CONSOLIDATED CONDENSED STATEMEN
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (USD $) | ||||
In Millions, except Per Share data | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Net product sales | 5385.5 | 5092.4 | 15390.6 | 14835.6 |
Collaboration and other revenue | 176.5 | 117.1 | 511.2 | 331.9 |
Total revenue | 5,562 | 5209.5 | 15901.8 | 15167.5 |
Cost of sales | 1051.9 | 1155.2 | 2815.7 | 3467.4 |
Research and development | 1122.1 | 953 | 3109.8 | 2781.6 |
Marketing, selling, and administrative | 1701.8 | 1649.2 | 4939.2 | 4899.8 |
Acquired in-process research and development | 0 | 28 | 0 | 150 |
Asset impairments, restructuring, and other special charges | 549.8 | 1659.4 | 654.8 | 1,894 |
Other - net, expense (income) | 66.9 | -2.5 | 161.7 | -55.1 |
Cost of sales, operating expenses, and other-net | 4492.5 | 5442.3 | 11681.2 | 13137.7 |
Income (loss) before income taxes | 1069.5 | -232.8 | 4220.6 | 2029.8 |
Income taxes | 127.7 | 232.8 | 807.2 | 472.3 |
Net income (loss) | 941.8 | -465.6 | 3413.4 | 1557.5 |
Earnings per share - basic and diluted | 0.86 | -0.43 | 3.11 | 1.42 |
Dividends paid per share | 0.49 | 0.47 | 1.47 | 1.41 |
CONSOLIDATED CONDENSED BALANCE
CONSOLIDATED CONDENSED BALANCE SHEETS (USD $) | ||
In Millions | Sep. 30, 2009
| Dec. 31, 2008
|
CURRENT ASSETS | ||
Cash and cash equivalents | 3848.2 | 5496.7 |
Short-term investments | 80.9 | 429.4 |
Accounts receivable, net of allowances of $106.2 (2009) and $97.4 (2008) | 3016.8 | 2778.8 |
Other receivables | 466.1 | 498.5 |
Inventories | 3128.2 | 2493.2 |
Deferred income taxes | 263.7 | 382.1 |
Prepaid expenses | 1006.1 | 374.6 |
TOTAL CURRENT ASSETS | 11,810 | 12453.3 |
OTHER ASSETS | ||
Investments | 1173.8 | 1544.6 |
Goodwill and other intangibles - net | 3738.9 | 3929.1 |
Sundry | 2172.5 | 2659.3 |
Total other assets | 7085.2 | 8,133 |
PROPERTY AND EQUIPMENT | ||
Land, buildings, equipment, and construction-in-progress | 15188.5 | 15315.9 |
Less accumulated depreciation | -6955.8 | -6689.6 |
Land, buildings, equipment, and construction-in-progress, net | 8232.7 | 8626.3 |
Total assets | 27127.9 | 29212.6 |
CURRENT LIABILITIES | ||
Short-term borrowings | 622.5 | 5846.3 |
Accounts payable | 887.7 | 885.8 |
Employee compensation | 730.6 | 771 |
Sales rebates and discounts | 999.3 | 873.4 |
Dividends payable | 0 | 536.8 |
Income taxes payable | 275.9 | 229.2 |
Accrued marketing investigation charges | 239.6 | 1,425 |
Other current liabilities | 2311.9 | 2542.2 |
TOTAL CURRENT LIABILITIES | 6067.5 | 13109.7 |
Long-term debt | 6769.7 | 4615.7 |
Accrued retirement benefit | 2009.3 | 2387.6 |
Long-term income taxes payable | 990 | 906.2 |
Deferred income taxes | 101.8 | 74.7 |
Other noncurrent liabilities | 1284.6 | 1,381 |
Total noncurrent liabilities | 11155.4 | 9365.2 |
SHAREHOLDERS' EQUITY | ||
Common stock | 718.7 | 711.1 |
Additional paid-in capital | 4560.2 | 3976.6 |
Retained earnings | 9992.7 | 7654.9 |
Employee benefit trust | -3013.2 | (2,635) |
Deferred costs-ESOP | -79.9 | -86.3 |
Accumulated other comprehensive loss | -2175.4 | -2786.8 |
Noncontrolling interests | 0.4 | 2.4 |
Shareholders' equity, including treasury shares | 10003.5 | 6836.9 |
Less cost of common stock in treasury | 98.5 | 99.2 |
Total shareholders' equity | 9,905 | 6737.7 |
Total liabilities and shareholders' equity | 27127.9 | 29212.6 |
1_CONSOLIDATED CONDENSED BALANC
CONSOLIDATED CONDENSED BALANCE SHEETS (Parenthetical) (USD $) | ||
In Millions | Sep. 30, 2009
| Dec. 31, 2008
|
Consolidated Condensed Balance Sheet (Parenthetical) [Abstract] | ||
Accounts receivable, allowances | 106.2 | 97.4 |
2_CONSOLIDATED CONDENSED STATEM
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (USD $) | ||
In Millions | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income | 3413.4 | 1557.5 |
Adjustments to Reconcile Net Income to Cash Provided by (Used in) Operating Activities [Abstract] | ||
Net marketing investigation charges accrued (paid) | -1185.3 | 1,477 |
Other changes in operating assets and liabilities, net of acquisitions | (1,768) | 144 |
Depreciation and amortization | 922 | 842.3 |
Stock-based compensation expense | 264.4 | 192.7 |
Deferred income taxes | 306.3 | 268 |
Acquired in-process research and development, net of tax | 0 | 107.3 |
Other, net | 364.1 | 326.3 |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 2316.9 | 4915.1 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Net purchases of property and equipment | -508.2 | -671.5 |
Net change in short-term investments | 563.2 | -237.3 |
