Lilly Takes $2.4 Billion Charge For PCS

US firm Eli Lilly has said that it is taking a one-time non-cash chargeof $2.4 billion, or $4.40 per share, in order to write down the carrying value of its PCS health care management businesses to a current fair value, as had been expected (Marketletter June 16).

At the same time, Lilly insisted that pharmacy benefit manager PCS still has a role as an important part of its core pharmaceutical strategy. It added that although PCS' capabilities have expanded and its revenues and profits are growing, it has determined that current accounting rules make it necessary to reflect a lower carrying value for PCS. The write-down will be taken in the second quarter.

The adjustment was necessary, according to Lilly, because the projected undiscounted cash flows for PCS are now expected to fall below the previous carrying value. Lilly noted that the highly competitive and rapidly changing environment in which PCS operates has held its operating profits below levels anticipated prior to the acquisition.