On February 6, 2024 Eli Lilly and Company (NYSE: LLY) reported its financial results for the fourth quarter of 2023 (Press release, Eli Lilly, FEB 6, 2024, View Source [SID1234639869]).
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"2023 was a year of tremendous achievement for Lilly, which delivered life-changing medicines to more patients than ever before resulting in strong revenue growth," said David A. Ricks, Lilly’s chair and CEO. "We advanced our pipeline of new medicines for serious diseases and created new partnerships and innovative ways of collaborating to add to that pipeline. Lilly invested in the quality, reliability and resilience of our supply chain with new advanced manufacturing plants and lines in the U.S. and in Europe. Entering 2024, we remain focused on the opportunity in front of us, to help solve some of the most challenging healthcare problems in the world and make life better for millions of patients."
Lilly has had numerous updates recently on key regulatory, clinical, business development and other events, including:
U.S. Food and Drug Administration (FDA) approval of Zepbound (tirzepatide) for the treatment of adult patients with obesity or overweight with weight-related comorbidities;
FDA approval of Jaypirca for the treatment of adult patients with chronic lymphocytic leukemia or small lymphocytic lymphoma (CLL/SLL) who have received at least two prior lines of therapy, including a BTK inhibitor and a BCL-2 inhibitor, under the Accelerated Approval Program;
Positive results from SYNERGY-NASH, a Phase 2 study of tirzepatide in adults with nonalcoholic steatohepatitis (NASH), also known as metabolic dysfunction-associated steatohepatitis (MASH), which met its primary endpoint where up to 74% of participants achieved an absence of MASH with no worsening of fibrosis at 52 weeks, compared to nearly 13% of participants on placebo;
Negative Phase 3 CYCLONE-2 results, in which Verzenio added to abiraterone did not meet the primary endpoint of improved radiographic progression-free survival (rPFS) in men with metastatic castration-resistant prostate cancer (mCRPC); the overall safety and tolerability profile was consistent with the known profiles of the medicines;
Approval of Ebglyss (lebrikizumab) for adult and adolescent patients with moderate-to-severe atopic dermatitis in the European Union and Japan (Almirall S.A. has licensed the rights from Lilly to develop and commercialize Ebglyss in Europe);
Announcement of LillyDirect, the company’s end-to-end digital healthcare experience;
Announcement of further expansion of the company’s injectable manufacturing capacity with a planned investment of $2.5 billion to build a site in Germany;
Completion of the acquisitions of POINT Biopharma Global Inc. and Mablink Biosciences SAS;
The sixth consecutive 15% annual increase in Lilly’s quarterly dividend, more than doubling the dividend since 2018; and
Announcement of Johna Norton, Lilly executive vice president of Global Quality, retirement after 34 years of service with the company, effective July 31, 2024.
For information on important public announcements, visit the news section of Lilly’s website.
Financial Results
$ in millions, except
per share data
Fourth Quarter
2023
2022
% Change
Revenue
$ 9,353.4
$ 7,301.8
28 %
Net income – Reported
2,189.6
1,937.7
13 %
Earnings per share – Reported
2.42
2.14
13 %
Net income – Non-GAAP
2,249.4
1,893.1
19 %
Earnings per share – Non-GAAP
2.49
2.09
19 %
A discussion of the non-GAAP financial measures is included below under "Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information (Unaudited)."
Fourth-Quarter Reported Results
In Q4 2023, worldwide revenue was $9.35 billion, an increase of 28% compared with Q4 2022, driven by increases of 16% due to higher realized prices, 11% in volume and 1% from the favorable impact of foreign exchange rates. Higher realized prices were driven by Mounjaro in the U.S., partially offset by lower realized prices for Humalog and Trulicity. In the U.S., Mounjaro saw net price positively impacted by savings card dynamics compared with Q4 2022, as well as a favorable one-time change in estimates for rebates and discounts. The volume increase was primarily driven by growth from Mounjaro, Verzenio, Zepbound, Jardiance and Taltz, partially offset by declines in Alimta and Trulicity. New Products revenue grew by $2.19 billion to $2.49 billion in Q4 2023. Growth Products revenue increased 9% to $5.27 billion in Q4 2023.
Revenue in the U.S. increased 39% to $6.46 billion, driven by a 27% increase in realized prices and a 12% increase in volume. The higher realized prices in the U.S. were driven by Mounjaro, partially offset by lower realized prices for Humalog and Trulicity. When excluding Mounjaro, realized prices in the U.S. declined by high-single digits for the quarter. The increase in U.S. volume was driven by Mounjaro, Zepbound, Verzenio, Jardiance and Taltz, partially offset by a decrease in Trulicity.
