2012 Annual Report Notice of 2013 Annual Meeting Proxy Statement Putting the Pieces Together the Lilly Promise Advancing Health
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PROGRESS AGAINST ALZHEIMER’S DISEASE ELI LILLY AND COMPANY 2012 ANNUAL REPORT NOTICE OF 2013 ANNUAL MEETING PROXY STATEMENT PUTTING THE PIECES TOGETHER THE LILLY PROMISE ADVANCING HEALTH. IMPROVING LIFE. In 2012, Eli Lilly and Company saw promising signs Our Mission For more than 136 years, Lilly has demonstrated its people suffering from deadly multidrug-resistant that we’re beginning to piece together the puzzle that is Lilly makes medicines that help people live longer, commitment to be a responsible global citizen. Today, tuberculosis. Alzheimer’s disease—a disease that has so far defied the healthier, more active lives. our understanding of corporate responsibility is evolv- • In 2011, we announced Lilly TruAssist, an easy-to- best efforts of medical science. While most of the public ing beyond philanthropy and reaching into the core of use, one-stop resource for the U.S.-based patient- attention was on Phase III trial results for solanezumab, our Our Values our business operations. assistance programs that we have long offered to monoclonal antibody being studied as a potential therapy Integrity | Excellence | Respect for People help people obtain the Lilly medications they need. for patients with Alzheimer’s disease, we continued to We promise to operate our business with absolute Increasingly, we’re bringing to the table our business • Through a partnership with Heifer International®, advance a multifaceted effort. (Please see pages 6–9.) integrity and earn the trust of all, set the highest assets and expertise, along with our financial resourc- our Elanco animal health business aims to bring standards for our performance and for the performance es, to address global health challenges. And we’re cre- 100,000 families worldwide out of hunger. At the same time, we also began to complete the puzzle of of our products, and demonstrate caring and respect ating shared value—for society and for Lilly—through how we navigate through the current “YZ” period of patent for all those who share in our mission and are touched efforts that include partnering with leading global Improving life. We’re committed to maintaining a sup- expirations and return to growth in the years that follow. In by our work. health organizations to find new solutions to the rising portive working environment, serving our local commu- the year after our Zyprexa® patent expired in most major burden of non-communicable diseases (NCDs). nities, and reducing our environmental footprint. markets, we met our financial performance goals, and Our Vision received encouraging data from late-stage clinical trials for We will make a significant contribution to humanity by All told, our corporate responsibility efforts can be We put special emphasis on flexibility in the workplace, potential medicines across our therapeutic areas. improving global health in the 21st century. Starting summed up in two goals: Advancing health. Improving life. and we were honored to have been named as Diversity- with the work of our scientists, we will place improved Inc’s Top Company for Working Families in 2012. We also Lilly’s progress against Alzheimer’s and other diseases outcomes for individual patients at the center of what Advancing health. Our vision as a company is to make a provide opportunities for our employees to share their reflects our resolute commitment to innovation, and we do. We will listen carefully to understand patient significant contribution to humanity by improving global expertise with communities around the world through exemplifies the work of Lilly scientists in neuroscience, needs and work with health care partners to provide health in the 21st century. We do this, first and fore- Connecting Hearts Abroad, a program that sends 200 cancer, diabetes, autoimmunity, and other therapeutic meaningful benefits for the people who depend on us. most, by creating innovative medicines that help people Lilly ambassadors each year on two-week community areas. That work goes on today, and there is much more live longer, healthier, more active lives. development assignments in Asia, Africa, and Central to do. But our scientific achievements and operating Our Strategy and South America. performance in 2012 strengthen our confidence that new We will create value for all our stakeholders by accel- We’re also spearheading broad, strategic partnerships and better medicines for patients around the world will erating the flow of innovative medicines that provide to improve access to health care and reduce hunger. Our commitment to corporate responsibility is reflected continue to flow from our laboratories. improved outcomes for individual patients. For example: in our ongoing support for the United Nations Global • The Lilly NCD Partnership, launched in 2011, will Compact’s 10 principles related to human rights, labor, provide $30 million over five years to fight NCDs in the environment, and anticorruption. developing nations, with an emphasis on diabetes. • The Lilly MDR-TB Partnership, launched in 2003, You can review our performance across all areas of our works to build health care provider capacity and business in our 2011/2012 Lilly Corporate Responsibility Year in Review Proxy Statement access to needed drugs in order to improve care for Update at www.lilly.com/responsibility/our-approach. 