Purchases of noncurrent investments | -329.3 | -1295.4 |
Proceeds from sales and maturities of noncurrent investments | 742.2 | 653.5 |
Cash paid for acquisitions, net of cash acquired | 0 | -44.4 |
Purchase of in-process research and development | 0 | (122) |
Other, net | -70.8 | -85.4 |
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | 397.1 | -1802.5 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Dividends paid | -1612.4 | -1541.5 |
Net change in short-term borrowings | -4829.4 | -392.2 |
Proceeds from issuance of long-term debt | 2,400 | 0.1 |
Repayment of long-term debt | (400) | -10.8 |
Other, net | 36.6 | -6.8 |
NET CASH USED IN FINANCING ACTIVITIES | -4405.2 | -1951.2 |
Effect of exchange rate changes on cash and cash equivalents | 42.7 | -28.3 |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | -1648.5 | 1133.1 |
Cash and cash equivalents at January 1 | 5496.7 | 3220.5 |
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 | 3848.2 | 4353.6 |
3_CONSOLIDATED CONDENSED STATEM
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) | |||||||||||||||||||
In Millions | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 | |||||||||||||||
Net income (loss) | 941.8 | -465.6 | 3413.4 | 1557.5 | |||||||||||||||
Other comprehensive income (loss), net of tax | 291.4 | [1] | (610) | [1] | 611.4 | [1] | -409.1 | [1] | |||||||||||
Comprehensive income (loss) | 1233.2 | -1075.6 | 4024.8 | 1148.4 | |||||||||||||||
[1]The significant components of other comprehensive income (loss) were gains from foreign currency translation adjustments of $189.1 million and $381.8 million for the three months and nine months ended September 30, 2009, respectively. In addition, net unrealized gains on investment securities of $72.4 million and $169.4 million were included in other comprehensive income (loss) for the three months and nine months ended September 30, 2009, respectively. The significant components of other comprehensive income (loss) for the three months and nine months ended September 30, 2008 were losses from foreign currency translation adjustments of $640.4 million and $376.7 million, respectively. |
Segment Information
Segment Information | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Segment Information [Abstract] | |
Segment Information [Text Block] | SEGMENT INFORMATION We operate in one significant business segment human pharmaceutical products. Operations of our animal health business segment are not material and share many of the same economic and operating characteristics as human pharmaceutical products. Therefore, they are included with pharmaceutical products for purposes of segment reporting. Our business 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. Income before income taxes for the animal health business was $59.3 million and $47.6 million for the quarters ended September 30, 2009 and 2008, respectively, and $142.6 million and $102.9 million for the nine months ended September 30, 2009 and 2008, respectively. REVENUE BY CATEGORY Worldwide revenue by category was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2009 2008 2009 2008 (Dollars in millions) Net sales to unaffiliated customers Neurosciences........................................................ $2,252.1 $2,160.4 $ 6,515.5 $ 6,258.5 Endocrinology......................................................... 1,448.7 1,371.4 4,164.2 4,098.8 Oncology................................................................. 816.0 754.0 2,307.6 2,142.5 Cardiovascular........................................................ 509.9 477.4 1,419.1 1,416.1 Animal health.......................................................... 314.6 277.1 854.0 766.9 Other pharmaceuticals............................................. 44.2 52.1 130.2 152.8 Net product sales...................................................... 5,385.5 5,092.4 15,390.6 14,835.6 Collaboration and other revenue................................. 176.5 117.1 511.2 331.9 Total revenue............................................................ $5,562.0 $5,209.5 $15,901.8 $15,167.5 |
Basis of Presentation
Basis of Presentation | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Basis of Presentation [Abstract] | |
Basis of Presentation [Text Block] | 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 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, revenues, 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 10K for the year ended December 31, 2008. Certain reclassifications have been made to the December31, 2008 consolidated condensed financial statements to conform with the September 30, 2009 presentation. We issued our financial statements by filing with the Securities and Exchange Commission on October 30, 2009. We have evaluated subsequent events up to the time of the filing. |
