On April 27, 2023 Eli Lilly and Company (NYSE: LLY) reported its financial results for the first quarter of 2023 (Press release, Eli Lilly, APR 27, 2023, View Source [SID1234630600]).
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
"Core business growth drove solid first-quarter financial results and a strong start for Lilly in 2023, which includes pipeline progress led by positive SURMOUNT-2 data for tirzepatide in obesity," said David A. Ricks, Lilly’s chair and CEO. "We also announced important price reductions to make insulin more affordable and accessible for people with diabetes, as well as a significant investment in manufacturing facilities. It is an exciting year for Lilly and we look forward to delivering more medicines for unmet health needs to more people around the world."
Lilly has had numerous updates recently on key regulatory, clinical, business development and other events, including:
The announcement that tirzepatide achieved superior weight loss and met both co-primary objectives and all key secondary objectives compared to placebo at 72 weeks in the Phase 3 SURMOUNT-2 study;
The U.S. Food and Drug Administration’s (FDA) approval of an expanded indication for Verzenio, in combination with endocrine therapy, for the adjuvant treatment of adult patients with hormone receptor-positive, human epidermal growth factor receptor 2-negative, node-positive, early breast cancer at a high risk of recurrence;
Price reductions of 70% for the company’s most commonly prescribed insulins and an expansion of its Insulin Value Program that caps patient out-of-pocket costs at $35 or less per month;
The FDA’s issuance of a complete response letter for mirikizumab in ulcerative colitis, citing issues related to the proposed manufacturing of mirikizumab with no concerns about the clinical data package, safety or label;
The FDA’s acceptance of the supplemental New Drug Application for Jardiance for children 10 years and older with type 2 diabetes;
The announcement that the company will invest an additional $1.6 billion at its two new manufacturing sites in Indiana, bringing the company’s total commitment to $3.7 billion and up to 700 new jobs;
The agreement to sell the rights of the olanzapine portfolio, including Zyprexa, to Cheplapharm Arzneimittel GmbH for $1.05 billion in cash upon regulatory approval and successful closing of the transaction, with an additional $305 million in cash upon the one year anniversary of closing and milestone payments of up to $50 million.
The agreement to sell the rights of Baqsimi to Amphastar Pharmaceuticals, Inc. for $500 million in cash upon regulatory approval and successful closing of the transaction, with an additional $125 million in cash upon the one year anniversary of closing and milestone payments of up to $450 million.
The collaboration with International Agencies Ltd. to increase patient access and improve affordability for high-quality insulin for nearly one million people living with diabetes in Bangladesh by 2030.
For additional information on important public announcements, visit the news section of Lilly’s website.
Financial Results
$ in millions, except
per share data
First Quarter
2023
2022
% Change
Revenue
$6,960.0
$7,810.0
(11) %
Net Income – Reported
1,344.9
1,902.9
(29) %
EPS – Reported
1.49
2.10
(29) %
Net Income – Non-GAAP
1,463.9
2,372.8
(38) %
EPS – Non-GAAP
1.62
2.62
(38) %
A discussion of the non-GAAP financial measures is included below under "Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information (Unaudited)."
First-Quarter Reported Results
In Q1 2023, worldwide revenue was $6.96 billion, a decrease of 11% compared with Q1 2022, driven by a 5% decrease due to lower realized prices, a 4% decrease due to lower volume, and a 2% decrease from the unfavorable impact of foreign exchange rates. The decline in volume was driven by $1.47 billion in revenue from COVID-19 antibodies in Q1 2022. Excluding COVID-19 antibodies, revenue in Q1 2023 increased 10% and total worldwide volume increased 18%. New Products contributed $573.6 million to revenue in Q1 2023. Growth Products revenue increased 18% to $4.56 billion in Q1 2023.
