in new prescriptions as a result of fewer patient visits to physician’s offices to begin or change treatment, changes in payer segment mix, and the use of patient affordability programs in the United States (U.S.) due to increased unemployment. Additionally, we have experienced, and may continue to experience, decreased demand as a result of lack of normal access and fewer in-person interactions by patients and our employees with the healthcare system. In certain locations in the U.S. and around the world with COVID-19 outbreaks, we temporarily halted in-person interactions by our employees with healthcare providers and increased virtual interactions. While in-person interactions have resumed in many locations, we may decide to halt such activity in the future and, in those cases, expect to resume such interactions as it is safe to do so and in compliance with applicable guidance and requirements. We may experience additional pricing pressures resulting from the financial strain of the COVID-19 pandemic on government-funded healthcare systems around the world.
We remain committed to discovering and developing new treatments for the patients we serve. At the beginning of the COVID-19 pandemic, we paused new clinical trial starts and enrollment in new trials in order to reduce the strain on the medical system, and we have resumed this activity in our clinical trials. However, significant delays or unexpected issues, such as higher discontinuation rates or delays accumulating data, affecting the timing, conduct, or regulatory review of our clinical trials, could adversely affect our ability to commercialize some assets in our product pipeline if the COVID-19 pandemic continues for a protracted period.
Since the start of the pandemic we have been working with a variety of organizations, including governmental agencies, to facilitate access to our COVID-19 therapies in various countries. The U.S. Food and Drug Administration (FDA) granted Emergency Use Authorizations (EUA) for bamlanivimab and bamlanivimab and etesevimab administered together for higher-risk patients who have been recently diagnosed with mild-to-moderate COVID-19 and for baricitinib in combination with remdesivir in hospitalized COVID-19 patients. We have taken several steps in order to transition from bamlanivimab administered alone to bamlanivimab and etesevimab administered together in the U.S. for the treatment of COVID-19. In April 2021, we requested the FDA revoke the EUA for bamlanivimab alone. This request was not due to any new safety concern. The FDA subsequently revoked the EUA for bamlanivimab alone. We have agreed with the U.S. government to supply bamlanivimab and etesevimab together and to supply etesevimab to complement doses of bamlanivimab that the U.S. government previously purchased. As a result, we terminated the purchase agreement with the U.S. government to supply bamlanivimab alone and cancelled orders for any remaining doses scheduled to be delivered. The European Medicines Agency's (EMA) Committee for Medicinal Products for Human Use (CHMP) issued a positive opinion for bamlanivimab alone and for bamlanivimab and etesevimab administered together for patients that do not require supplemental oxygen and who are at high risk of progressing to severe COVID-19.
We face unique risks and uncertainties in our development, manufacture, and uptake of potential treatments for COVID-19, including vulnerability to supply chain disruptions, higher manufacturing costs, difficulties in manufacturing sufficient quantities of our therapies, heightened regulatory scrutiny of our manufacturing practices, restrictions on administration that limit widespread and timely access to our therapies, and risks related to handling, return, and/or refund of product after delivery by us. Expedited authorization processes, including our EUA for bamlanivimab and etesevimab administered together, have allowed restricted distribution of products with less than typical safety and efficacy data, and additional data that become available may call into question the safety or effectiveness of our COVID-19 therapies. Additionally, the availability of superior or competitive therapies, or preventative measures, such as vaccines, coupled with the transient nature of pandemics, could negatively impact or eliminate demand for our COVID-19 therapies. Mutations or the spread of other variants of the coronavirus could also render our therapies ineffective. We may also be required to accept returns of certain bamlanivimab and etesevimab previously supplied together in the U.S. if the relevant EUA is revoked or terminated due to safety and efficacy concerns. In addition, evolving regulatory priorities have intensified governmental scrutiny of our operations, including our compliance with Good Manufacturing Practices (cGMP), quality assurance, and similar regulations relating to our manufacture of COVID-19 therapies and other medicines. Any of these risks could prevent us from recouping our substantial investments in the research, development, and manufacture of our COVID-19 therapies. These risks could also affect other aspects of our business, including potentially resulting in delays or denials in the approval or launch of other products.
Our ability to continue to operate without significant negative impacts will in part depend on our ability to protect our employees and our supply chain. We have taken steps to protect our employees worldwide, with particular measures in place for those working in our manufacturing sites and distribution facilities. We have been able to largely maintain our normal operations. However, uncertainty resulting from the COVID-19 pandemic could have an adverse impact on our manufacturing operations, global supply chain, and distribution systems, which could impact our ability to produce and distribute our products and the ability of third parties on which we rely to fulfill their obligations to us, and could increase our expenses.
Although the COVID-19 pandemic has affected our operations and demand for our products, it has not negatively impacted our liquidity position. We expect to continue to generate cash flows to meet our short-term liquidity needs and to have access to liquidity via the short-term and long-term debt markets. As part of our response to the COVID-19 pandemic, we worked quickly to ramp up the manufacturing of our COVID-19 antibodies in order to ensure ample supply. Due in part to the termination of the purchase agreement with the U.S. government to supply bamlanivimab alone and the cancellation of orders for the remaining doses of bamlanivimab alone that were scheduled to be delivered pursuant to the agreement, we have experienced impairment charges for excess inventory related to our COVID-19 antibodies during the three months ended March 31, 2021. We could experience additional impairments of our assets, including inventory related to our COVID-19 antibodies, or significant changes in the fair value of our assets due to the COVID-19 pandemic, including as a result of the factors discussed above.
See “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 for additional information on risk factors that could impact our results.
Financial Results
The following table summarizes our key operating results: | | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | | Three Months Ended March 31, | | |
| | 2017 | | 2016 | | Percent Change | | 2017 | | 2016 | | Percent Change | | 2021 | | 2020 | | Percent Change | |
| Revenue | $ | 5,658.0 |
| | $ | 5,191.7 |
| | 9 | | $ | 16,710.6 |
| | $ | 15,461.6 |
| | 8 | Revenue | $ | 6,805.6 | | | $ | 5,859.8 | | | 16 | |
| Gross margin | 4,091.9 |
| | 3,790.8 |
| | 8 | | 12,265.2 |
| | 11,272.7 |
| | 9 | Gross margin | 4,927.0 | | | 4,644.7 | | | 6 | |
| Gross margin as a percent of revenue | 72.3 | % | | 73.0 | % | |
| | 73.4 | % | | 72.9 | % | |
| Gross margin as a percent of revenue | 72.4 | % | | 79.3 | % | | |
Operating expense (1) | $ | 2,874.9 |
| | $ | 2,801.8 |
| | 3 | | $ | 8,616.2 |
| | $ | 8,455.2 |
| | 2 | |
| Acquired in-process research and development | 205.0 |
| | — |
| | NM | | 1,062.6 |
| | — |
| | NM | |
| Operating expenses | | Operating expenses | $ | 3,260.8 | | | $ | 2,941.7 | | | 11 | |
| Acquired in-process research and development (IPR&D) | | Acquired in-process research and development (IPR&D) | 299.3 | | | 52.3 | | | NM | |
| Asset impairment, restructuring, and other special charges | 406.5 |
| | 45.5 |
| | NM | | 670.4 |
| | 234.9 |
| | 185 | Asset impairment, restructuring, and other special charges | 211.6 | | | 59.9 | | | NM | |
| | Net income | 555.6 |
| | 778.0 |
| | (29) | | 1,452.8 |
| | 1,965.8 |
| | (26) | Net income | 1,355.3 | | | 1,456.5 | | | (7) | |
| Earnings per share | 0.53 |
| | 0.73 |
| | (27) | | 1.37 |
| | 1.85 |
| | (26) | |
| | EPS | | EPS | 1.49 | | | 1.60 | | | (7) | |
(1) NM - not meaningful
Revenue increased for the three months ended March 31, 2021 driven by increased volume and the favorable impact of foreign exchange rates, partially offset by lower realized prices. Operating expense consistsexpenses, defined as the sum of research and development and marketing, selling, and administrative expenses.
NM - not meaningful
In September 2017, we announced plansexpenses, increased for the three months ended March 31, 2021, primarily due to reduce our cost structure research and development expenses for COVID-19 antibody therapies and baricitinib, as well as higher research and development expenses for late-stage assets. The decrease in net income and EPS for the three months ended March 31, 2021 was primarily driven by streamlining our operations. Global workforce reductions, including those from a U.S. voluntary early retirement program, are expected to impact approximately 3,500 positions. These plans are expected to result in charges of approximately $1.2 billion (pretax). In addition to thehigher research and development expenses, higher acquired IPR&D, and higher asset impairment, restructuring, and other special charges, of $406.5 million that were incurred during the three months ended September 30, 2017, which are discussed further below, we expect to incur additional charges of approximately $800 million in the fourth quarter of 2017 related to these plans. The fourth quarter charge could vary depending on the composition of participants within the United States (U.S.) voluntary early retirement program, as well as partially offset by higher gross margin, higher other actions taken to improve our cost structure.income, and lower income tax expense.
We are reviewing strategic alternatives for Elanco Animal Health (our animal health segment), including an initial public offering, merger, sale, or retention of the business, and will provide an update no later than the middle of 2018.
Revenue increased for the three and nine months ended September 30, 2017 primarily driven by increased volume for Trulicity®, Taltz®, Basaglar®, and other new pharmaceutical products. Operating expense increased for the three months ended September 30, 2017, driven by an increase in research and development expense. Operating expense increased for the nine months ended September 30, 2017 driven by an increase in marketing, selling, and administrative expense. The following highlighted items also affect comparisons of our financial results for the three and nine months ended September 30, 2017March 31, 2021 and 2016:2020:
20172021
Acquired in-process research and development (IPR&D) (NoteIPR&D (See Note 3 to the consolidated condensed financial statements)
•We recognized acquired IPR&D charges of $205.0$299.3 million (pretax), or $0.13 per share, and $1.06 billion (pretax), or $0.94 per share, for the three and ninemonths ended September 30, respectively,March 31, 2021 related to upfront fees paid in connectioncollaborations with the collaboration agreements with Nektar Therapeutics (Nektar) and KeyBioscience AG (KeyBioscience). The charges for the nine months ended September 30 also included the charge associated with the acquisition of CoLucidRigel Pharmaceuticals, Inc. (CoLucid) which was not tax-deductible.
(Rigel), Precision BioSciences, Inc. (Precision), Merus N.V. (Merus), and Asahi Kasei Pharma Corporation (Asahi).Asset Impairment, Restructuring, and Other Special Charges (Note(See Note 5 to the consolidated condensed financial statements)
| |
• | We recognized charges of $406.5 million (pretax), or $0.29 per share, and $670.4 million (pretax), or $0.48 per share, for the three and nine months ended September 30, respectively. The charges for the third quarter were partially associated with asset impairments related to lower projected revenue for Posilac® (rbST), as well as severance costs incurred as a result of actions taken to reduce the company's cost structure as discussed above. The charges for the nine months ended September 30 were primarily due to severance costs incurred as a result of actions taken to reduce our cost structure, charges associated with the Posilac impairment, integration costs related to the acquisition of Novartis Animal Health (Novartis AH), asset impairments and other charges related to animal health assets, as well as exit costs due to site closures.
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2016•We recognized charges of $211.6 million for the three months ended March 31, 2021 primarily related to an intangible asset impairment resulting from the decision to sell the rights to Qbrexza®, as well as acquisition and integration costs associated with the acquisition of Prevail Therapeutics Inc. (Prevail).