Implementation of New Financial
Implementation of New Financial Accounting Pronouncements | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
New Accounting Pronouncements [Abstract] | |
Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Text Block] | In September 2009, the Emerging Issues Task Force (EITF) issued guidance related to Revenue Recognition that amends the previous guidance on arrangements with multiple deliverables. This guidance provides principles and application guidance on whether multiple deliverables exist, how the arrangements should be separated, and how the consideration should be allocated. It also clarifies the method to allocate revenue in an arrangement using the estimated selling price. This guidance is effective for us January 1, 2011 and is not expected to be material to our consolidated financial position or results of operations. In June 2009, the Financial Accounting Standards Board (FASB) issued a Statement on Subsequent Events. This Statement provides authoritative accounting guidance and disclosure requirements for material events occurring subsequent to the balance sheet date and prior to the issuance of the financial statements. This Statement is effective for us for the periods ended on and after June 30, 2009. The implementation of this Statement had no effect on our consolidated financial position or results of operations. In June 2009, the FASB issued a Statement on Transfers and Servicing, an amendment of previous authoritative guidance. The most significant amendments resulting from this Statement consist of the removal of the concept of a qualifying special-purpose entity (SPE) from previous authoritative guidance, and the elimination of the exception for qualifying SPEs from the Consolidation guidance regarding variable interest entities. This Statement is effective for us January 1, 2010 and is not expected to be material to our consolidated financial position or results of operations. In June 2009, the FASB issued a Statement that amends the previous Consolidations guidance regarding variable interest entities and addresses the effects of eliminating the qualifying special-purpose entity concept from the guidance on Transfers and Servicing. This Statement responds to concerns about the application of certain key provisions of the previous guidance on Consolidations regarding variable interest entities, including concerns over the transparency of enterprises involvement with variable interest entities. This Statement is effective for us January 1, 2010 and is not expected to be material to our consolidated financial position or results of operations. We adopted the provisions of a FASB Staff Position (FSP) relating to Fair Value Measurements and Disclosures, as of March 31, 2009. This FSP provides additional guidance on estimating fair value when the volume and level of activity for an asset or liability have significantly decreased in relation to normal market activity. The FSP also provides additional guidance on circumstances that may indicate that a transaction is not orderly and requires additional disclosures. The implementation of this FSP was not material to our consolidated financial position or results of operations. We adopted the provisions of a FSP on Financial Instruments, as of March 31, 2009. This FSP required disclosures about fair value of all financial instruments for interim reporting periods. The applica |
Acquisitions
Acquisitions | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Acquisitions [Abstract] | |
Acquisitions [Text Block] | During 2008 we acquired several businesses. These acquisitions were accounted for as business combinations under the purchase method of accounting. Under the purchase method of accounting, the assets acquired and liabilities assumed were recorded at their respective fair values as of the acquisition date in our consolidated 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 these acquisitions are included in our consolidated financial statements from the date of acquisition. Most of these acquisitions included in-process research and development (IPRD), which represented compounds, new indications, or line extensions under development that had not yet achieved regulatory approval for marketing. There