Revenue in the U.S. decreased 14% to $4.44 billion, driven by a 10% decrease in volume and a 5% decrease due to lower realized prices. The decline in volume was driven by $1.46 billion in revenue from COVID-19 antibodies in Q1 2022. Excluding revenue from COVID-19 antibodies, revenue in the U.S. increased 19%, primarily driven by volume from Mounjaro, Trulicity and Verzenio, partially offset by decreased volume from Alimta due to the loss of patent exclusivity. The lower realized prices in the U.S. were primarily driven by Humalog and Trulicity.
Revenue outside the U.S. decreased 4% to $2.52 billion, driven by a 6% decrease from the unfavorable impact of foreign exchange rates and a 5% decrease due to lower realized prices, partially offset by a 7% increase in volume. The lower realized prices were primarily driven by the impact of government pricing in China from the volume-based procurement (VBP) for Humalog. The increase in volume outside the U.S. was largely driven by Verzenio and Jardiance and, to a lesser extent, Taltz, Trulicity and Mounjaro, partially offset by a decrease in Cialis volume due to the Q1 2022 sales of the company’s rights to Cialis in Taiwan and Saudi Arabia.
Gross margin decreased 7% to $5.33 billion in Q1 2023. Gross margin as a percent of revenue was 76.6%, an increase of 3.1 percentage points. The increase in gross margin percent was primarily driven by sales of COVID-19 antibodies in Q1 2022, partially offset by lower realized prices.
In Q1 2023, research and development expenses increased 23% to $1.99 billion, or 29% of revenue, primarily driven by higher development expenses for late-stage assets.
Marketing, selling and administrative expenses increased 12% to $1.75 billion in Q1 2023, primarily driven by costs associated with launches of new products and indications.
In Q1 2023, the company recognized acquired in-process research and development (IPR&D) charges of $105.0 million. In Q1 2022, the company recognized acquired IPR&D charges of $165.6 million, primarily related to a purchase of a Priority Review Voucher.
Other income (expense) was income of $35.7 million in Q1 2023 compared with expense of $350.7 million in Q1 2022. The increase in other income (expense) was primarily driven by net losses on investments in equity securities in Q1 2022.
The effective tax rate was 12.1% in Q1 2023 compared with 7.3% in Q1 2022. The effective tax rate in Q1 2023 reflects the tax impact of the new Puerto Rico tax regime, partially offset by a net discrete tax benefit. The effective tax rate in Q1 2022 reflected the favorable tax impact of net investment losses on equity securities.
In Q1 2023, net income and earnings per share (EPS) were $1.34 billion and $1.49, respectively, compared with $1.90 billion and $2.10 in Q1 2022. EPS in Q1 2023 was inclusive of $0.10 of acquired IPR&D, compared with $0.15 in Q1 2022.
First-Quarter Non-GAAP Measures
On a non-GAAP basis, Q1 2023 gross margin decreased 8% to $5.46 billion. Gross margin as a percent of revenue was 78.4%, an increase of 2.3 percentage points. The increase in gross margin percent was primarily driven by sales of COVID-19 antibodies in Q1 2022, partially offset by lower realized prices.
The effective tax rate on a non-GAAP basis was 12.8% in Q1 2023 compared with 10.3% in Q1 2022. The effective tax rate for Q1 2023 reflects the tax impact of the new Puerto Rico tax regime, partially offset by a net discrete tax benefit.
On a non-GAAP basis, Q1 2023 net income and EPS were $1.46 billion and $1.62, respectively, compared with $2.37 billion and $2.62 in Q1 2022. Non-GAAP EPS in Q1 2023 was inclusive of $0.10 of acquired IPR&D, compared with $0.15 in Q1 2022.
For further detail on non-GAAP measures, see the reconciliation below as well as the "Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information (Unaudited)" table later in this press release.
First Quarter
2023
2022
% Change
Earnings per share (reported)
$ 1.49
$ 2.10
(29) %
Amortization of intangible assets
.11
.18
Net losses on investments in equity securities
.02
.34
Earnings per share (non-GAAP)
$ 1.62
$ 2.62
(38) %
Numbers may not add due to rounding.