Other-Net, (Income) Expense (See Note 6 to the consolidated condensed financial statements)
•We recognized other income of $301.5 million of net investment gains on equity securities.
2020
Acquired IPR&D (See Note 3 to the consolidated condensed financial statements)
•We recognized acquired IPR&D charges of $52.3 million for the three months ended March 31, 2020 related to a collaboration with Sitryx Therapeutics Limited (Sitryx).
Asset Impairment, Restructuring, and Other Special Charges (Note(See Note 5 to the consolidated condensed financial statements)
•We recognized charges of $45.5$59.9 million (pretax), or $0.03 per share, and $234.9 million (pretax), or $0.19 per share, for the three and nine months ended September 30, respectively,March 31, 2020 primarily related to theacquisition and integration costs for ourassociated with the acquisition of Novartis AH and severance costs. The charges for the nine months ended September 30 also included asset impairment charges related to the closure of an animal health manufacturing facility in Ireland.Dermira, Inc. (Dermira).
Other–Net,Other-Net, (Income) Expense (Note 12(See Note 6 to the consolidated condensed financial statements)
•We recognized chargesother income of $203.9$186.6 million (pretax), or $0.19 per share, in the first quarter, related to the impact of the Venezuelan financial crisis, including the significant deterioration of the bolívar.net investment gains on equity securities.
The decreases in net income and EPS for the third quarter of 2017 were due to higher asset impairment, restructuring, and other special charges, higher acquired IPR&D charges, and, to a lesser extent, higher operating expenses, partially offset by a higher gross margin and lower income taxes. The decreases in net income and EPS for the nine months ended September 30, 2017, were due to higher acquired IPR&D charges and, to a lesser extent, asset impairment, restructuring, and other special charges, and higher operating expenses, partially offset by a higher gross margin and, to a lesser extent, the 2016 charge related to the Venezuelan financial crisis, including the significant deterioration of the bolívar.
Late-Stage Pipeline
Our long-term success depends to a great extent on our ability to continue tocontinually discover or acquire, develop, and developcommercialize innovative pharmaceutical products and acquire or collaborate on molecules currently in development by other biotechnology or pharmaceutical companies.new medicines. We currently have approximately 50 potential new drugs45 candidates in human testingclinical development or under regulatory review, and a larger number of projects in preclinical research.the discovery phase.
The following new molecular entities (NMEs) have been approved by regulatory authorities in at least one of the major geographies for use in the diseases described. The first quarter in which each NME initially was approved in any major geography for any indication is shown in parentheses:
Abemaciclib (Verzenio™) (Q3 2017)—a small molecule cell-cycle inhibitor, selective for cyclin-dependent kinases 4 and 6 for the treatment of metastatic breast cancer. In the U.S., abemaciclib is protected by a compound patent (2029, not including possible patent extension).
Baricitinib (Olumiant®) (Q1 2017)—a Janus tyrosine kinase inhibitor for the treatment of moderate-to-severe active rheumatoid arthritis (in collaboration with Incyte Corporation).
Olaratumab* (Lartruvo™) (Q4 2016)—a human lgG1 monoclonal antibody for the treatment of advanced soft tissue sarcoma.
The following NME has been submitted for regulatory review in at least one of the major geographies for potential use in the disease described. The first quarter in which the NME initially was submitted in any major geography for any indication is shown in parentheses:
Galcanezumab* (Q3 2017)—a once-monthly subcutaneously injected calcitonin gene-related peptide (CGRP) antibody for the treatment of migraine prevention. In the U.S., galcanezumab is protected by a compound patent (2033). Refer to Item 1, "Legal Proceedings—Other Patent Matters" for discussion of the lawsuit filed by Teva Pharmaceuticals International GMBH.
The following NMEs and diagnostic agent are currently in Phase III clinical trial testingtrials or have been submitted for potential useregulatory review or have received first regulatory approval in the diseases described. The first quarterU.S., Europe, or Japan in which each NME and diagnostic agent initially entered2021. In addition, the following table includes certain NMEs currently in Phase III for any indication is shown in parentheses:
Ultra-rapid insulin* (Q3 2017)—an ultra-rapid insulin for the treatment of type 1 and type 2 diabetes.
Flortaucipir** (Q3 2015)—a positron emission tomography (PET) tracer intended to image tau (or neurofibrillary) tangles in the brain, which are an indicator of Alzheimer's disease.
Lanabecestat (Q2 2016)—an oral beta-secretase cleaving enzyme (BACE) inhibitor for the treatment of early and mild Alzheimer's disease (in collaboration with AstraZeneca).
Lasmiditan (Q2 2015)—an oral 5-HT1F agonist for the acute treatment of migraine.
Nasal glucagon* (Q3 2013)—a glucagon nasal powder formulation for the treatment of severe hypoglycemia in patients with diabetes treated with insulin.
Solanezumab* (Q2 2009)—an anti-amyloid beta monoclonal antibody for the treatment of preclinical Alzheimer’s disease.
Tanezumab* (Q3 2008)—an anti-nerve growth factor monoclonal antibody for the treatment of osteoarthritis pain, chronic low back pain, and cancer pain (in collaboration with Pfizer Inc.).
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* | Biologic molecule subject to the U.S. Biologics Price Competition and Innovation Act |
I or Phase II clinical trials. The following table reflects the status of each NME and diagnostic agent within our late-stage pipeline and recently approved productsthese NMEs, including certain other developments since January 1, 2017:2021. |
| | | | | | | | | | |
| Compound | Indication | U.S.Status | Europe | Japan | Developments |
EndocrinologyCOVID-19 Therapies |
Nasal glucagonBamlanivimab administered alone | Severe hypoglycemiaCOVID-19 | Phase IIIEmergency Use Authorization(1) | Development of commercial manufacturing process is ongoing. |
Ultra-rapid insulin | Type 1 diabetes | Phase III | Initiated Phase III studyAnnounced in third quarter of 2017. |
Immunology |
Olumiant | Rheumatoid arthritis | See Developments | Launched | Approved and launched in Europe inthe first quarter of 2017. Received complete response letter from the U.S. Food and Drug Administration (FDA) in second quarter of 2017. After discussions with FDA, resubmission in the U.S. is expected before the end of January 2018. Approved and launched in Japan in third quarter of 2017. |
Neuroscience |
Flortaucipir | Alzheimer's disease | Phase III | 2021 that a Phase III trial is ongoing.met the primary and all key secondary endpoints. The EMA's CHMP issued a positive scientific opinion in the first quarter of 2021. In April 2021 the FDA revoked the EUA for bamlanivimab alone in the U.S. |
GalcanezumabBamlanivimab and etesevimab administered together | Cluster headacheCOVID-19 | Emergency Use Authorization | Announced in the first quarter of 2021 that Phase III | trials met the primary and key secondary endpoints. Additional Phase III trials are ongoing. The FDA granted EUA for higher-risk patients recently diagnosed with mild-to-moderate COVID-19 in the first quarter of 2021. We intend to submit to the FDA for approval in the second half of 2021. The EMA's CHMP issued a positive scientific opinion in the first quarter of 2021. Submitted in Europe in the first quarter of 2021. |
Migraine preventionVIR-7831 and bamlanivimab administered together(2) | SubmittedCOVID-19 | Phase II | Phase II trial initiated in the first quarter of 2021. |
| Bamlanivimab, etesevimab and LY-CoV1404 administered together | COVID-19 | Phase I | Phase I trial initiated in April 2021. |
| Endocrinology |
| Tirzepatide | Type 2 diabetes | Phase III | ThreeAnnounced in the first quarter of 2021 that Phase III trials met the primary and key secondary endpoints. Submitted to FDA in third quarter of 2017. |
Lanabecestat | Early and mild Alzheimer's disease | Phase III | Additional Phase III trials are ongoing. |
LasmiditanObesity | Migraine | Phase III trials are ongoing. |
| Nonalcoholic steatohepatitis | Acquired from CoLucidPhase II | Phase II trial is ongoing. |
| Basal Insulin-Fc | Type 1 and 2 diabetes | Phase II | Phase II trials are ongoing. |
| Immunology |
Lebrikizumab(3) | Atopic dermatitis | Phase III | Granted FDA Fast Track designation(4). Phase III trials are ongoing. |
| Mirikizumab | Crohn's disease | Phase III | Phase III trials are ongoing. |
| Psoriasis | Not pursuing submission | Announced in April 2021 that we do not plan to pursue submission. |
| Ulcerative colitis | Phase III | Announced in the first quarter of 2017. In third quarter of 2017, announced2021 that a Phase III trial met the primary endpoint. Submission to FDA expected in second half of 2018. See Note 3 to the consolidated condensed financial statements for information on the acquisition.and key secondary endpoints. Additional Phase III trials are ongoing. |
SolanezumabCXCR1/2 Ligands Monoclonal Antibody | Preclinical Alzheimer's diseaseHidradenitis suppurativa | Phase IIIII | Phase IIIII trial is ongoing. |
Tanezumab | Osteoarthritis pain | Phase III | Granted Fast Track designation(1) from the FDA in second quarter of 2017.
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Chronic low back pain | Phase III |
Cancer pain | Phase III | Phase III trial is ongoing.
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| Compound | Indication | U.S.Status | Europe | Japan | Developments |
OncologyIL-2 Conjugate | Systemic lupus erythematosus | Phase II | Phase II trial is ongoing. |
VerzenioUlcerative colitis | Adjuvant breast cancerPhase II trial initiated in April 2021. |
| PD-1 MAB Agonist | Rheumatoid arthritis | Phase IIIII | Initiated Phase III studyII trial initiated in thirdthe first quarter of 2017.2021. |
Metastatic breast cancerNeuroscience |
Tanezumab(5) | LaunchedOsteoarthritis pain | Submitted | Two Phase III trials met primary endpoints. Approved and launched inIn the U.S. in the third and fourth quarters of 2017, respectively. Submitted to regulatory authorities in Europe and Japan in thirdfirst quarter of 2017.2021 an Advisory Committee to the FDA concluded that the proposed risk evaluation and mitigation strategy will not ensure that the benefits outweigh the risks. In collaboration with Pfizer, we plan to continue to work with the FDA as it continues to review the submission. |
KRAS-mutant non-small cell lung cancerCancer pain | Terminated | In fourth quarter of 2017, announced Phase III trial did not meet primary endpoint and further development of monotherapy in this indication has been discontinued. |
Lartruvo | Soft tissue sarcoma | Launched | Phase III | Granted accelerated approval(2) by the FDA in fourth quarter of 2016 based on phase II data. Launched in the U.S. in the fourth quarter of 2016. Granted conditional approval(3) and launched in Europe in fourth quarter of 2016. Phase III trial is ongoing.