are several methods that can be used to determine the estimated fair value of the IPRD acquired in a business combination. We utilized the income method, which applies a probability weighting to the estimated future net cash flows that are derived from projected sales revenues and estimated costs. These projections are based on factors such as relevant market size, patent protection, historical pricing of similar products, and expected industry trends. The estimated future net cash flows are then discounted to the present value using an appropriate discount rate. This analysis is performed for each project independently. Pursuant to the existing rules, these acquired IPRD intangible assets totaling $4.71 billion in 2008 were expensed immediately subsequent to the acquisition because the products had no alternative future use. None of these charges were incurred during the first or second quarters of 2008 and $28.0 million was incurred in the third quarter of 2008. The ongoing activities with respect to each of these products in development are not material to our research and development expenses. In addition to the acquisitions of businesses, we also acquired several products in development. The acquired IPRD related to these products of $122.0 million in 2008 was also written off by a charge to income immediately upon acquisition because the products had no alternative future use. ImClone Acquisition On November 24, 2008, we acquired all of the outstanding shares of ImClone Systems Inc. (ImClone), a biopharmaceutical company focused on advancing oncology care, for a total purchase price of approximately $6.5 billion, which was financed through borrowings. This strategic combination offers both targeted therapies and oncolytic agents along with a pipeline spanning all phases of clinical development. The combination also expands our biotechnology capabilities. The acquisition was accounted for as a business combination under the purchase method of accounting, resulting in goodwill of $425.9 million. No portion of this goodwill is expected to be deductible for tax purposes. Allocation of Purchase Price We are currently determining the fair values of a few of these net assets. The purchase |
Collaborations
Collaborations | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Collaborations [Abstract] | |
Collaborations [Text Block] | We often enter into collaborative arrangements to develop and commercialize drug candidates. Collaborative activities might include research and development, marketing and selling (including promotional activities and physician detailing), manufacturing, and distribution. These collaborations often require milestone and 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 or payments to the third party. Revenues related to products sold by us pursuant to these arrangements are included in net product sales, while other sources of revenue (e.g., royalties and profit share payments) are included in collaboration and other revenue. Operating expenses for costs incurred pursuant to these arrangements are reported in their respective expense line item, net of any payments made to or reimbursements received from our collaboration partners. Each collaboration is unique in nature, and our more significant arrangements are discussed below. Erbitux Prior to our acquisition, ImClone entered into several collaborations with respect to Erbitux, a product approved to fight cancer, while still in its development phase. The most significant collaborations operate in these geographic territories: the U.S., Japan, and Canada (Bristol-Myers Squibb Company); and worldwide except the U.S.and Canada (Merck KGaA). The agreements are expected to expire in 2018, upon which all of the rights with respect to Erbitux in the U.S.and Canada return to us. The following table summarizes the revenue recognized with respect to Erbitux: Three Months Ended September 30, 2009 Nine Months Ended September 30, 2009 (Dollars in millions) Net product sales........................................... $ 22.3 $ 72.3 Collaboration and other revenue...................... 