Acquired IPR&D
.10
.15
(33) %
Selected Revenue Highlights
(Dollars in millions)
First Quarter
Selected Products
2023
2022
% Change
Trulicity
$ 1,977.1
$ 1,741.3
14 %
Verzenio
750.9
469.4
60 %
Jardiance(a)
577.5
419.4
38 %
Mounjaro
568.5
—
NM
Taltz
527.0
488.1
8 %
Humalog(b)
460.9
618.2
(25) %
Cyramza
236.8
230.3
3 %
Olumiant(c)
228.9
255.6
(10) %
Emgality
154.3
149.3
3 %
Tyvyt
61.0
85.5
(29) %
Alimta
58.2
343.9
(83) %
Retevmo
51.4
41.8
23 %
COVID-19 antibodies(d)
—
1,469.8
(100) %
Total Revenue
6,960.0
7,810.0
(11) %
(a) Jardiance includes Glyxambi, Synjardy and Trijardy XR
(b) Humalog includes Insulin Lispro
(c) Olumiant includes sales of baricitinib that were made pursuant to Emergency Use
Authorization (EUA) or similar regulatory authorizations
(d) COVID-19 antibodies include sales for bamlanivimab administered alone, for
bamlanivimab and etesevimab administered together, and for bebtelovimab, and were made
pursuant to EUAs or similar regulatory authorizations
NM – not meaningful
Trulicity
For Q1 2023, worldwide Trulicity revenue was $1.98 billion, an increase of 14% compared with Q1 2022. U.S. revenue increased 18% to $1.55 billion, driven by increased demand and, to a lesser extent, wholesaler buying patterns, partially offset by lower realized prices driven by higher contracted rebates as well as unfavorable segment mix. Lilly experienced intermittent delays in fulfilling certain U.S. Trulicity orders in Q4 2022. These delays persisted through Q1 2023, but at a reduced level. Revenue outside the U.S. was $429.7 million, an increase of 1%, driven by increased volume, largely offset by the unfavorable impact of foreign exchange rates and lower realized prices. Actions to manage strong demand across the company’s incretin portfolio, including measures to minimize existing patient impact in international markets, also affected volume.
Verzenio
For Q1 2023, worldwide Verzenio revenue increased 60% compared with Q1 2022 to $750.9 million. U.S. revenue was $461.1 million, an increase of 53%, driven by increased demand, partially offset by customer buying patterns. Revenue outside the U.S. was $289.8 million, an increase of 73%, driven by increased demand, partially offset by the unfavorable impact of foreign exchange rates and lower realized prices.
Jardiance
The company’s worldwide Jardiance revenue for Q1 2023 was $577.5 million, an increase of 38% compared with Q1 2022. U.S. revenue increased 43% to $329.4 million, primarily driven by increased demand. Revenue outside the U.S. was $248.1 million, an increase of 31%, primarily driven by increased volume, partially offset by the unfavorable impact of foreign exchange rates.
Jardiance is part of the company’s alliance with Boehringer Ingelheim. Lilly reports as revenue royalties received on net sales of Jardiance.
Mounjaro
For Q1 2023, worldwide Mounjaro revenue was $568.5 million. U.S. revenue was $536.4 million. Mounjaro launched in the U.S. for the treatment of type 2 diabetes in June 2022.
Taltz
For Q1 2023, worldwide Taltz revenue increased 8% compared with Q1 2022 to $527.0 million. U.S. revenue increased 2% to $312.2 million, driven by increased demand, largely offset by lower realized prices. Revenue outside the U.S. increased 19% to $214.8 million, driven by increased volume, partially offset by the unfavorable impact of foreign exchange rates.
Humalog
For Q1 2023, worldwide Humalog revenue decreased 25% compared with Q1 2022 to $460.9 million. U.S. revenue decreased 26% to $271.6 million, primarily driven by lower realized prices due to unfavorable segment mix. Revenue outside the U.S. decreased 24% to $189.3 million, primarily driven by lower realized prices due to the impact of VBP in China.