1 Financial Highlights 1 Notice of 2013 Annual Meeting and Proxy Statement 2 Letter to Shareholders 2 Proxy Statement Overview 6 Progress Against Alzheimer’s Disease 4 Board of Directors 10 Pipeline of Molecules in Clinical Development 9 Director Compensation For more information on Lilly’s commitment to corporate responsibility 11 Highlights of the Company’s Corporate Governance Guidelines www.lilly.com/responsibility Form 10-K 16 Committees of the Board of Directors 3 Business 16 Membership and Meetings of the Board and Its Committees For more information on Lilly’s commitment to transparency and links to 16 Risk Factors 17 Directors and Corporate Governance Committee Matters • Lilly Clinical Trial Registry 19 Properties 18 Audit Committee Matters • Lilly Grant Registry 20 Legal Proceedings 20 Compensation Committee Matters 23 Management’s Discussion and Analysis of Results of 22 Compensation Discussion and Analysis • Lilly Physician Payment Registry Operations and Financial Condition 37 Executive Compensation • Lilly Political Contributions 40 Consolidated Statements of Operations 37 Summary Compensation Table www.lilly.com/about/business-practices/Pages/transparency.aspx 41 Consolidated Statements of Comprehensive Income 47 Ownership of Company Stock 42 Consolidated Balance Sheets 48 Items of Business To Be Acted Upon at the Meeting For more information on Lilly and pharmaceutical industry patient-assistance programs 43 Consolidated Statements of Cash Flows 52 Meeting and Voting Logistics Lilly TruAssist: 44 Segment Information 54 Other Matters www.lillytruassist.com 46 Selected Quarterly Data or call toll-free 1.855.LLY.TRUE (1.855.559.8783) 47 Selected Financial Data 55 Executive Committee and Senior Leadership 49 Notes to Consolidated Financial Statements 56 Corporate Information Partnership for Prescription Assistance (program sponsored by America’s pharmaceutical research companies): 82 Management’s Reports 57 Annual Meeting Admission Ticket www.pparx.org 84 Reports of Independent Registered Public Accounting Firm For perspectives on health care innovation For more information on Lilly’s commitment to corporate LillyPAD, an official blog of Eli Lilly and Company: responsibility, please see the inside back cover of this report. lillypad.lilly.com © 2013 Eli Lilly and Company YEAR2012AR 2012 Financial Highlights ELI LILLY AND COMPANY AND SUBSIDIARIES (Dollars in millions, except per-share data) Year Ended December 31 2012 2011 Change % R evenue . $22,603.4 $24,286 .5 (7) Research and development . $5,278.1 $5,020 .8 5 Research and development as a percent of revenue . 23.4% 20 7%. Net income . $4,088.6 $4,347 7. (6) Earnings per share—diluted . 3.66 3 90 . (6) Reconciling items1: A cquired in-process research and development (IPR&D) . — 0 .23 A sset impairments, restructuring, and other special charges . 0.16 0 .29 Income from early payment of Amylin revenue-sharing obligation . (0.43) — Non-GAAP earnings per share—diluted . 3.39 4 .412 (23) Dividends paid per share . 1.96 1 9. 6 Capital expenditures . 905.4 672 .0 35 Employees . 38,350 38,080 1 1 For more information on these reconciling items, see the Financial Results section of the Executive Overview on page 24 of the Form 10-K . 2 Numbers in the 2011 column do not add due to rounding . Revenue Growth Across Business Areas Return on Assets and Shareholders’ Equity Total Shareholder Return ($ millions, percent growth) ROA and ROE declined in In 2012, the steady Revenue in Neuroscience 26.4% 51.0% 2012 as a result of the dividend stream and 24.9% decreased 22 percent Zyprexa patent loss, increase in the stock price 24.0% 46.1% due to the loss of patent offset in part by growth contributed to Lilly’s total protection for Zyprexa 16.3% in other products and shareholder return of 15.0% in most major markets, $6,810.9 0% cost-containment efforts. 24.0 percent, which once partially offset by a again compared 20 percent increase 31.4% favorably against the 3.7% $7,575.1 27.8% in Cymbalta. $3,281.6 S&P 500 benchmark. 2.1% Excluding Zyprexa, -22% -1% Neuroscience revenue 17.7% increased 15 percent. 15.8% 12.3% Animal Health grew 13.4% 21 percent driven by -6.1% strong growth in both food and companion $2,036.5 $266.8 $2,632.5 animal products. +21% -1% +6% -21.4% Return on Assets (ROA) Lilly Neuroscience -7.5% Endocrinology Return on Shareholders’ S&P 500 Oncology Equity (ROE) Cardiovascular -36.9% -16.3% Other Pharmaceutical Animal Health 08 09 10 11 12 08 09 10 11 12 To Our Shareholders In 2012, Eli Lilly and Company completed one of the understanding Alzheimer’s disease and develop- most challenging yet encouraging years in its 136-year ing potential treatments is just one of the fruits of ® history.