79.6 223.5 Total revenue................................................. $101.9 $ 295.8 Bristol-Myers Squibb Company Pursuant to a commercial agreement with Bristol-Myers Squibb Company and E.R. Squibb (collectively, BMS), relating to Erbitux, ImClone is co-developing and co-promoting Erbitux in the U.S. and Canada with BMS, exclusively, and in Japan with BMS and Merck KGaA. The companies have jointly agreed to expand the investment in the ongoing clinical development plan for Erbitux to further explore its use in additional tumor types. Under this arrangement, Erbitux research and development and other costs, up to threshold amounts, are the sole responsibility of BMS, with costs in excess of the thresholds shared by both companies according to a predetermined ratio. Responsibilities associated with clinical and other ongoing studies are apportioned between the parties as determined pursuant to the agreement. Collaborative reimbursements received by ImClone for supply of clinical trial materials; for research and development; and for a portion of marketing, selling, and administrative expenses are recorded as a reduction to the respective expense line items on the consolidated condensed statement of operations. We receive |
Asset Impairments, Restructurin
Asset Impairments, Restructuring, and Other Special Charges | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Asset Impairments, Restructuring, and Other Special Charges [Abstract] | |
Asset Impairments, Restructuring, and Other Special Charges [Text Block] | The components of the charges included in asset impairments, restructuring, and other special charges in our consolidated condensed statements of operations are described below. We recognized asset impairment, restructuring, and other special charges of $424.8 million in the third quarter of 2009 primarily due to the announced agreement to sell our Tippecanoe Laboratories manufacturing site to an affiliate of Evonik Industries AG (Evonik) by the end of 2009, subject to certain closing conditions. In connection with the sale of the site, we will enter into a nine-year supply and services agreement, whereby the Evonik affiliate will manufacture final and intermediate step active pharmaceutical ingredient (API) for certain of our human and animal health products. The decision to sell the site was based upon a projected decline in utilization of the site due to several factors, including upcoming patent expirations on certain medicines made at the site; our strategic decision to purchase, rather than manufacture, many late-stage chemical intermediates; and the evolution of the our pipeline toward more biotechnology medicines. In addition to the sale of the Tippecanoe site, in the third quarter of 2009 we announced a voluntary exit program for certain U.S. sales employees. Components of the third-quarter restructuring charge include non-cash asset impairment charges and other charges of $363.7 million, and $61.1 million in severance related charges, substantially all of which is expected to be paid in cash by early 2010. The fair value of assets used in determining impairment charges is based on contracted sales prices. In the second and third quarters of 2009, we incurred other special charges of $105.0 million and $125.0million, respectively. We are in advanced discussions with the attorneys general for several states that were not part of the Eastern District of Pennsylvania settlement, seeking to resolve their Zyprexa-related claims, and we have agreed to settlements with the states of Connecticut, Idaho, South Carolina, Utah, and West Virginia. The charge reflects the currently probable and estimable exposures in connection with the states claims. See Note 12 for additional information. In the third quarter of 2008, as a result of our previously announced agreements with Covance Inc. (Covance), Quintiles Transnational Corp. (Quintiles), and Ingenix Pharmaceutical Services, Inc., doing business as i3 Statprobe (i3), and as part of our efforts to transform into a more flexible organization, we recognized asset impairments, restructuring, and other special charges of $182.4 million. We sold our Greenfield, Indiana, site to Covance, a global drug development services firm, and entered into a 10-year service agreement under which Covance will provide preclinical toxicology work and perform additional clinical trials for us as well as operate the site to meet our needs and those of other pharmaceutical industry clients. In addition, we signed agreements with Quintiles for clinical trial monitoring services and with i3 for clinical data management services. Components of the third-quarter 2008 restructuring charge include non-cash charg |
Financial Instruments
Financial Instruments | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Financial Instruments [Abstract] | |