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| Donanemab | Early Alzheimer’s disease | Phase III | Announced in the first quarter of 2021 that a Phase II trial met the primary endpoint and that we expanded a Phase II trial to become a Phase III trial. |
| Solanezumab | Preclinical Alzheimer's disease | Phase III | Phase III trial is ongoing. |
| Epiregulin/TGFα MAB | Chronic pain | Phase II | Phase II trials are ongoing. |
| GBA1 Gene Therapy (PR001) | Parkinson's disease | Phase II | Acquired in the Prevail acquisition in January 2021. Granted FDA Fast Track designation(2). Phase II trials are ongoing. |
| GRN Gene Therapy (PR006) | Frontotemporal dementia | Phase II |
| PACAP38 Antibody | Chronic pain | Phase II | Phase II trial is ongoing. |
| SSTR4 Agonist | Chronic pain | Phase II | Phase II trials are ongoing. |
| Zagotenemab | Alzheimer’s disease | Phase II | Phase II trial is ongoing. |
| Oncology |
Selpercatinib (Retevmo®) | Thyroid cancer | Launched(5) | Granted conditional marketing authorisation(6) in Europe in the first quarter of 2021. Phase III trials are ongoing. |
| Lung cancer |
| Pirtobrutinib (LOXO-305) | Chronic lymphocytic leukemia | Phase III | Phase III trial initiated in the first quarter of 2021. |
| Mantle cell lymphoma | Phase II | Phase II trial is ongoing. |
(1) The FDA's fast track programEUAs remain active for certain countries outside of the U.S.
(2) In collaboration with Vir Biotechnology, Inc. and GlaxoSmithKline plc.
(3) In collaboration with Almirall, S.A. (Almirall) in Europe.
(4) Fast Track designation is designeddesignated to expedite the development and review of new therapies to treat serious conditions and address unmet medical needs.
(2) (5) In collaboration with Pfizer, Inc (Pfizer).
(6) Continued approval for this indication may be contingent on verification and description of clinical benefit in a confirmatory Phase III trial.trials.
(3) As part of a conditional marketing authorization, resultsour collaboration with Innovent Biologics, Inc. (Innovent), Innovent, with collaboration from an ongoingus, will pursue the initial registration of sintilimab injection (Tyvyt®) in the U.S., and we will pursue initial registration of Tyvyt in other markets and all other subsequent registrations of Tyvyt.
Our pipeline also contains several new indication line extension (NILEX) products. The following certain NILEX products are currently in Phase II or Phase III study will needclinical testing, have been submitted for regulatory review, or have received first regulatory approval in the U.S., Europe, or Japan for use in the indication described in 2021. The following table reflects the status of certain NILEX products, including certain other developments since January 1, 2021:
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| Compound | Indication | Status | Developments |
| Endocrinology |
Empagliflozin (Jardiance®)(1) | Heart failure with reduced ejection fraction | Submitted | Granted FDA Fast Track designation(2). |
| Chronic kidney disease | Phase III | Granted FDA Fast Track designation(2). Phase III trials are ongoing. |
| Heart failure with preserved ejection fraction |
| Immunology |
Baricitinib (Olumiant®) | Atopic dermatitis | Approved | In April 2021 the FDA extended the review period for the submission in the U.S. to the third quarter of 2021. |
| COVID-19 | Emergency Use Authorization(3) | Announced in April 2021 that a Phase III trial evaluating baricitinib 4 mg once daily plus standard of care did not meet the primary endpoint, but did result in a significant reduction in death. |
| Alopecia areata | Phase III | Granted FDA Breakthrough Therapy designation(4). Announced in the first quarter of 2021 and in April 2021 that Phase III trials met the primary endpoint. Phase III trials are ongoing. |
| Systemic lupus erythematosus | Phase III trials are ongoing. |
| Oncology |
Abemaciclib (Verzenio®) | Adjuvant breast cancer | Submitted | Announced in the first quarter of 2021 patient-reported outcomes in combination with standard adjuvant endocrine therapy. Submitted in Japan in the first quarter of 2021. |
| Prostate cancer | Phase II | Phase II trials are ongoing. |
(1) In collaboration with Boehringer Ingelheim.
(2) Fast Track designation is designated to be provided. This studyexpedite the development and review of new therapies to treat serious conditions and address unmet medical needs.
(3) The FDA granted EUA in combination with remdesivir in hospitalized COVID-19 patients.
(4) Breakthrough Therapy designation is fully enrolled. Until availabilitydesigned to expedite the development and review of potential medicines that are intended to treat a serious condition where preliminary clinical evidence indicates that the full data, the Committee for Medicinal Products for Human Use will review the benefits and risks of Lartruvo annually to determine whether the conditional marketing authorization can be maintained.treatment may demonstrate substantial improvement over available therapy on a clinically significant endpoint.
Other Matters
Patent Matters
We depend on patents or other forms of intellectual-propertyintellectual property protection for most of our revenue, cash flows, and earnings.
We lostexpect the Alimta® vitamin regimen patents to provide us with patent protection for Alimta through June 2021 in major European countries and Japan and through May 2022 in the U.S. These patents have been challenged in each of these jurisdictions and in many cases have been finally resolved in our favor. However, we and Eagle Pharmaceuticals, Inc. (Eagle) reached an agreement in December 2019 to settle all pending U.S. patent litigation, allowing Eagle a limited initial entry into the market with its product starting February 2022 (up to an approximate three-week supply) and subsequent unlimited entry starting April 2022. We expect that the entry of generic competition in the U.S., major European countries, and Japan following the loss of patent exclusivity for the schizophrenia and bipolar mania indications for Zyprexa® in Japan in December 2015 and April 2016, respectively. Generic versions of Zyprexa were launched in Japan in June 2016. The loss of exclusivity for Zyprexa in Japan has causedwill cause a rapid and severe decline in revenue, forand we expect that the product.
We lost our patent exclusivity for Strattera® in the U.S. in May 2017, and generic versions of Strattera were approved in the same month. As described in Note 10 to the consolidated condensed financial statements, following the settlement related to the compound patent challenge for Effient®, generic products launched in the U.S. in the third quarter of 2017. The entry of generic competition for these products has caused a rapid and severe decline in revenue, which will, in the aggregate,U.S. will have a material adverse effect on our consolidated results of operations and cash flows.
We will lose our compound patent protection for Cialis® (tadalafil) and Adcirca® (tadalafil) in major European markets in November 2017. We will also lose compound patent protection for Cialis and Adcirca in the U.S. in November 2017; however, we now expect U.S. exclusivity for Cialis to end in late September 2018 at the earliest. We expect that the entry of generic competition into these markets following the loss of exclusivity will cause a rapid and severe decline in revenue for the affected products, which will, in the aggregate, have a material adverse effect on our consolidated results of operations and cash flows.
Additionally, as described inSee Note 109 to the consolidated condensed financial statements the Alimta® vitamin regimen patents, which provide us with patent protection for Alimta through June 2021 in Japan and major European countries, and through May 2022 in the U.S., have been challenged in each of these jurisdictions. Our vitamin regimen patents have also been challenged in other smaller European jurisdictions. Our compound patent for Alimta expired in the U.S. in January 2017, and expired in major European countries and Japan in December 2015. We expect that the entry of generic competition for Alimta following the loss of effective patent protection will cause a rapid and severe decline in revenue for the product, which will, in the aggregate, have a material adverse effect on our consolidated results of operations and cash flows. While the U.S. Patent and Trademark Office recently ruled in our favor regarding the validitymore detailed account of the vitamin regimen patent, the generic companies which filed petitions seeking inter partes review oflegal proceedings currently pending regarding, among others, our vitamin regimen patent may appeal these rulings as further described in Note 10 to the consolidated condensed financial statements. We are aware that generic competitors have received approval to market generic versions of pemetrexed in major European markets, and that a generic product is currently on the market in at least one major European market. In light of the United Kingdom (U.K.) Supreme Court's judgment finding infringement in the U.K., Italy, France, and Spain, Actavis has withdrawn its previously launched-at-risk generic products from these markets. We will continue to seek to remove any generic pemetrexed products launched at risk in other European markets. Notwithstanding our patents, generic versions of Alimta were also approved in Japan starting in February 2016. As described in Note 10 to the consolidated condensed financial statements, we do not currently anticipate that generic versions of Alimta will proceed to pricing approval.patents.
The compound patent for Humalog® (insulin lispro) has expired in major markets. Thus far, the loss of compound patent protection for Humalog has not resulted in a rapid and severe decline in revenue. Global regulators have different legal pathways to approve similar versions of insulin lispro. A similar version of insulin lispro has received tentative approval in the U.S. and could launch soon. We are also aware that a competitor's insulin lispro product hascompetitor launched in certain European markets. Other manufacturers have efforts underway to bring to market a similar version of insulin lispro in certain European markets in 2017 and in the U.S. and Europe.in the second quarter of 2018. While it is difficult to estimate the severity of the impact of similar insulin lispro products entering the market, we do not expect and have not experienced a rapid and severe decline in revenue; however, we expect competitiveadditional pricing pressure and some loss of market share initially that would continue over time.
The formulation and use patents for Forteo® have expired in major markets. We expect further decline in revenue as a result of the anticipated entry of generic and biosimilar competition due to the loss of patent exclusivity in major markets.
Our compound patent protection for Cymbalta® expired in Japan in January 2020. We expect generics to enter the market in mid-2021. We expect that the entry of generic competition will cause a rapid and severe decline in revenue.
Foreign Currency Exchange Rates
As a global company with substantial operations outside the U.S., we face foreign currency risk exposure from fluctuating currency exchange rates, primarily the U.S. dollar against the euro and Japanese yen, and British pound; and the British pound against the euro.yen. While we manage a portion of these exposures through hedging and other risk management techniques, significant fluctuations in currency rates can have a substantial impact, either positive or negative, on our revenue, cost of sales, and operating expenses. Over the past two years, we have seen significant foreign currency rate fluctuations between the U.S. dollar and several other foreign currencies, including the euro, British pound, and Japanese yen. While there is uncertainty in the future movements in foreign exchange rates, fluctuations in these fluctuationsrates could negatively impact our future consolidated results of operations and cash flows.
The impact of the Venezuelan financial crisis, including the significant deterioration of the bolívar, resulted in a charge of $203.9 million in the first quarter of 2016. See Note 12 to the consolidated condensed financial statements for additional information related to the charge. As of September 30, 2017, our Venezuelan subsidiaries represented a de minimis portion of our consolidated assets and liabilities. We continue to monitor other deteriorating economies and it is possible that additional charges may be recorded in the future. Any additional charges are not expected to have a material adverse effect on our future consolidated results of operations.
Trends Affecting Pharmaceutical Pricing, Reimbursement, Access, and AccessOther Regulatory Matters
United StatesU.S.
In the U.S., public concern over access to and affordability of pharmaceuticals continues to drive the regulatory and legislative debate. These policy and political issues increase the risk that taxes, fees, rebates, or other cost control measures may be enacted to manage federal and state measures may be enacted.budgets. Evolving regulatory priorities could further intensify these efforts and otherwise increase regulatory scrutiny over our operations. Key health policy proposalsinitiatives affecting biopharmaceuticals includeinclude:
•the Coronavirus Aid, Relief, and Economic Security (CARES) Act and subsequent stimulus bills that focus on ensuring availability and access to lifesaving drugs during a reductionpublic health crisis,
•foreign reference pricing in biologic data exclusivity, Medicare and private insurance,
•modifications to Medicare Parts B and D, language
•provisions that would allow the Department of Health and Human Services (HHS) to negotiate prices for biologics and drugs in Medicare,
•a reduction in biologic data exclusivity,
•proposals related to Medicaid prescription drug coverage and manufacturer drug rebates,
•proposals that would require biopharmaceutical manufacturers to disclose proprietary drug pricing information, and
•state-level proposals related to prescription drug prices and reducing the cost of pharmaceuticals purchased by government health care programs. Severalprograms,
•federal and state proposals to permit importation of pharmaceuticals, including insulin, intended for sale in foreign markets, and
•the Biden administration's regulatory rule freeze affecting all federal agency rules that had not gone into effect as of January 20, 2021, impacting the implementation or effectiveness, as applicable, of final rules related to the 340B prescription drug program, rebate reform in Medicare Part D, drug importation including insulin, and foreign reference pricing in Medicare Parts B and D.
