Eli Lilly & Co. (LLY) Sees FY17 Adj. EPS of $4.05-$4.15, Versus $3.97 Consensus

Eli Lilly and Company (NYSE: LLY) today announced its 2017 financial guidance and highlighted key events for the upcoming year. The company reaffirmed its financial expectations through the remainder of the decade, including at least 5 percent average annual revenue growth driven by volume and an increase in gross margin as a percent of revenue, both on a constant currency basis. The company also reaffirmed its commitment to achieve an OPEX-to-revenue ratio of 50 percent or less in 2018, along with annual dividend increases for shareholders.

"As we move past the negative solanezumab data read-out, Lilly's innovation-based strategy is generating strong momentum in multiple therapeutic areas. Most recently we have received an important cardiovascular indication for Jardiance, as well as U.S. approval and conditional EU approval of Lartruvo, and we are awaiting global regulatory decisions for baricitinib," said David A. Ricks, president of Lilly Bio-Medicines and Lilly's incoming president and chief executive officer.

Ricks added, "We are already seeing substantial revenue from recently launched products, including Trulicity and Cyramza, and we are pleased with early uptake for Taltz. We remain confident that we could launch at least 20 new products in 10 years from 2014 through 2023, creating value for all stakeholders in the company."

"Because of our confidence in our future growth prospects, we are reaffirming our financial commitments through the remainder of the decade," said Derica Rice, Lilly's executive vice president for global services and chief financial officer. "In 2017, we are expecting mid-single-digit revenue growth driven by volume from recent product launches. By improving productivity through prudent expense management, we expect to leverage this top-line growth into double-digit earnings growth."

2016 Financial Guidance

Earnings per share in 2016 are now expected to be in the range of $2.57 to $2.67 on a reported basis. This revision is primarily due to restructuring charges associated with the negative outcome of the recent solanezumab study, as well as the charge associated with the agreement with AstraZeneca to co-develop MEDI1814.

Non-GAAP earnings per share in 2016 are still expected to be in the range of $3.50 to $3.60.

The company still expects 2016 revenue of between $20.8 billion and $21.2 billion.

Gross margin percentage is now expected to be approximately 73.5 percent on a reported basis, and 76.5 percent on a non-GAAP basis.

Marketing, selling and administrative expenses are still expected to be in the range of $6.2 billion to $6.4 billion. Research and development expenses are now expected to be in the range of $5.0 billion to $5.2 billion.

Other income (expense) is still expected to be in a range between $150 million and $100 million of expense on a reported basis. On a non-GAAP basis, other income (expense) is still expected to be in a range between $50 million and $100 million of income.

The 2016 tax rate is now expected to be approximately 20.5 percent on a reported basis. On a non-GAAP basis, the 2016 tax rate is still expected to be approximately 21.0 percent.

Capital expenditures are still expected to be approximately $1.0 billion.

The following table summarizes the company's 2016 financial guidance:

2017 Financial Guidance Earnings per share for 2017 are expected to be in the range of $3.51 to $3.61 on a reported basis and $4.05 to $4.15 on a non-GAAP basis. (**** consensus is $3.97) Non-GAAP earnings per share for 2017 exclude amortization of intangibles, inventory step-up costs associated with the planned acquisition of Boehringer Ingelheim Vetmedica's U.S. feline, canine and rabies vaccines portfolio, and integration costs associated with the Novartis Animal Health acquisition.

The company anticipates 2017 revenue between $21.8 billion and $22.3 billion. Excluding the impact of foreign exchange rates, the company expects revenue growth from animal health products and a number of established pharmaceutical products including Trajenta, Forteo and Humalog, as well as higher revenues from new products including Trulicity, Taltz, Basaglar, Cyramza, Jardiance and Lartruvo.

Marketing, selling and administrative expenses are expected to be in the range of $6.4 billion to $6.6 billion. Research and development expenses are expected to be in the range of $4.9 billion to $5.1 billion.

The 2017 tax rate is expected to be approximately 20.0 percent on a reported basis and 22.0 percent on a non-GAAP basis. The expected 2017 reported tax rate includes the tax impact of amortization of intangibles, inventory step-up costs associated with the planned acquisition of Boehringer Ingelheim Vetmedica's U.S. feline, canine and rabies vaccines portfolio, and integration costs associated with the Novartis Animal Health acquisition.

The following table summarizes the company's 2017 financial guidance.

Webcast of Conference Call and Investor MaterialsAs previously announced, investors and the general public can access a live webcast of the 2017 financial guidance conference call and investor materials through a link on Lilly's website at www.investor.lilly.com. The conference call will be held today beginning at 10:00 a.m. Eastern Time (ET) and will be available for replay via the website.

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