Financial Instruments [Text Block] | Financial instruments that potentially subject us to credit risk consist principally of trade receivables and interest-bearing investments. Wholesale distributors of life-sciences products account for a substantial portion of trade receivables; collateral is generally not required. The risk associated with this concentration is mitigated by our ongoing credit review procedures and insurance. Major financial institutions represent the largest component of our investments in corporate debt securities. In accordance with documented corporate policies, we limit 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. Accounting Policy for Risk-Management Instruments Our derivative activities are initiated within the guidelines of documented corporate risk-management policies and do not create additional risk because gains and losses on derivative contracts offset losses and gains on the assets, liabilities, and transactions being hedged. As derivative contracts are initiated, we designate the instruments individually as either a fair value hedge or a cash flow hedge. Management reviews the correlation and effectiveness of our derivatives on a quarterly basis. For derivative contracts 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 contracts that are designated and qualify as cash flow hedges, the effective portion of gains and losses on these contracts is reported as a component of other comprehensive loss and reclassified into earnings in the same period the hedged transaction affects earnings. 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 currently in earnings. We may enter into foreign currency forward and purchase option contracts to reduce the effect of fluctuating currency exchange rates (principally the euro, the 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 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 othernet, expense (income). The purchased option contracts are used to hedge anticipated foreign currency transactions, primarily intercompany inventory activities expected to occur within the next year. These contracts are designated as cash flow hedges of those future transactions, and the impact on earnings is included in cost of sales. We may enter into foreign currency forward contracts and currency swaps as fair value h |
Stock-Based Compensation
Stock-Based Compensation | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Stock-Based Compensation [Abstract] | |
Stock-Based Compensation [Text Block] | Our stock-based compensation expense consists primarily of performance awards (PAs) and shareholder value awards (SVAs). We recognized pretax stock-based compensation expense of $104.0 million and $77.9million in the third quarter of 2009 and 2008, respectively. In the first nine months of 2009 and 2008, we recognized pretax stock-based compensation expense of $264.4 million and $192.7 million, respectively. PAs are granted to officers and management and are payable in shares of our common stock. The number of PA shares actually issued, if any, varies depending on the achievement of certain earnings per share targets over a one-year and a two-year period. PA shares are accounted for at fair value based upon the closing stock price on the date of grant and fully vest at the end of the measurement periods. As of September 30, 2009, the total remaining unrecognized compensation cost related to nonvested PAs amounted to $149.1 million, which will be amortized over the weighted-average remaining requisite service period of approximately 11 months. SVAs are granted to officers and management and are payable in shares of common stock at the end of a three-year period. The number of shares actually issued varies depending on our stock price at the end of the three-year vesting period compared to pre-established target prices. We measure the fair value of the SVA unit on the grant date using a Monte Carlo simulation model. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award grant and calculates the fair value of the award. As of September 30, 2009, the total remaining unrecognized compensation cost related to nonvested SVAs amounted to $58.4 million, which will be amortized over the weighted-average remaining requisite service period of approximately 23 months. |
Shareholders' Equity
Shareholders' Equity | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Shareholders' Equity [Abstract] | |