On September 1, 2020, we announced we would distribute all 340B ceiling priced products directly to covered entities and their child sites only. We provide 340B discounts to a contract pharmacy only if it is a wholly owned subsidiary of a covered entity, if a covered entity does not have an in-house retail pharmacy or, in the case of insulin, if the subject covered entity and its contract pharmacies agree to pass along the discount to patients without any markup for dispensing fees and without billing insurance or collecting duplicate discounts. We have been transparent with regulators on our distribution activity and continue to comply with all 340B program requirements. Certain covered entities and their trade associations have initiated litigation questioning whether our program, and similar actions by other manufacturers, violate 340B program requirements.
On October 9, 2020, three covered entities sued HHS and the Health Resources and Services Administration (HRSA) in the U.S. District Court for the District of Columbia seeking to compel the agencies to take enforcement action against us and three other companies, among other requested relief. On October 21, 2020, a trade association representing certain covered entities sued HHS in the same court seeking to compel the agency to promulgate administrative dispute resolution regulations. On December 11, 2020, a number of associations and entities filed suit against HHS in the U.S. District Court for the Northern District of California requesting immediate enforcement of the contract pharmacy guidance. On December 31, 2020, the General Counsel of HHS issued an advisory opinion alleging that honoring contract pharmacy agreements is mandatory. In January 2021, we filed suit against HHS, the Secretary of HHS, the HRSA, and the Administrator of the HRSA in the U.S. District Court for the Southern District of Indiana seeking a declaratory judgment that HHS's attempt to require manufacturers to permit contract pharmacy distribution is unlawful and a preliminary injunction enjoining implementation of the administrative dispute resolution process created by defendants and, with it, their application of the advisory opinion, and other related relief. On March 16, 2021, the U.S. District Court for the Southern District of Indiana issued an order granting our request for a preliminary injunction. See Note 9 to the consolidated condensed financial statements for additional information.
California and several other states have enacted legislation in 2017 related to prescription drug pricing transparency. Savings projected undertransparency and it is unclear the effect this legislation or future legislation will have on our business. Several states have also passed importation legislation, including Colorado, Florida, Maine, New Hampshire, New Mexico, and Vermont. As of late 2020 several of these states were actively working with the former presidential administration to implement an importation program from Canada. On November 22, 2020, Florida announced it submitted a proposed importation plan to the U.S. In 2020, HHS and the FDA also took several actions to advance state importation initiatives, including issuing requests for proposals are targetedfor personal importation and reimportation of insulin and a final rule on the Importation of Prescription Drugs. We continue to review these state proposals and legislation, as a meanswell as federal rules, commentary to fund both health care expendituresthe rulemaking, and non-health careguidance published by HHS and the FDA, the impact of which is uncertain at this time. Currently, it is unclear if the Biden administration will adopt any of the importation initiatives orput forth by the former presidential administration. We will continue to manage federalmonitor and state budgets.assess these developments.
In the private sector, consolidation and integration among healthcare providers is also a major factor insignificantly affects the competitive marketplace for human pharmaceuticals. Health plans, pharmaceuticalpharmacy benefit managers, wholesalers, and other supply chain stakeholders have been consolidating into fewer, larger entities, thus enhancing their purchasing strength and importance. PayersPrivate third-party insurers, as well as governments, typically maintain formularies whichthat specify coverage (the conditions under which drugs are included on a plan's formulary) and reimbursement (the associated out-of-pocket cost to the consumer).to control costs by negotiating discounted prices in exchange for formulary inclusion. Formulary placement can lead to reduced usage of a drug for the relevant patient population due to coverage restrictions, such as prior authorizations and formulary exclusions, or due to reimbursement limitations whichthat result in higher consumer out-of-pocket cost, such as non-preferred co-pay tiers, increased co-insurance levels, and higher deductibles. Consequently, pharmaceutical companies compete for formulary placement not only on the basis of product attributes such as greater efficacy, fewer side effects,safety profile, or greater patient ease of use, but also by providing rebates. Value-based agreements, where pricing is based on achievement (or not) of specified outcomes, are another tool that may be utilized between payers and pharmaceutical companies as formulary placement and pricing are negotiated. Price is an increasingly important factor in formulary decisions, particularly in treatment areas in which the payer has taken the position that multiple branded products are therapeutically comparable. TheseWe anticipate these downward pricing pressures couldwill continue to negatively affect futureour consolidated results of operationsoperations. In addition to formulary placement, changes in insurance designs continue to drive greater consumer cost-sharing through high deductible plans and cash flows.higher co-insurance or co-pays. We continue to invest in patient affordability solutions (resulting in lower revenue) in an effort to assist patients in affording their medicines.
The main coverage expansion provisions of the Affordable Care Act (ACA) are currently in effect through both state-based exchanges and the expansion of Medicaid. A trend has been the prevalence of benefit designs containing high out-of-pocket costs for patients, particularly for pharmaceuticals. In addition to the coverage expansions, many employers in the commercial market driven in part by ACA changes such as the 2020 implementation of the excise tax on employer-sponsored health care coverage for which there is an excess benefit (the so-called "Cadillac tax"), continue to evaluate strategies such as private exchanges and wider use of consumer-driven health plans to reduce their healthcare liabilities over time. Repealing and replacingFederal legislation, litigation, or administrative actions to repeal or modify some or all of the provisions of the ACA remains a priority for President Trump and Congress. Provisions included in final legislation could have a material adverse effect on our consolidated results of operations and cash flows. At the same time, the broader paradigm shift towards performance-based reimbursement and the launch of several value-based purchasing initiatives have placed demands on the pharmaceutical industry to offer products with proven real-world outcomes data and a favorable economic profile.
On December 31, 2020, the Centers for Medicare and Medicaid Services published in the Federal Register a final regulation impacting the rules for calculating Medicaid rebate amounts, though the provision most likely to have a material impact on us relates to the inclusion of copayment assistance programs in best price and will take effect January 1, 2023. We are evaluating the impact of this regulation. We do not anticipate the changes related to "line extensions," which are scheduled to take effect January 1, 2022, to be material.
On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (ARP). Section 9816 of the ARP removed Medicaid's maximum rebate percentage effective January 1, 2024. We are evaluating the impact of this legislation. We expect to see continued focus on regulating pricing, potentially resulting in additional legislation and regulation under the newly elected Congress and the Biden administration.
In addition, evolving regulatory priorities have intensified governmental scrutiny of our operations, including our compliance with cGMP, quality assurance, and similar regulations. Any regulatory issues concerning these matters could lead to regulatory and legal actions, product recalls and seizures, fines and penalties, interruption of production leading to product shortages, import bans or denials of import certifications, delays or denials in the approvals of new products pending resolution of the issues, and reputational harm, any of which would adversely affect our business. See “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020.
International
International operations also are generally subject to extensive price and market regulations. Cost-containment measures exist in a number of countries, including additional price controls and mechanisms to limit reimbursement for our products. Such policies are expectedanticipated to increase in impact and reach, given the pressures on national and regional health care budgets that come from a growing, aging population and ongoing economic challenges. As additional reforms are finalized, we will assess their impact on future revenues. In addition, governments in many emerging markets are becoming increasingly active in expanding health care system offerings. Given the budget challenges of increasing health care coverage for citizens, policies may be proposed that promote generics and biosimilars only and reduce current and future access to branded human pharmaceutical products. The COVID-19 pandemic is also creating additional pressure on health systems worldwide. As a result, cost containment and other measures may intensify as governments manage and emerge from the pandemic.
Tax Matters
We are subject to income taxes and various other taxes in the U.S. and numerousin many foreign jurisdictions. Changesjurisdictions; therefore, changes in the relevantboth domestic and international tax laws or regulations administrative practices, principles, and interpretations could adversely affect our future effective tax rates. The U.S. and a number of other countries are actively considering or enacting changes in this regard. For example, the Trump administration has stated that one of its top priorities is comprehensive tax reform. The tax rates and the manner in which U.S. companies are taxed could be altered by any such potential tax reform and could have a material adverse effect on our consolidatedrate, results of operations, and cash flows. Additionally,Countries around the world, including the U.S., are actively considering and enacting tax law changes. The Biden administration's tax proposal contains significant changes, including increases to the tax rates at which both domestic and foreign income of U.S. companies would be taxed. Further, actions taken with respect to tax-related matters by associations such as the Organisation for Economic Co-operation and Development issued its final recommendations of international tax reform proposals toand the European Commission could influence international tax policy in major countries in which we operate. Other institutions have alsoIn addition, global tax authorities routinely examine our tax returns and are expected to become more active regarding tax-related matters,aggressive in their examinations of profit allocations among jurisdictions, which could affect our anticipated tax liabilities.
Acquisitions
We strategically invest in external research and technologies that we believe to complement and strengthen our own efforts. These investments can take many forms, including acquisitions, strategic alliances, collaborations, investments, and licensing arrangements. We view our business development activity as an important way to achieve our strategies, as we seek to bolster our pipeline and enhance shareholder value. We continuously evaluate business development transactions that have the European Commission,potential to strengthen our business.
In February 2020, we acquired all shares of Dermira for a purchase price of $849.3 million, net of cash acquired. Under the United Nations, the Group of Twenty, and the European Parliament. While outcomes of these initiatives continue to develop and remain uncertain, changes to key elementsterms of the agreement, we acquired lebrikizumab, a novel, investigational, monoclonal antibody being evaluated for the treatment of moderate-to-severe atopic dermatitis. Lebrikizumab was granted Fast Track designation from the FDA. We also acquired Qbrexza cloth, a medicated cloth for the topical treatment of primary axillary hyperhidrosis (uncontrolled excessive underarm sweating). During the three months ended March 31, 2021, we decided to sell the rights to Qbrexza. See Note 5 to the consolidated condensed financial statements for additional information.
In January 2021, we acquired all shares of Prevail for a purchase price that included $22.50 per share in cash (or an aggregate of $747.4 million, net of cash acquired) plus one non-tradable contingent value right (CVR) per share. The CVR entitles Prevail stockholders to up to an additional $4.00 per share in cash (or an aggregate of approximately $160 million) payable, subject to certain terms and conditions, upon the first regulatory approval of a Prevail product in one of the following countries: U.S., Japan, United Kingdom, Germany, France, Italy, or international tax framework could haveSpain. Under the terms of the agreement, we acquired a material adverse effect on our consolidated results of operations and cash flows.
Acquisitionsgene therapy program for patients with neurodegenerative diseases.
See Note 3 to the consolidated condensed financial statements for further discussion regarding our recent acquisitions of businesses and assets, including:acquisitions.
Our acquisition of Boehringer Ingelheim Vetmedica, Inc.'s U.S. feline, canine, and rabies vaccine portfolio and other related assets (BIVIVP), completed on January 3, 2017, in an all-cash transaction for $882.1 million.
Our acquisition of CoLucid, completed on March 1, 2017, for a cash purchase price of $831.8 million, net of cash acquired.
Legal Matters
Information regarding contingencies relating to certain legal proceedings can be found in Note 10 to the consolidated condensed financial statements and is incorporated here by reference.
