What Drove Eli Lilly's 1Q16 Revenue Growth?
Animal health segment
Eli Lilly’s (LLY) animal health company, Elanco, reported nearly flat revenues at $754.6 million in 1Q16, as compared to $749.8 million for 1Q15. This segment contributed ~15.5% of the company’s total revenues. It deals with products for companion animals as well as food and other products.
Reported revenues for animal health segment
The US animal health sales increased ~10.0% to $392.4 million during 1Q16 while animal health sales outside the US markets decreased 7.8% to $362.2 million, mainly driven by the inclusion of revenues from Novartis’s (NVS) animal health segment. The US revenues increased due to increased demand across both franchises of the segment while the decline in international revenues was due to the negative impact of foreign exchange. Excluding the impact of foreign exchange, the revenues outside the US markets increased 5% during 1Q16.
Companion animal products
The companion animal products segment reported growth of 3% in revenues to $232.1 million in 1Q16. This was mainly driven by a 14% increase in US sales of companion animal products due to the launch of new products including Interceptor Plus and Osurnia, substantially offset by a 10% decline in sales of companion animal products outside the US markets.
Food and other products
The revenues for food and other products were nearly flat at $522.5 million in 1Q16, as compared to $524.4 million in 1Q15. The revenues were driven by 8% growth in the US sales due to increased sales of beef and poultry products. The revenue growth was offset by the negative impact of foreign exchange in sales outside the US.
Other companies like Zoetis (ZTS), the animal health arm of Pfizer (PFE), Merck and Company (MRK), and Merial, a Sanofi (SNY) company, compete with Eli Lilly on certain product mixes. Investors can consider ETFs like the Healthcare Select Sector SPDR (XLV), which holds ~3.0% of its total assets in Eli Lilly, ~7.3% of its total assets in Pfizer (PFE), ~5.4% of its total assets in Merck and Company (MRK), and ~0.8% of its total assets in Zoetis (ZTS). You can also consider the iShares Core S&P 500 ETF (IVV), which holds ~0.5% of its total assets in Eli Lilly, in order to divest company-specific risk.
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