Olumiant
For Q1 2023, worldwide Olumiant revenue decreased 10% compared with Q1 2022 to $228.9 million. U.S. revenue decreased 41% to $42.3 million, driven by a decline in utilization for COVID-19 treatment, partially offset by increased utilization for the treatment of alopecia areata. Revenue outside the U.S. was $186.5 million, an increase of 1%, driven by increased volume, largely offset by a decline in utilization for COVID-19 treatment and the unfavorable impact of foreign exchange rates.
Emgality
For Q1 2023, Emgality generated worldwide revenue of $154.3 million, an increase of 3% compared with Q1 2022. U.S. revenue remained relatively flat as increased demand was offset by lower realized prices. Revenue outside the U.S. was $45.6 million, an increase of 11%, primarily driven by increased volume.
2023 Financial Guidance
The company has updated certain elements of its 2023 financial guidance on both a reported and non-GAAP basis. Since announcing financial guidance in December 2022, the U.S. dollar has weakened against most major currencies and full-year guidance has been updated based on recent spot rates. Our guidance does not include the potential impacts of the pending business development transactions associated with the sales of the company’s rights to both the olanzapine portfolio and Baqsimi.
Revenue guidance has been increased by $900 million to the range of $31.2 to $31.7 billion, driven by approximately $650 million associated with updates to foreign exchange rate assumptions, with the remainder attributable to underlying business performance.
Gross margin as a percent of revenue guidance remains unchanged on both a reported and non-GAAP basis at approximately 77% and 79%, respectively.
Marketing, selling and administrative expenses were increased by $100 million to reflect updated foreign exchange rate assumptions and are now expected to be in the range of $7.0 to $7.2 billion.
Research and development expenses were increased by $100 million driven by updated foreign exchange rate assumptions and progress within the late-stage portfolio, and are now expected to be in the range of $8.3 to $8.5 billion.
Acquired IPR&D of $105 million in Q1 2023 has also been incorporated into guidance.
Other income (expense) guidance remains unchanged at a range of ($200) to ($100) million of expense on both a reported and non-GAAP basis.
Based on these changes, EPS guidance has been increased to the range of $8.18 to $8.38 on a reported basis and $8.65 to $8.85 on a non-GAAP basis. The company’s 2023 financial guidance reflects adjustments shown in the reconciliation table below.
2023
Expectations
Earnings per share (reported)
$8.18 to $8.38
Amortization of intangible assets
.45
Net losses on investments in equity securities
.02
Earnings per share (non-GAAP)
$8.65 to $8.85
Numbers may not add due to rounding
The following table summarizes the company’s updated 2023 financial guidance:
2023 Guidance(1)
Prior
Updated
Revenue
$30.3 to $30.8 billion
$31.2 to $31.7 billion
Gross Margin % of Revenue (reported)
Approx. 77%
Unchanged
Gross Margin % of Revenue (non-GAAP)
Approx. 79%
Unchanged
Marketing, Selling & Administrative
$6.9 to $7.1 billion
$7.0 to $7.2 billion
Research & Development
$8.2 to $8.4 billion
$8.3 to $8.5 billion
Acquired IPR&D
n/a
$105 million(2)
Other Income/(Expense)
$(200) to $(100) million
Unchanged
Tax Rate
Approx. 13%
Unchanged
Earnings per Share (reported)
$7.90 to $8.10
$8.18 to $8.38
Earnings per Share (non-GAAP)
$8.35 to $8.55
$8.65 to $8.85
(1) Non-GAAP guidance reflects adjustments presented in the earnings per share reconciliation table above.
(2) Guidance does not include acquired IPR&D either incurred, or that may potentially be incurred, after Q1 2023.
Webcast of Conference Call
As previously announced, investors and the general public can access a live webcast of the Q1 2023 financial results conference call through a link on Lilly’s website at investor.lilly.com/webcasts-and-presentations. The conference call will begin at 10 a.m. Eastern time today and will be available for replay via the website.