Revenue
The following tables summarizetable summarizes our revenue activity by region:
| | | | | | | | | | | | | | | Three Months Ended March 31, | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
| | 2021 | | 2020 | | Percent Change | |
| | 2017 | | 2016 | | Percent Change | 2017 | | 2016 | | Percent Change | |
U.S. (1) | $ | 3,104.4 |
| | $ | 2,837.6 |
| | 9 | $ | 9,361.8 |
| | $ | 8,283.1 |
| | 13 | |
| U.S. | | U.S. | $ | 3,941.3 | | | $ | 3,328.8 | | | 18 | % | |
| Outside U.S. | 2,553.6 |
| | 2,354.1 |
| | 8 | 7,348.7 |
| | 7,178.5 |
| | 2 | Outside U.S. | 2,864.3 | | | 2,531.0 | | | 13 | | |
| Revenue | $ | 5,658.0 |
| | $ | 5,191.7 |
| | 9 | $ | 16,710.6 |
| | $ | 15,461.6 |
| | 8 | Revenue | $ | 6,805.6 | | | $ | 5,859.8 | | | 16 | | |
Numbers may not add due to rounding.
(1) U.S. revenue includes revenue in Puerto Rico.
The following are components of the change in revenue compared with the prior year: | | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three Months Ended March 31, | |
| | 2017 vs. 2016 | | 2017 vs. 2016 | | 2021 vs. 2020 | |
| | U.S. | Outside U.S. | Consolidated | | U.S. | Outside U.S. | Consolidated | | U.S. | Outside U.S. | Consolidated | |
| Volume | 6 | % | 8 | % | 7 | % | | 8 | % | 5 | % | 7 | % | Volume | 24 | % | 9 | % | 17 | % | |
| Price | 3 |
| — |
| 2 |
| | 5 |
| (1 | ) | 2 |
| Price | (6) | | (2) | | (4) | | |
| Foreign exchange rates | — |
| — |
| — |
| | — |
| (1 | ) | (1 | ) | Foreign exchange rates | — | | 6 | | 3 | | |
| Percent change | 9 | % | 8 | % | 9 | % | | 13 | % | 2 | % | 8 | % | Percent change | 18 | % | 13 | % | 16 % | |
Numbers may not add due to roundingrounding.
In the U.S.,We estimate that revenue for the three and nine months ended September 30, 2017,March 31, 2020 for many of our products was favorably impacted by increased customer buying patterns and patient prescription trends resulting from the COVID-19 pandemic that increased revenue by approximately $250 million worldwide, including approximately $200 million in the U.S. and approximately $50 million outside the U.S. We believe that this increase in U.S. revenue primarily impacted our diabetes portfolio, with estimated increases of approximately $70 million to $80 million for insulin products and approximately $30 million to $40 million for Trulicity®. We also estimate that U.S. revenue for Taltz® was favorably impacted by approximately $20 million to $25 million.
In the U.S. for the three months ended March 31, 2021, the increase in volume increase was primarily driven by new pharmaceutical products, includingCOVID-19 antibodies, Trulicity, and Taltz, Basaglar, Lartruvo, and Jardiance®, as wellpartially offset by lower volume for Alimta. In the U.S. for the three months ended March 31, 2021, the decrease in realized prices was primarily driven by increased rebates to gain broad commercial access for Taltz, partially offset by modest list price increases. Segment mix was not a major driver of U.S. price performance during the three months ended March 31, 2021, as increased utilization in more highly-rebated government segments was offset by lower utilization in the 340B segment, primarily for the diabetes portfolio.
Outside the U.S. for the three months ended March 31, 2021, the increase in volume for companion animal products from the acquisition of BIVIVP,was primarily driven by COVID-19 antibodies, Alimta, Olumiant, Tyvyt, and Verzenio, partially offset by decreased volume for several established pharmaceutical products, including Cialis due to decreased demand as well as Strattera due to the loss of exclusivity. The U.S. increase in realized prices for the three®, Forteo, and nine months ended September 30, 2017 was driven by several pharmaceutical products, primarily Forteo®, Cialis, and Humalog. For the three and nine months ended September 30, 2017, Cymbalta® revenue declined as the third quarter of 2016 included an increase in revenue due to a reduction to the return reserve of approximately $145 million.Cymbalta.
Outside the U.S., for the threeand ninemonths ended September 30, 2017, the volume increase was driven by sales of several new pharmaceutical products, including Trulicity and Cyramza®. For the nine months ended September 30, 2017, the volume increase was partially offset by the loss of exclusivity for several established products, including Zyprexa in Japan, Cymbalta in Canada and Europe, and Alimta in several countries.
The following
tables summarizetable summarizes our revenue activity by
product:product for the three months ended March 31, 2021 and 2020: |
| | | | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | |
| | 2017 | | 2016 |
| Product | U.S. (1) | | Outside U.S. | | Total | | Total | Percent Change |
| Humalog | $ | 414.9 |
| | $ | 281.3 |
| | $ | 696.2 |
| | $ | 640.8 |
| | 9 |
| Cialis | 319.6 |
| | 245.3 |
| | 564.9 |
| | 588.2 |
| | (4) |
| Trulicity | 412.9 |
| | 114.8 |
| | 527.7 |
| | 243.6 |
| | 117 |
| Alimta | 260.3 |
| | 254.2 |
| | 514.5 |
| | 570.4 |
| | (10) |
| Forteo | 234.1 |
| | 207.6 |
| | 441.7 |
| | 391.2 |
| | 13 |
Humulin® | 203.0 |
| | 97.5 |
| | 300.5 |
| | 322.0 |
| | (7) |
| Cyramza | 69.5 |
| | 126.5 |
| | 196.0 |
| | 159.0 |
| | 23 |
| Cymbalta | 19.6 |
| | 163.5 |
| | 183.2 |
| | 313.5 |
| | (42) |
Erbitux® | 136.0 |
| | 27.4 |
| | 163.5 |
| | 184.6 |
| | (11) |
Trajenta™ (2) | 68.4 |
| | 84.9 |
| | 153.3 |
| | 115.4 |
| | 33 |
| Taltz | 131.3 |
| | 20.0 |
| | 151.3 |
| | 32.5 |
| | NM |
| Basaglar | 115.2 |
| | 30.5 |
| | 145.7 |
| | 19.4 |
| | NM |
| Zyprexa | 12.6 |
| | 128.0 |
| | 140.6 |
| | 148.9 |
| | (6) |
| Strattera | 52.9 |
| | 84.1 |
| | 137.1 |
| | 198.8 |
| | (31) |
Jardiance (3) | 83.8 |
| | 43.4 |
| | 127.2 |
| | 47.5 |
| | 168 |
| Effient | 42.7 |
| | 13.1 |
| | 55.9 |
| | 127.7 |
| | (56) |
| Other human pharmaceutical products | 174.6 |
| | 243.9 |
| | 418.1 |
| | 382.0 |
| | 9 |
| Animal health products | 353.0 |
| | 387.6 |
| | 740.6 |
| | 706.2 |
| | 5 |
| Revenue | $ | 3,104.4 |
| | $ | 2,553.6 |
| | $ | 5,658.0 |
| | $ | 5,191.7 |
| | 9 |
|
| | | | | | | | | | | | | | | | | |
| | Nine Months Ended
September 30, | | |
| | 2017 | | 2016 |
| Product | U.S. (1) | | Outside U.S. | | Total | | Total | Percent Change |
| Humalog | $ | 1,254.3 |
| | $ | 828.6 |
| | $ | 2,083.0 |
| | $ | 1,949.0 |
| | 7 |
| Cialis | 997.3 |
| | 728.5 |
| | 1,725.7 |
| | 1,795.3 |
| | (4) |
| Alimta | 761.9 |
| | 775.4 |
| | 1,537.3 |
| | 1,741.7 |
| | (12) |
| Trulicity | 1,090.1 |
| | 290.7 |
| | 1,380.8 |
| | 588.5 |
| | 135 |
| Forteo | 661.5 |
| | 574.3 |
| | 1,235.8 |
| | 1,077.5 |
| | 15 |
| Humulin | 634.9 |
| | 337.9 |
| | 972.8 |
| | 1,010.6 |
| | (4) |
| Cymbalta | 100.8 |
| | 463.6 |
| | 564.4 |
| | 748.7 |
| | (25) |
| Cyramza | 204.3 |
| | 349.2 |
| | 553.5 |
| | 437.0 |
| | 27 |
| Strattera | 276.9 |
| | 243.0 |
| | 519.9 |
| | 611.5 |
| | (15) |
| Erbitux | 398.2 |
| | 78.8 |
| | 477.0 |
| | 533.3 |
| | (11) |
| Zyprexa | 49.3 |
| | 379.6 |
| | 428.9 |
| | 572.3 |
| | (25) |
Trajenta (2) | 174.2 |
| | 234.1 |
| | 408.2 |
| | 330.8 |
| | 23 |
| Taltz | 343.6 |
| | 43.1 |
| | 386.7 |
| | 51.9 |
| | NM |
| Effient | 290.8 |
| | 35.8 |
| | 326.6 |
| | 394.3 |
| | (17) |
Jardiance (3) | 198.3 |
| | 105.9 |
| | 304.3 |
| | 125.8 |
| | 142 |
| Basaglar | 196.7 |
| | 81.6 |
| | 278.3 |
| | 46.6 |
| | NM |
| Other human pharmaceutical products | 555.3 |
| | 677.2 |
| | 1,232.6 |
| | 1,126.3 |
| | 9 |
| Animal health products | 1,173.4 |
| | 1,121.4 |
| | 2,294.8 |
| | 2,320.5 |
| | (1) |
| Revenue | $ | 9,361.8 |
| | $ | 7,348.7 |
| | $ | 16,710.6 |
| | $ | 15,461.6 |
| | 8 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | |
| 2021 | | 2020 | |
| Product | U.S. | | Outside U.S. | | Total | | Total | Percent Change | |
| Trulicity | $ | 1,116.8 | | | $ | 335.7 | | | $ | 1,452.4 | | | $ | 1,229.4 | | | 18 | |
COVID-19 antibodies (1) | 650.6 | | | 159.5 | | | 810.1 | | | — | | | NM | |
Humalog (2) | 332.7 | | | 284.4 | | | 617.0 | | | 695.8 | | | (11) | |
| Alimta | 261.1 | | | 297.8 | | | 559.0 | | | 560.1 | | | — | |
| Taltz | 249.6 | | | 153.6 | | | 403.2 | | | 443.5 | | | (9) | |
Humulin® | 219.0 | | | 102.7 | | | 321.7 | | | 315.7 | | | 2 | |
Jardiance (3) | 151.2 | | | 160.8 | | | 312.0 | | | 267.5 | | | 17 | |
| Verzenio | 172.8 | | | 96.2 | | | 269.0 | | | 188.0 | | | 43 | |
Basaglar® | 175.2 | | | 71.4 | | | 246.6 | | | 303.7 | | | (19) | |
Cyramza® | 80.2 | | | 160.3 | | | 240.5 | | | 239.0 | | | 1 | |
| Forteo | 97.7 | | | 100.8 | | | 198.5 | | | 272.4 | | | (27) | |
| Olumiant | 24.7 | | | 169.1 | | | 193.8 | | | 139.7 | | | 39 | |
| Cymbalta | 11.0 | | | 165.7 | | | 176.6 | | | 210.4 | | | (16) | |
| Cialis | 8.6 | | | 118.1 | | | 126.8 | | | 193.0 | | | (34) | |
Erbitux® | 107.9 | | | 14.4 | | | 122.4 | | | 130.8 | | | (6) | |
Emgality® | 101.5 | | | 18.0 | | | 119.5 | | | 74.0 | | | 61 | |
| Tyvyt | — | | | 109.7 | | | 109.7 | | | 57.4 | | | 91 | |
Zyprexa® | 6.9 | | | 88.9 | | | 95.8 | | | 98.4 | | | (3) | |
| Other products | 173.8 | | | 257.2 | | | 431.0 | | | 441.2 | | | (2) | |
| Revenue | $ | 3,941.3 | | | $ | 2,864.3 | | | $ | 6,805.6 | | | $ | 5,859.8 | | | 16 | |
Numbers may not add due to rounding.