Shareholders' Equity [Text Block] | As of September 30, 2009, we have purchased $2.58 billion of our previously announced $3.0 billion share repurchase program. During the first nine months of 2009, we did not acquire any shares pursuant to this program, nor do we expect any share repurchases under this program for the remainder of 2009. In the first quarter of 2009, we contributed an additional 10 million shares to the employee benefit trust, which resulted in a reclassification within equity from additional-paid-in capital of $371.9 million and common stock of $6.3 million to the employee benefit trust of $378.2 million. |
Earnings Per Share
Earnings Per Share | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Earnings Per Share [Abstract] | |
Earnings Per Share [Text Block] | Unless otherwise noted in the footnotes, all per-share amounts are presented on a diluted basis, that is, based on the weighted-average number of outstanding common shares plus the effect of all potentially dilutive common shares (primarily contingently issuable shares and unexercised stock options). |
Income Taxes
Income Taxes | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Income Taxes [Abstract] | |
Income Taxes [Text Block] | We file income tax returns in the United States (U.S.) federal jurisdiction and various state, local, and non-U.S. jurisdictions. We are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations in major taxing jurisdictions for years before 2002. During the first quarter of 2008, we completed and effectively settled our Internal Revenue Service (IRS) audit of tax years 2001-2004 except for one matter for which we were seeking resolution through the IRS administrative appeals process. As a result of the IRS audit conclusion, gross unrecognized tax benefits were reduced by approximately $618million, and the consolidated results of operations were benefited by $210.3 million through a reduction in income tax expense. The majority of the reduction in gross unrecognized tax benefits related to intercompany pricing positions that were agreed with the IRS in a prior audit cycle for which a prepayment of tax was made in 2005. Application of the prepayment and utilization of tax carryovers resulted in a refund of approximately $50 million. The IRS began its examination of tax years 2005-2007 during the third quarter of 2008. In addition, the IRS administrative appeals matter from the 2001-2004 IRS audit was settled in the third quarter of 2009. Considering the current status of the 2005-2007 IRS examination and the settlement of the IRS administrative appeals matter from the 2001-2004 audit, gross unrecognized tax benefits have been reduced approximately $190 million in the third quarter of 2009. As a result, our income tax expense was reduced by $54.4 million. After utilization of all tax credit carryovers, a cash payment of $52.8 million was paid in the third quarter of 2009 upon settlement of the IRS appeals matter. While the IRS is currently examining tax years 2005-2007, the resolution of all issues in this audit period will likely extend beyond the next 12 months. |
Retirement Benefits
Retirement Benefits | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Retirement Benefits [Abstract] | |
Retirement Benefits [Text Block] | Net pension and retiree health benefit expense included the following components: Defined Benefit Pension Plans Three Months Ended September 30, Nine Months Ended September 30, 2009 2008 2009 2008 (Dollars in millions) Components of net periodic benefit cost Service cost....................................... $ 59.3 $ 61.4 $179.0 $186.8 Interest cost....................................... 104.6 102.7 312.0 308.5 Expected return on plan assets............ (149.9) (151.3) (435.3) (455.0) Amortization of prior service cost......... 1.8 1.8 5.4 5.3 Recognized actuarial loss.................... 21.2 19.2 63.0 57.8 Net periodic benefit cost...................... $ 37.0 $ 33.8 $124.1 $103.4 Retiree Health Benefit Plans Three Months Ended September 30, Nine Months Ended September 30, 2009 2008 2009 2008 (Dollars in millions) Components of net periodic benefit cost Service cost....................................... $ 13.4 $ 15.5 $ 40.1 $ 46.6 Interest cost....................................... 29.2 26.5 87.7 79.4 Expected return on plan assets............ (29.5) (29.1) (88.4) (88.3) Amortization of prior service cost......... (9.0) (9.0) (27.0) (27.0) Recognized actuarial loss.................... 17.2 15.7 51.5 47.1 Net periodic benefit cost...................... $ 21.3 $ 19.6 $ 63.9 $ 57.8 In 2009, we contributed approximately $70 million to our defined benefit pension plans to satisfy minimum funding requirements for the year. In addition, we contributed approximately $310 million of additional discretionary funding in 2009 to our defined benefit plans. We do not expect to contribute any significant additional amounts during the remainder of the year. |
