Segment Information

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 18: Segment Information

We have two operating segments—human pharmaceutical products and animal health products. Our operating segments are distinguished by the ultimate end user of the product—humans or animals. Performance is evaluated based on profit or loss from operations before income taxes. The accounting policies of the individual segments are the same as those described throughout the notes to the consolidated financial statements.

Our human pharmaceutical products segment includes the discovery, development, manufacturing, marketing, and sales of human pharmaceutical products worldwide in the following therapeutic areas: endocrinology, neuroscience, oncology, cardiovascular, and other. We lost our data package protection for Cymbalta in major European countries in 2014 and lost patent exclusivity in the U.S. for Evista^® in March 2014, both of which resulted in the immediate entry of generic competitors and a rapid and severe decline in revenue. We also lost patent exclusivity for the schizophrenia and bipolar mania indications in December 2015 and April 2016, respectively, for Zyprexa^® in Japan. Generic versions of Zyprexa were launched in Japan in June 2016. The loss of exclusivity for Zyprexa in Japan has caused a rapid and severe decline in revenue for the product. We will lose our patent protection for Strattera^® in the U.S. in May 2017 and Cialis^® in the U.S. and major European markets in November 2017. We will also lose exclusivity for Effient in the U.S. in October 2017, and we have authorized one generic manufacturer to enter the market as early as mid-August 2017.

Our animal health segment, operating through our Elanco animal health division, includes the development, manufacturing, marketing, and sales of animal health products worldwide for both food and companion animals. Animal health products include Rumensin^®, Posilac^®, Maxiban^®,Tylan^®, Denagard^®, Optaflexx^®, and other products for livestock and poultry, as well as Trifexis^®, Comfortis^®, and other products for companion animals. The animal health segment amounts for the years ended December 31, 2016 and 2015 include the results of operations from Novartis AH, which was acquired on January 1, 2015 (Note 3).

Most of our pharmaceutical products are distributed through wholesalers that serve pharmacies, physicians and other health care professionals, and hospitals. For the years ended December 31, 2016, 2015, and 2014, our three largest wholesalers each accounted for between 8 percent and 17 percent of consolidated total revenue. Further, they each accounted for between 12 percent and 21 percent of accounts receivable as of December 31, 2016 and 2015. Animal health products are sold primarily to wholesale distributors.

We manage our assets on a total company basis, not by operating segment, as the assets of the animal health business are intermixed with those of the pharmaceutical products business. Therefore, our chief operating decision maker does not review any asset information by operating segment and, accordingly, we do not report asset information by operating segment.

We are exposed to the risk of changes in social, political, and economic conditions inherent in foreign operations, and our results of operations and the value of our foreign assets are affected by fluctuations in foreign currency exchange rates.

The following table summarizes our revenue activity:

	2016		2015		2014
Segment revenue—to unaffiliated customers:
Human pharmaceutical products:
Endocrinology:
Humalog®	$	2,768.8	$	2,841.9	$	2,785.2
Forteo®	1,500.0		1,348.3		1,322.0
Humulin®	1,365.9		1,307.4		1,400.1
Trulicity®	925.5		248.7		10.2
Trajenta	436.6		356.8		328.8
Evista	172.4		237.3		419.8
Other Endocrinology	913.6		696.4		672.9
Total Endocrinology	8,082.8		7,036.8		6,939.0
Oncology:
Alimta	2,283.3		2,493.1		2,792.0
Erbitux	687.0		485.0		373.3
Cyramza®	614.1		383.8		75.6
Other Oncology	137.4		147.9		152.1
Total Oncology	3,721.8		3,509.8		3,393.0
Cardiovascular:
Cialis	2,471.6		2,310.7		2,291.0
Effient	535.2		523.0		522.2
Other Cardiovascular	218.6		234.3		240.3
Total Cardiovascular	3,225.4		3,068.0		3,053.5
Neuroscience:
Cymbalta(1)	930.5		1,027.6		1,614.7
Strattera	854.7		784.0		738.5
Zyprexa	725.3		940.3		1,037.3
Other Neuroscience	209.8		183.5		206.0
Total Neuroscience	2,720.3		2,935.4		3,596.5
Other human pharmaceutical products	313.6		227.7		287.0
Total human pharmaceutical products	18,063.9		16,777.7		17,269.0
Animal health products	3,158.2		3,181.0		2,346.6
Revenue	$	21,222.1	$	19,958.7	$	19,615.6

	2016			2015			2014
Segment profits:
Human pharmaceutical products	$	4,010.0		$	4,026.7		$	3,604.6
Animal health products	663.7			597.9			621.8
Total segment profits	$	4,673.7		$	4,624.6		$	4,226.4
Reconciliation of total segment profits to consolidated income before taxes:
Segment profits	$	4,673.7		$	4,624.6		$	4,226.4
Other profits (losses):
Amortization of intangible assets (Note 8)	(683.3		)	(626.2		)	(530.2		)
Asset impairment, restructuring, and other special charges (Note 5)	(382.5		)	(367.7		)	(468.7		)
Venezuela charge (Note 17)	(203.9		)	—			—
Acquired in-process research and development (Notes 3 and 4)	(30.0		)	(535.0		)	(200.2		)
Inventory fair value adjustment related to Novartis AH (Note 3)	—			(153.0		)	—
Debt repurchase charges, net(2) (Note 10)	—			(152.7		)	—
U.S. Branded Prescription Drug Fee	—			—			(119.0		)
Income related to transfer of linagliptin and empagliflozin rights in certain countries to Boehringer Ingelheim (Note 4)	—			—			92.0
Consolidated income before taxes	$	3,374.0		$	2,790.0		$	3,000.3

Numbers may not add due to rounding.

⁽¹⁾ Cymbalta revenues benefited from reductions to the reserve for expected product returns of approximately $175 million during the year ended December 31, 2016.

⁽²⁾ We recognized pretax net charges of $152.7 million for the year ended December 31, 2015, attributable to the debt extinguishment loss of $166.7 million from the purchase and redemption of certain fixed-rate notes, partially offset by net gains from non-hedging interest rate swaps and foreign currency transactions associated with the related issuance of euro-denominated notes.

Depreciation and software amortization expense included in our segment profits was as follows:

	2016		2015		2014
Human pharmaceutical products	$	723.4	$	720.7	$	790.0
Animal health products	89.9		80.8		58.8
Total depreciation expense and software amortization included in segment profits	$	813.3	$	801.5	$	848.8

For internal management reporting presented to the chief operating decision maker, certain costs are fully allocated to our human pharmaceutical products segment and therefore are not reflected in the animal health segment's profit. Such items include costs associated with treasury-related financing, global administrative services, certain acquisition-related transaction costs, and certain manufacturing costs.

	2016		2015		2014
Geographic Information
Revenue—to unaffiliated customers(1):
United States	$	11,506.2	$	10,097.4	$	9,134.1
Europe	3,768.1		3,943.6		4,506.7
Japan	2,330.9		2,033.1		2,027.1
Other foreign countries	3,616.9		3,884.6		3,947.7
Revenue	$	21,222.1	$	19,958.7	$	19,615.6
Long-lived assets(2):
United States	$	4,984.6	$	4,576.8	$	4,566.2
Europe	2,140.7		2,306.4		2,401.5
Japan	92.4		89.2		80.4
Other foreign countries	1,776.8		1,724.2		1,499.1
Long-lived assets	$	8,994.5	$	8,696.6	$	8,547.2

⁽¹⁾ Revenue is attributed to the countries based on the location of the customer.

⁽²⁾ Long-lived assets consist of property and equipment, net, and certain sundry assets.