NM - not meaningful
(1) U.S.COVID-19 antibodies include sales for bamlanivimab administered alone as well as sales for bamlanivimab and etesevimab administered together and were made pursuant to EUAs.
(2) Humalog revenue includes revenue in Puerto Rico.insulin lispro.
(2) Trajenta revenue includes Jentadueto®.
(3) Jardiance revenue includes Glyxambi®,Synjardy®, and SynjardyTrijardy®. XR.
Revenue of Trulicity, a treatment for type 2 diabetes and to reduce the risk of major adverse cardiovascular events in adult patients with type 2 diabetes and established cardiovascular disease or multiple cardiovascular risk factors, increased 20 percent in the U.S. during the three months ended March 31, 2021, driven by increased demand, partially offset by lower realized prices. Trulicity's lower realized prices in the U.S. were primarily due to higher contracted rebates, partially offset by a favorable segment mix that reflected lower utilization in the 340B segment, and modest list price increases. Revenue outside the U.S. increased 12 percent during the three months ended March 31, 2021, driven by increased volume and, to a lesser extent, favorable foreign exchange rates, partially offset by lower realized prices.
Revenue of COVID-19 antibodies, treatments that were authorized pursuant to EUAs for mild to moderate COVID-19 for higher-risk patients, was $650.6 million in the U.S. during the three months ended March 31, 2021. Revenue outside the U.S. was $159.5 million during the three months ended March 31, 2021. The availability of vaccines and other preventative measures, coupled with the transient nature of pandemics, could negatively impact or eliminate demand for these COVID-19 antibodies. In addition, mutations or the spread of other variants of the coronavirus could also render our COVID-19 antibodies ineffective.
Revenue of Humalog, ouran injectable human insulin analog for the treatment of diabetes, increased 10 percent and 8decreased 17 percent in the U.S. during the threeand and first nine months of 2017, respectively,ended March 31, 2021, driven by higherlower realized prices due to changes in estimates toas higher contracted rebates and discounts and, to a lesser extent, increased volume. For the first nine months of 2017, the increase in realized prices primarily resulted from decreased revenuewere partially offset by lower utilization in the first quarter of 2016 resulting from changes in estimates for rebates and discounts.340B segment. Revenue outside the U.S. increased 7 percent and 5decreased 4 percent during the threeand ninemonths ended September 30, 2017, respectively,March 31, 2021, driven by increaseddecreased volume, and, to a lesser extent, higher realized prices. The increase in revenue for the ninemonths ended September 30, 2017 was partially offset by the unfavorablefavorable impact of foreign exchange rates. A similar version of insulin lispro has received tentative approval in the U.S. and could launch soon. We are also aware that a competitor's insulin lispro product has launched in certain European markets. While it is difficult to estimate the severity of the impact of similar insulin lispro products entering the market, we do not expect and have not experienced a rapid and severe decline in revenue; however,revenue. However, due to the impact of competition and due to pricing pressure in the U.S. and some international markets, we expect competitive pressuresome price decline and some loss of market share initially that wouldto continue over time. See "Other Matters—Patent Matters" for more information.
Revenue of Cialis,Alimta, a treatment for erectile dysfunction and benign prostatic hyperplasia,various cancers, decreased 8 percent and 619 percent in the U.S. during the threeand ninemonths ended September 30, 2017, respectively,March 31, 2021, primarily driven by decreased demand, partially offset by higherlower volume as a result of customer buying patterns and, to a lesser extent, lower realized prices. Revenue outside the U.S. increased 226 percent induring the third quarter of 2017,three months ended March 31, 2021, primarily driven by higher realized pricesincreased volume in Germany and, to a lesser extent, the favorable impact of foreign exchange rates, partially offset by decreased volume. For the first nine months of 2017, revenue outside the U.S. decreased 2 percent, driven by decreased volume and, to a lesser extent, the unfavorable impact of foreign exchange rates, partially offset by higher realized prices.rates. We will lose our compound patent protection for CialisAlimta in Japan and major European marketscountries in November 2017June 2021. We expect the limited entry of generic competition in the U.S. starting February 2022 and now expect U.S. exclusivity for Cialis to end in late September 2018 at the earliest. See "Other Matters—Patent Matters" for more information regarding our U.S. exclusivity. In addition to potential competition from generic tadalafil, we also currently face competition from generic sildenafil, which we expect to accelerate during 2018.subsequent unlimited entry starting April 2022. We expect that the entry of generic competition following the loss of exclusivity will cause a rapid and severe decline in revenue. See "Executive Overview - Other Matters- Patent Matters" for more information.
Revenue of Alimta,Taltz, a treatment for various cancers,moderate-to-severe plaque psoriasis, active psoriatic arthritis, ankylosing spondylitis, and active non-radiographic axial spondyloarthritis, decreased 6 percent and 824 percent in the U.S. during the threeand ninemonths ended September 30, 2017, respectively,March 31, 2021, primarily driven by decreased demand due to competitive pressure. Revenue outside the U.S. decreased 13 percent and 15 percent during the threeand ninemonths ended September 30, 2017, respectively, driven by competitive pressure, lower realized prices and the loss of exclusivity in several countries. We have faced and remain exposeddue to generic entry in multiple countries that has eroded revenue and is likelyincreased rebates to continue to erode revenue from current levels.
Revenue of Trulicity, a treatment for type 2 diabetes, increased119 percent and 132 percent in the U.S. during the threeand ninemonths ended September 30, 2017, respectively, drivengain broad commercial access, partially offset by increased share of market for Trulicity and growth in the GLP-1 market.demand. Revenue outside the U.S. increased 109 percent and 14432 percent during the threeand ninemonths ended September 30, 2017, respectively,March 31, 2021, primarily driven by uptake in Europeincreased volume and, Japan.
Revenue of Forteo, an injectable treatment for osteoporosis in postmenopausal women and men at high risk for fracture and for glucocorticoid-induced osteoporosis in men and postmenopausal women, increased 13 percent and 22 percent into a lesser extent, the U.S. during the threeand ninemonths ended September 30, 2017, respectively, driven by higher realized prices. Revenue outside the U.S. increased 13 percent and 7 percent during the third quarter of 2017 and the first nine months of 2017, respectively, driven by increased volume. Revenue for the first nine months of 2017 was partially offset by lower realized prices and the unfavorablefavorable impact of foreign exchange rates.
Revenue of Humulin, an injectable human insulin for the treatment of diabetes, increased 42 percent in the U.S. during the third quarter of 2017,three months ended March 31, 2021, driven by increased volume,higher realized prices, partially offset by lower realized prices. For the first nine months of 2017, revenue decreased 1 percent in the U.S., primarily resulting from a change in estimate in the first quarter of 2016 for a government rebate, which increased revenue in that period, partially offset by increased volume.demand. Revenue outside the U.S. decreased 23increased 1 percent during the third quarter of 2017,three months ended March 31, 2021, driven by the favorable impact of foreign exchange rates and higher realized prices, largely offset by decreased volume, primarily duevolume.
Revenue of Jardiance, a treatment for type 2 diabetes and to buying patternsreduce the risk of cardiovascular death in China. Foradult patients with type 2 diabetes and established cardiovascular disease, increased 5 percent in the first nineU.S. during the three months of 2017, revenue decreased 9 percentended March 31, 2021, driven by increased demand. Revenue outside the U.S., increased 31 percent during the three months ended March 31, 2021, driven by lower realized pricesincreased volume and, to a lesser extent, the unfavorablefavorable impact of foreign exchange rates, and decreased volume.
Revenue of Cymbalta, a product for the treatment of major depressive disorder, diabetic peripheral neuropathic pain, generalized anxiety disorder, and for the treatment of chronic musculoskeletal pain and the management of fibromyalgia, was $19.6 million and $100.8 million in the U.S. during the threeand ninemonths ended September 30, 2017, respectively, compared to $162.3 million and $246.2 million during the threeand ninemonths ended September 30, 2016, respectively. The decreases were driven by reductions to the reserve for expected product returns, which increased revenue by approximately $145 million and $175 million in the third quarter and first nine months of 2016, respectively. Revenue increased 8 percent outside the U.S. during the third quarter of 2017, primarily driven by increased volume in Japan. Revenue decreased8 percent outside the U.S. during the ninemonths ended September 30, 2017, primarily driven by the loss of exclusivity in Canada and Europe, partially offset by increased volume in Japan.
Revenue of Cyramza, a treatment for various cancers, increased 4 percent in the U.S. during the third quarter of 2017, driven by increased volume. For the first nine months of 2017, revenue decreased 1 percent in the U.S., driven by lower realized prices and decreased demand due to competitive pressure. Revenue outside the U.S. increased 38 percent and 52 percent during the threeand ninemonths ended September 30, 2017, respectively, primarily due to strong volume growth in Japan, partially offset by lower realized prices and the unfavorable impact of foreign exchange rates.
Revenue of Strattera, a treatment for attention-deficit hyperactivity disorder, decreased 56 percent and 27 percent in the U.S. during the threeand ninemonths ended September 30, 2017, respectively, driven by the loss of exclusivity in the second quarter of 2017, partially offset by higher realized prices. We lost our patent protection for Strattera in the U.S. in May 2017. The entry of generic competition following the loss of effective patent protection has caused a rapid and severe decline in revenue. Revenue outside the U.S. increased 6 percent and 5 percent during the threeand ninemonths ended September 30, 2017, respectively, driven by increased volume in Japan, partially offset by lower realized prices and the unfavorable impact of foreign exchange rates.
Revenue of Erbitux, a treatment for various cancers, decreased 12 percent in the U.S. during both the third quarter and first nine months of 2017, due to competitive pressure from immuno-oncology products.
Worldwide food animal revenue decreased 6 percent during the third quarter of 2017, driven by market access and competitive pressures in U.S. cattle. Worldwide food animal revenue decreased 8 percent during the ninemonths ended September 30, 2017, driven by market access and competitive pressures in cattle and swine. Worldwide companion animal revenue increased 35 percent during the three months ended September 30, 2017, driven by the inclusion of $61.2 million in revenue from the BIVIVP acquisition and wholesaler buying patterns in the U.S. in the third quarter of 2016. The increase in revenue during the third quarter of 2017 was partially offset by competitive pressure and lower realized prices. Worldwide companion animal revenue increased 13 percent during the ninemonths ended September 30, 2017, driven by the inclusion of $180.2 million in revenue from the BIVIVP acquisition, partially offset by competitive pressure. We expect these pressures for both companion animal and food animal to continue.
