Fitch affirms Eli Lilly

Fitch Ratings said it affirmed Eli Lilly and Co.'s AA issuer default, bank loan, and senior unsecured debt ratings and F1+ commercial paper rating. The outlook remains stable.

The agency said it expects Lilly's ratings to be unaffected by the company's announced intention to acquire Icos Corp. for $2.1 billion in cash, as the company's large cash balance and securities portfolio affords financial flexibility to consummate the transaction with minimal incremental debt. Lilly had cash and marketable securities of $4.59 billion, long-term investments of $1.29 billion and $1.23 billion uncommitted lines of credit at the end of the second quarter of 2006.

The proposed acquisition will grant Lilly worldwide rights to Cialis, which is sold through Lilly/Icos joint venture Lilly Icos LLC. The vast majority of Icos' revenues are derived from Cialis. Currently, Lilly shares in the profits in North America and Europe and sells in countries outside of these territories. Fitch said Lilly reports equity income from the joint venture in other income, which ran at about $20 million per quarter this year, and that Cialis is expected to reach 'blockbuster' status (annual revenues greater than $1 billion) in 2007.

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