Contingencies
Contingencies | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Contingencies [Abstract] | |
Contingencies [Text Block] | We are a party to various legal actions, government investigations, and environmental proceedings. The most significant of these are described below. While it is not possible to determine the outcome of these matters, we believe that, except as specifically noted below, 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. Patent Litigation We are engaged in the following patent litigation matters brought pursuant to procedures set out in the Hatch-Waxman Act (the Drug Price Competition and Patent Term Restoration Act of 1984): Cymbalta: Sixteen generic drug manufacturers have submitted Abbreviated New Drug Applications (ANDAs) seeking permission to market generic versions of Cymbalta prior to the expiration of our relevant U.S. patents (the earliest of which expires in 2013). Of these challengers, all allege non-infringement of the patent claims directed to the commercial formulation, and nine allege invalidity of the patent claims directed to the active ingredient duloxetine. Of the nine challengers to the compound patent claims, one further alleges invalidity of the claims directed to the use of Cymbalta for treating fibromyalgia, and one alleges the patent having claims directed to the active ingredient is unenforceable. Lawsuits have been filed in U.S. District Court for the Southern District of Indiana against Activis Elizabeth LLC; Anchen Pharmaceuticals, Inc.; Aurobindo Pharma Ltd.; Cobalt Laboratories, Inc.; Impax Laboratories, Inc.; Lupin Limited; Sandoz Inc.; Sun Pharma Global, Inc.; and Wockhardt Limited, seeking rulings that the patents are valid, infringed, and enforceable. The cases have been consolidated and are proceeding. Gemzar: Mayne Pharma (USA) Inc. (Mayne), Sicor Pharmaceuticals, Inc. (Sicor), and SunPharmaceutical Industries Inc. (Sun) each submitted an ANDA seeking permission to market generic versions of Gemzar prior to the expiration of our relevant U.S.patents (compound patent expiring in 2010 and method-of-use patent expiring in 2013), and alleging that these patents are invalid. Sandoz Inc. (Sandoz) has similarly challenged our method-of-use patent. We filed lawsuits in the U.S.District Court for the Southern District of Indiana against Sicor (February 2006), Mayne (October 2006 and January 2008), and Sandoz (October 2009), seeking rulings that our patents are valid and are being infringed. The trial against Sicor was held in September 2009 and we are waiting for a ruling. Sicors ANDAs have been approved by the FDA; however, Sicor must provide 90 days notice prior to marketing generic Gemzar to allow time for us to seek a preliminary injunction. Both suits against Mayne have been administratively closed, and the parties have agreed to be bound by the results of the Sicor suit. In November 2007, Sun filed a declaratory judgment action in the United States District Court for the Eastern District of Michigan, seeking rulings that our method-of-use and compound patents are invalid or unenforceable, or would not be infringed |
Other-Net, Expense
Other-Net, Expense (Income) | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Other-Net, Expense (Income) [Abstract] | |
Other - Net, Expense (Income) [Text Block] | Other net, expense (income), consisted of the following: Three Months Ended September 30, Nine Months Ended September 30, 2009 2008 2009 2008 (Dollars in millions) Interest expense............................................ $59.2 $ 44.0 $211.1 $ 146.4 Interest income.............................................. (15.2) (53.2) (61.4) (156.8) Other............................................................. 22.9 6.7 12.0 (44.7) $66.9 $ (2.5) $161.7 $ (55.1) |
Document Information
Document Information | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Document Information [Line Items] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | 2009-09-30 |
Entity Information
Entity Information (USD $) | ||
9 Months Ended
Sep. 30, 2009 | Oct. 20, 2009
| |
Entity Information [Line Items] | ||
Entity Registrant Name | Lilly Eli & Co | |
Entity Central Index Key | 0000059478 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Listings [Line Items] | ||
Entity Common Stock, Shares Outstanding | 1,149,022,405 |