Lilly touts $850M manufacturing investment as CEO stumps for tax reform
- Drugmaker Eli Lilly isn't shying away from President Donald Trump's demand the pharma industry invest more in U.S. manufacturing, announcing Friday new details on plans to spend $850 million on expanding and upgrading its U.S. operations this year.
- The Indianapolis drugmaker said the capital expenditures would include a new $85 million expansion of its device assembly operations in the U.S. for the important diabetes drug Trulicity (dulaglutide). Much of the spending, though, appears to have already been in Lilly's plans for the year.
- Even in the midst of leadership turnover and a tightening diabetes market, Lilly has set an ambitious target of 5% annual revenue growth over the next five years. That forecast is a bet on the wave of new medicines Lilly hopes to launch through 2023.
Standing in front of a red banner proclaiming "Invested in America," Lilly CEO David Ricks used Friday's announcement as an opportunity to urge Congress reform and update the U.S. corporate tax system.
Ricks said changes to what he termed an "antiquated" tax code would help American businesses like Lilly bring back foreign earnings and invest more in the U.S. — something President Trump has made clear is a priority for his administration.
Comparing Lilly to the Swiss pharma Novartis, Ricks claimed a territorial taxation system coupled with lower rates like those enjoyed by Novartis would free up $150 million in funds that Lilly could use to spend and invest each year.
Ricks is one of four pharma CEOs to sign a letter to Congress urging adoption of corporate tax reforms championed by House Speaker Paul Ryan, R-WI, and Ways & Means Committee Chair Kevin Brady, R-TX.
"The equitable treatment of foreign earnings, a lower U.S. corporate tax rate, and U.S. innovation incentives — similar to the rest of the world — will encourage significant investment in the U.S., creating economic growth and good jobs for Americans," said Ricks in a prepared statement.
The $850 million in capital expenditures detailed on Friday are part of the $1.2 billion in spending Lilly predicted it would shell out in 2017 as part of its financial guidance for the year. While the announcement trumpeted the size of the investment, Lilly's planned capital spending for 2017 is only about $160 million higher than its five-year average expenditure.
Lilly said the money would fund both existing projects, as well as new projects such as the Trulicity assembly expansion and as yet undisclosed additional projects in Indianapolis. A company spokesperson declined to break out the $850 million figure into specific projects when reached for comment.
Lilly's plans certainly fit the current political climate.
President Trump has set the biopharma market on edge with repeated comments calling for action to lower drug prices. Recent meetings with top Democrats have appeared to indicate his willingness to push for legislation to change how the government buys drugs for Medicare, but whether that could involve direct price negotiation remains unclear.
Given the alternative, drugmakers have been much more eager to engage with Trump on his calls to boost manufacturing in the U.S. and lower corporate tax rates. Pharmaceutical executives from Pfizer's CEO Ian Read to Amgen's chief Robert Bradway and Lilly's Ricks have all said tax reform would allow their companies to spend more in the U.S.
And for an industry still on its heels over rising prescription drug costs, trumpeting a new manufacturing plant or the hiring of U.S. workers is a much-needed PR win.
- Eli Lilly Press release
- BioPharma Dive Trump pushes pharma to boost drug production in US
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