Gross Margin, Costs, and Expenses
Gross margin as a percent of revenue decreased 0.7 percentage points to 72.3 percent and increased 0.5 percentage points to 73.4 percent for the threeand ninemonths ended September 30, 2017, respectively. The decrease in gross margin percent for the third quarter of 2017 was primarily due to the effect of foreign exchange rates on international inventories sold and negative product mix, partially offset by manufacturing efficiencies. The increase in gross margin percent for the ninemonths ended September 30, 2017 was primarily due to manufacturing efficiencies and higher realized prices, partially offset by the effect of foreign exchange rates on international inventories sold and negative product mix.
Research and development expenses increased 7 percent to $1.32 billion and remained relatively flat at $3.81 billion for the threeand ninemonths ended September 30, 2017, respectively. The increase for the third quarter of 2017 was primarily due to a $50.0 million milestone payment related to lanabecestat as part of our collaboration with AstraZeneca and, to a lesser extent, higher late-stage clinical development costs. For the ninemonths ended September 30, 2017, higher late-stage clinical development costs were essentially offset by lower milestone payments in 2017 as compared with 2016. See Note 4 to the consolidated condensed financial statements for additional information regarding our collaboration with AstraZeneca.Boehringer Ingelheim involving Jardiance.
Revenue of Verzenio, a treatment for HR+, HER2- metastatic breast cancer, increased 34 percent in the U.S. during the three months ended March 31, 2021, primarily driven by increased demand, and, to a lesser extent, higher realized prices. Revenue outside the U.S. increased 64 percent during the three months ended March 31, 2021, primarily driven by increased volume.
Revenue of Basaglar, a long-acting human insulin analog for the treatment of diabetes, decreased 24 percent in the U.S. during the three months ended March 31, 2021, driven by decreased demand caused by competitive pressures and, to a lesser extent, lower realized prices. Revenue outside the U.S. decreased 3 percent during the three months ended March 31, 2021, driven by lower realized prices and decreased volume, partially offset by the favorable impact of foreign exchange rates. See Note 4 to the consolidated condensed financial statements for information regarding our collaboration with Boehringer Ingelheim involving Basaglar. A competitor launched a similar version of glargine in the U.S. in 2020. Due to the impact of competitive pressures, we expect some price decline and loss of market share over time.
Revenue of Cyramza, a treatment for various cancers, decreased 10 percent in the U.S. during the three months ended March 31, 2021, primarily driven by decreased demand and lower realized prices. Revenue outside the U.S. increased7 percent for the three months ended March 31, 2021, driven by the favorable impact of foreign exchange rates and increased volume.
Gross Margin, Costs, and Expenses
Gross margin as a percent of revenue was 72.4 percent for the three months ended March 31, 2021, a decrease of 6.9 percentage points compared with the three months ended March 31, 2020. The decrease in gross margin percent was primarily due to unfavorable product mix driven by sales of COVID-19 antibodies, the unfavorable effect of foreign exchange rates on international inventories sold, higher amortization of intangibles expense related to Retevmo, charges resulting from excess inventory of COVID-19 antibodies due in part to the termination of the purchase agreement with the U.S. government for bamlanivimab following discontinuation of the product's distribution on its own in the U.S., and, to a lesser extent, the impact of lower realized prices on revenue.
Research and development expenses increased 21 percent to $1.68 billion for the three months ended March 31, 2021. The increase in research and development expenses for the three months ended March 31, 2021 was driven primarily by approximately $220 million of research and development expenses for COVID-19 antibody therapies and baricitinib, as well as higher research and development expenses for late-stage assets.
Marketing, selling, and administrative expenses decreased 1increased 2 percent to $1.56 billion and increased 3 percent to $4.81$1.58 billion for the threeand ninemonths ended September 30, 2017, respectively. The decrease for the third quarter of 2017 was due to decreased expenses related to late life-cycle products, partially offset by increased expenses related to new pharmaceutical products. The increase for the first nine months of 2017 was due to increased expenses related to new pharmaceutical products, partially offset by decreased expenses related to late life-cycle products.March 31, 2021.
We recognized $205.0$299.3 million and $1.06 billion of acquired IPR&D charges for the threeand ninemonths ended September 30, 2017, respectively, comparedMarch 31, 2021 related to collaborations with noRigel, Precision, Merus, and Asahi. We recognized $52.3 million of acquired IPR&D charges for the threeand ninemonths ended September 30, 2016. The charges during the third quarter of 2017 relateMarch 31, 2020 related to the upfront payments associateda collaboration with our collaborations with Nektar and KeyBioscience. The charges during the first nine months of 2017, also include the acquired IPR&D charges associated with the acquisition of CoLucid. See Note 3 to the consolidated condensed financial statements for additional information.Sitryx.
We recognized asset impairment, restructuring, and other special charges of $406.5 million and $670.4$211.6 million for the threeand ninemonths ended September 30, 2017, respectively, compared with charges of $45.5 million and $234.9 million for the threeand ninemonths ended September 30, 2016, respectively.March 31, 2021. The charges for the third quarter of 2017three months ended March 31, 2021 were partially associated with asset impairmentsprimarily related to lower projected revenue for Posilac, severance costs incurred as a result of actions takenan intangible asset impairment resulting from the decision to reduce our cost structure,sell the rights to Qbrexza, as well as exitacquisition and integration costs due to site closures. See "Executive Overview—Financial Results" for more information on the actions taken to reduce our cost structure. The charges for the first nine months of 2017 were due to severance costs incurred as a result of actions taken to reduce our cost structure, charges associated with the Posilac impairment, integration costs related to the acquisition of Novartis AH, asset impairments and other charges related to animal health assets, as well as exit costs due to site closures. Prevail. We are exploring strategic options for Posilac, including seeking a buyer for the molecule and its Augusta manufacturing site. The charges for the third quarter of 2016 related to integration and severance costs for Novartis AH. The charges for the first nine months of 2016 were primarily associated with integration costs related to our acquisition of Novartis AH, asset impairments related to the closure of an animal health manufacturing facility in Ireland, as well as severance costs for Novartis AH. See Note 5 to the consolidated condensed financial statements for additional information.
Other–net, (income) expense was expense of $13.9 million and expense of $2.7 million for the third quarter and first nine months of 2017, respectively, compared with income of $27.2 million and expense of $100.6 million for the third quarter and first nine months of 2016. The increase in expense during the third quarter of 2017 was driven by higher net gains on investments in the third quarter of 2016 as compared to 2017. Other expense during the first nine months of 2016 was driven by a $203.9 million charge related to the impact of the Venezuelan financial crisis, including the significant deterioration of the bolívar. See Note 12 to the consolidated condensed financial statements for additional information.
The effective tax rates were 6.1 percent and 24.1 percent for the three and nine months ended September 30, 2017, respectively, compared with 19.9 percent and 20.8 percent for the same respective periods of 2016. The decrease in the effective tax rate for the third quarter of 2017 is primarily due to the income tax benefit of acquired IPR&D charges andrecognized asset impairment, restructuring, and other special charges.charges of $59.9 million for the three months ended March 31, 2020, primarily related to acquisition and integration costs associated with the acquisition of Dermira.
Other–net, (income) expense was income of $321.1 million for the three months ended March 31, 2021 compared with income of $89.1 million for the three months ended March 31, 2020. The increase in theother income was driven primarily by higher net gains on investment securities.
The effective tax rate was 8.2 percent for the first ninethree months of 2017 is primarily due to the non-tax deductible $857.6 million acquired IPR&D chargeended March 31, 2021, compared with 13.3 percent for the acquisition of CoLucid, partially offsetthree months ended March 31, 2020. The effective tax rates for both periods were reduced by the incomenet discrete tax benefits, with a larger net discrete tax benefit of acquired IPR&D charges and asset impairment, restructuring, and other special charges.reflected for the three months ended March 31, 2021.
Financial Condition and Liquidity
We believe our available cash and cash equivalents, together with our ability to generate operating cash flow and our access to short-term and long-term borrowings, are sufficient to fund our existing and planned capital requirements. For a discussion of our capital requirements, see “Management's Discussion and Analysis of Results of Operations and Financial Condition” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020. Cash and cash equivalents decreased to $3.72$3.00 billion as of September 30, 2017,March 31, 2021, compared with $4.58$3.66 billion as of December 31, 2016.2020. Refer to the consolidated condensed statements of cash flows for additional detailsinformation on the significant sources and uses of cash for the ninethree months ended September 30, 2017March 31, 2021 and 2016.2020.
In addition to our cash and cash equivalents, we held total investments of $9.37$3.28 billion and $6.66$2.99 billion as of September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively. See Note 6 to the consolidated condensed financial statements for additional details.information.
Total debt increasedIn January 2021, we acquired all shares of Prevail for a purchase price that included $22.50 per share in cash (or an aggregate of $747.4 million, net of cash acquired) plus one non-tradable CVR per share. The CVR entitles Prevail stockholders to $13.46 billion asup to an additional $4.00 per share in cash (or an aggregate of September 30, 2017, compared with $10.31 billion as of December 31, 2016.approximately $160 million) payable, subject to certain terms and conditions. The increaseacquisition was funded primarily due to thethrough cash proceeds of $2.23 billion from the issuance of fixed-rate notes and, to a lesser extent, the net increase in the balance of commercial paper outstanding of $1.23 billion, partially offset by the repayment of $630.6 million of long term debt.on hand. See Note 63 to the consolidated condensed financial statements for additional details regarding the May 2017information.
As of March 31, 2021, total debt issuance. At September 30, 2017,was $16.20 billion, a decrease of $390.8 million compared with $16.60 billion as of December 31, 2020.
As of March 31, 2021, we had a total of $5.17$5.24 billion of unused committed bank credit facilities, $5.00 billion of which is available to support our commercial paper program. We believe that amounts accessible through existing commercial paper markets should be adequate to fund short-term borrowings.borrowing needs.
During the ninethree months ended September 30, 2017,March 31, 2021, we repurchased $259.9 million ofdid not repurchase any shares associated withunder our previously announced $5.00$8.00 billion share repurchase program authorized in June 2018. As of March 31, 2021, we had $1.00 billion remaining under this program.
We believe that cash generated from operations, along with available cash and cash equivalents, will be sufficientDuring the three months ended March 31, 2021, we paid dividends of approximately $774.8 million, or $0.85 per share, to fund our normal operating needs, including dividends, share repurchases, and capital expenditures.shareholders.
See "Other Matters—"Executive Overview - Other Matters - Patent Matters" for information regarding recent and upcoming losses of patent protection.
Both domestically and abroad, we continue to monitor the potential impacts of the economic environment; the creditworthiness of our wholesalers and other customers, including foreign government-backed agencies and suppliers; the uncertain impact of health care legislation; various international government funding levels; and changesfluctuations in interest rates, foreign currency exchange rates (see "Other Matters—"Executive Overview - Other Matters - Foreign Currency Exchange Rates").
, and fair values of equity securities.
Financial Expectations
Full-year 2017 EPS is now anticipatedWe have updated certain elements of our 2021 financial guidance. The update to be in the range of $1.73our 2021 financial guidance includes acquired IPR&D charges, asset impairment, restructuring and other special charges, and excess inventory charges related to $1.83 reflecting charges associated with recently announced streamlining initiatives. We now expect 2017 revenue of between $22.4 billion and $22.7 billion, primarily due to uptake trends for new pharmaceutical products and, to a lesser extent, the positive impact of the Euro. Excluding the impact of foreign exchange rates, we expect revenue growth from new pharmaceutical products including Trulicity, Taltz, Basaglar, Cyramza, Jardiance, and Lartruvo,COVID-19 antibodies, as well as a number of established pharmaceutical products including Trajenta, Forteo,net gains on investments in equity securities recognized during the three months ended March 31, 2021. The update to 2021 financial guidance also reflects lower expected revenue from COVID-19 antibody sales due to lower expected demand and Humalog.
Gross margin as a percent of revenue is stillhigher expected to be approximately 72.5 percent. Researchresearch and development expensesexpenses.
Earnings per share for 2021 are now expected to be in the range of $5.1$7.03 to $7.23.
We now anticipate 2021 revenue to be between $26.6 billion and $27.6 billion, including an estimated $1.0 billion to $5.2 billion.$1.5 billion of revenue from COVID-19 therapies. Revenue growth is additionally expected to be driven by volume from Trulicity, Taltz, Verzenio, Jardiance, Olumiant, Cyramza, Emgality, Tyvyt, and Retevmo, as well as by COVID-19 therapies. Revenue growth is expected to be partially offset by lower revenue for products that have lost patent exclusivity. We expect mid-single digit net price declines globally in 2021. In the U.S., we expect low-to-mid-single digit net price declines, driven primarily by increased rebates to maintain broad commercial access and segment mix, partially offset by lower utilization in the 340B segment. Outside the U.S., we expect net price declines in China, Japan and Europe.
Gross margin as a percent of revenue for 2021 is still expected to be approximately 77 percent. Research and development expenses for 2021 are now expected to be in the range of $6.9 billion to $7.1 billion, reflecting additional investments in potential therapies for Alzheimer's disease and approximately $400 million to $500 million of continued investment in COVID-19 therapies. Marketing, selling, and administrative expenses for 2021 are still expected to be in the range of $6.4$6.2 billion to $6.6$6.4 billion. Other—net, (income) expense for 2021 is stillnow expected to be income in the range of up$150 million to $100$250 million.
The 20172021 effective tax rate is now expected to be approximately 20.013 percent.
Capital expenditures are still expected to be approximately $1.1 billion.
Available Information on our Website
We make available through our company website, free of charge, our company filings with the Securities and Exchange Commission (SEC) as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. The reports we make available include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, registration statements, and any amendments to those documents.
The website link to our SEC filings is http://investor.lilly.com/sec.cfmfinancial-information/sec-filings. The information contained in, or that can be accessed through, our website is not a part of, or incorporated by reference in, this Quarterly Report.
Item 4. Controls and Procedures
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(a) | Evaluation of Disclosure Controls and Procedures. Under applicable SEC regulations, management of a reporting company, with the participation of the principal executive officer and principal financial officer, must periodically evaluate the company’s “disclosure controls and procedures,” which are defined generally as controls and other procedures of a reporting company designed to ensure that information required to be disclosed by the reporting company in its periodic reports filed with the SEC (such as this Form 10-Q) is recorded, processed, summarized, and reported on a timely basis.
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(a)Evaluation of Disclosure Controls and Procedures. Under applicable SEC regulations, management of a reporting company, with the participation of the principal executive officer and principal financial officer, must periodically evaluate the company’s “disclosure controls and procedures,” which are defined generally as controls and other procedures of a reporting company designed to ensure that information required to be disclosed by the reporting company in its periodic reports filed with the SEC (such as this Quarterly Report on Form 10-Q) is recorded, processed, summarized, and reported on a timely basis.
Our management, with the participation of David A. Ricks, chairman, president and chief executive officer, and Derica W. Rice, executiveAnat Ashkenazi, senior vice president global services, and chief financial officer, evaluated our disclosure controls and procedures (as such terms are defined in our Annual Report on Form 10-K for the year ended December 31, 2020) as of September 30, 2017,March 31, 2021, and concluded that they were effective. (b)Changes in Internal Controls. During the first quarter of 2021, there were no changes in our internal control over financial reporting that materially affected, or are effective.
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(b) | Changes in Internal Controls. During the third quarter of 2017, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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reasonably likely to materially affect, our internal control over financial reporting.
PART II. Other Information
Item 1. Legal Proceedings
We are a party to various currently pending legal actions, government investigations, and environmental proceedings. See "NotesNote 9 to Consolidated Condensed Financial Statements—Note 10, Contingencies"the consolidated condensed financial statements for information on various legal proceedings, including but not limited to:proceedings.
•The patent litigation and administrative proceedings involving Alimta and Effient.
•The product liability litigation involving Actos® and Cymbalta.
•The employee litigation in Brazil.
That information is incorporated into this Item by reference.
This Item should be read in conjunction with the Legal Proceedings disclosures"Legal Proceedings" in Part I, Item 3 of our Annual Report on Form 10-K for the year ended December 31, 2016 (Part I, Item 3) and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017 (Part II, Item 1).2020. Other Product Liability Litigation
We are named as a defendant in approximately 505 Byetta®product liability lawsuits in the U.S. involving approximately 770 plaintiffs. Approximately 60 of these lawsuits, covering about 320 plaintiffs, are filed in California state court and coordinated in a Los Angeles Superior Court. Approximately 440 lawsuits, covering about 445 plaintiffs, are filed in federal court, the majority of which are coordinated in a multidistrict litigation (MDL) in the U.S. District Court for the Southern District of California. The remaining three lawsuits, representing approximately five plaintiffs, are in various state courts. Approximately 495 of the lawsuits, involving approximately 730 plaintiffs, contain allegations that Byetta caused or contributed to the plaintiffs' cancer (primarily pancreatic cancer or thyroid cancer); most others allege Byetta caused or contributed to pancreatitis. The federal and state trial courts granted summary judgment in favor of us and our co-defendants on the claims alleging pancreatic cancer. The plaintiffs appealed those rulings. In October 2017, oral argument was held in the U.S. Court of Appeals for the Ninth Circuit for the federal court decision. No oral argument date has been set for appeal of the state court decision. We are aware of approximately 20 additional claimants who have not yet filed suit. These additional claims allege damages for pancreatic cancer or thyroid cancer. We believe these lawsuits and claims are without merit and are prepared to defend against them vigorously.
We are named as a defendant in approximately 135 Cialis product liability lawsuits in the U.S. These cases, originally filed in various federal courts, contain allegations that Cialis caused or contributed to the plaintiffs' cancer (melanoma). In December 2016, the Judicial Panel on Multidistrict Litigation (JPML) granted the plaintiffs' petition to have the filed cases and an unspecified number of future cases coordinated into a federal MDL in the U.S. District Court for the Northern District of California, alongside an existing coordinated proceeding involving Viagra®. The JPML ordered the transfer of the existing cases to the now-renamed MDLIn re: Viagra (Sildenafil Citrate) and Cialis (Tadalafil) Products Liability Litigation. We believe these lawsuits and claims are without merit and are prepared to defend against them vigorously.
Other Patent Matters
In Canada, several generic companies previously challenged the validity of our Zyprexa patent. In September 2012, the Canadian Court of Appeals affirmed the lower court's decision that the patent was invalid for lack of utility. In 2013, our petition for leave to appeal the decision to the Supreme Court of Canada was denied. Two of the generic companies, Apotex Inc. (Apotex) and Teva Canada Limited (Teva Canada), pursued claims for damages arising from our enforcement of the patent under Canadian regulations. In April 2014, the Supreme Court of Canada dismissed Apotex's damages suit. Teva Canada's claim for damages remains, and a separate trial to determine the total amount of damages that may be awarded to Teva Canada concluded in May 2016. In January 2017, the court issued a ruling that Teva Canada is entitled to damages. We have appealed this decision and a hearing is expected in late 2017.
In October 2017, Teva Pharmaceuticals International GMBH filed a lawsuit against us in U.S District Court for the District of Massachusetts seeking a ruling that various patents would be infringed if we launch galcanezumab. We believe these patents are invalid and that this lawsuit is without merit. We are prepared to vigorously defend against this lawsuit.
Other Matters
We,along with Sanofi, Novo Nordisk, and various pharmacy benefit managers, are named as defendants in a purported class action lawsuit in the U.S. District Court of Western District of Texas, MSP Recovery Claims, Series, LLC et al. v. CVS Health Corp., et al., relating to insulin pricing. The complainants are seeking damages under common law fraud, unjust enrichment, and the federal Racketeer Influenced and Corrupt Organizations Act. We believe this lawsuit and these claims are without merit and are prepared to defend against them vigorously.
We are also a defendant in other litigation and investigations, including product liability, patent, employment, and premises liability litigation, of a character we regard as normal to our business.
Item 1A. Risk Factors
Our material risk factors are disclosed in "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016.2020. There have been no material changes from the risk factors previously disclosed in our Annual Report.Report on Form 10-K for the year ended December 31, 2020. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no share
Information relating to the principal market for our common stock and related shareholder matters is described in "Management's Discussion and Analysis of Results of Operations and Financial Condition" in Part II, Item 7 and in "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" in Part III, Item 12 of our Annual Report on Form 10-K for the year ended December 31, 2020. The following table summarizes the activity related to repurchases of our equity securities during the three months ended September 30, 2017.March 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Period | Total Number of
Shares Purchased
(in thousands) | | Average Price Paid
per Share | | Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
(in thousands) | | Approximate Dollar Value
of Shares that May Yet Be
Purchased Under the
Plans or Programs
(in millions) |
| January 2021 | — | | | $ | — | | | — | | | $ | 1,000.0 | |
| February 2021 | — | | | — | | | — | | | 1,000.0 | |
| March 2021 | — | | | — | | | — | | | 1,000.0 | |
| Total | — | | | — | | | — | | | |
During the three months ended March 31, 2021, we did not repurchase any shares under our $8.00 billion share repurchase program authorized in June 2018.
Item 6. Exhibits
The following documents are filed as exhibits toa part of this Quarterly Report: | | | | | | | | |
| Exhibit | | Description |
| EXHIBIT 3.1 | | |
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EXHIBIT 3.13.2 | | Amended Articles of Incorporation |
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EXHIBIT 3.210.1 | | By-laws, as amended |
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EXHIBIT 12.10.2 | | Statement re: Computation |
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| EXHIBIT 31.1 | | |
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| EXHIBIT 31.2 | | |
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| EXHIBIT 32. | | |
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| EXHIBIT 101. | | Interactive Data Files (embedded within the Inline XBRL document) |
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| EXHIBIT 104. | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
(i) Long-term debt instruments under which the total amount of securities authorized does not exceed 10% of our consolidated assets are not filed as exhibits to this Quarterly Report. We will furnish a copy of these agreements to the SEC upon request.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. | | | | | | | | |
| | ELI LILLY AND COMPANY |
| | (Registrant) |
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| Date: | April 30, 2021 | ELI LILLY AND COMPANY/s/Anat Ashkenazi |
| | (Registrant)Anat Ashkenazi |
| | Senior Vice President and Chief Financial Officer |
| Date: | October 27, 2017April 30, 2021 | /s/Bronwen L. Mantlo |
| | Bronwen L. Mantlo |
| | Corporate Secretary
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Date: | October 27, 2017 | /s/Donald A. Zakrowski |
| | Donald A. Zakrowski |
| | Vice President, Finance, and Chief Accounting Officer |
Index to Exhibits
The following documents are filed as a part of this Report: |
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Exhibit | | |
EXHIBIT 3.1 | | |
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EXHIBIT 3.2 | | |
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EXHIBIT 12. | | |
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EXHIBIT 31.1 | | |
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EXHIBIT 31.2 | | |
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EXHIBIT 32. | | |
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EXHIBIT 101. | | Interactive Data Files |