Revenue outside the U.S. increased 10% to $2.90 billion, driven by a 10% increase in volume and a 3% increase from the favorable impact of foreign exchange rates, partially offset by a 3% decrease due to lower realized prices. The increase in volume outside the U.S. was driven by Verzenio, Mounjaro, Jardiance, Tyvyt and Taltz. Revenue also benefited from $65 million associated with milestones for the EU approval and launch of Ebglyss. These drivers were partially offset by approximately $130 million of one-time revenue in 2022 associated with the sale of the company’s rights to Alimta in Korea and Taiwan.
Gross margin increased 31% to $7.57 billion in Q4 2023. Gross margin as a percent of revenue was 80.9%, an increase of 2.1 percentage points. The increase in gross margin percent was primarily driven by higher realized prices, partially offset by increased manufacturing expenses related to labor costs and investments in capacity expansion.
In Q4 2023, research and development expenses increased 28% to $2.56 billion, or 27% of revenue, primarily driven by development expenses for late-stage assets and additional investments in early-stage research, as well as higher incentive compensation costs.
Marketing, selling and administrative expenses increased 17% to $1.92 billion in Q4 2023, primarily driven by costs associated with launches of new products and indications, as well as higher incentive compensation costs.
In Q4 2023, the company recognized acquired in-process research and development (IPR&D) charges of $622.6 million compared with $240.1 million in Q4 2022. The Q4 2023 charges primarily related to the acquisition of Mablink Biosciences SAS and the business development transaction with Beam Therapeutics Inc.
Other income (expense) was $121.0 million of income in Q4 2023, compared with $260.0 million of income in Q4 2022. The decrease in income was driven by lower net gains on investments in equity securities in Q4 2023 compared with Q4 2022 and, to a lesser extent, higher net interest expenses.
The effective tax rate was 12.7% in Q4 2023 compared with 7.6% in Q4 2022. The higher effective tax rate for Q4 2023 was primarily driven by a lower net discrete tax benefit compared with Q4 2022 and the new Puerto Rico tax regime.
In Q4 2023, net income and earnings per share (EPS) were $2.19 billion and $2.42, respectively, compared with net income of $1.94 billion and EPS of $2.14 in Q4 2022. EPS in Q4 2023 included $0.62 of acquired IPR&D charges compared with $0.23 in Q4 2022.
Fourth-Quarter Non-GAAP Measures
On a non-GAAP basis, Q4 2023 gross margin increased 31% to $7.69 billion. Gross margin as a percent of revenue was 82.3%, an increase of 1.8 percentage points. The increase in gross margin percent was primarily driven by higher realized prices, partially offset by increased manufacturing expenses related to labor costs and investments in capacity expansion.
The effective tax rate on a non-GAAP basis was 13.1% in Q4 2023 compared with 7.3% in Q4 2022. The higher effective tax rate for Q4 2023 was primarily driven by a lower net discrete tax benefit compared with Q4 2022 and the new Puerto Rico tax regime.
On a non-GAAP basis, Q4 2023 net income and EPS were $2.25 billion and $2.49, respectively, compared with net income of $1.89 billion and EPS of $2.09 in Q4 2022. Non-GAAP EPS in Q4 2023 included $0.62 of acquired IPR&D charges compared with $0.23 in Q4 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.
Fourth Quarter
2023
2022
% Change
Earnings per share (reported)
$ 2.42
$ 2.14
13 %
Amortization of intangible assets
.11
.11
Asset impairment, restructuring and other
special charges
.06
.03
Net gains on investments in equity securities
(.11)
(.19)
Earnings per share (non-GAAP)
$ 2.49
$ 2.09
19 %
Numbers may not add due to rounding.
Acquired IPR&D
.62
.23
NM
Selected Revenue Highlights
(Dollars in millions)
Fourth Quarter
Year-to-Date
Selected Products
2023
2022
% Change
2023
2022
% Change
Trulicity
$ 1,669.3
$ 1,936.2
(14) %
$ 7,132.6
$ 7,439.7
(4) %
Mounjaro
2,205.6
279.2
NM
5,163.1
482.5
NM
Verzenio
1,145.4
808.0
42 %
3,863.4
2,483.5
56 %
Taltz
784.6
707.8
11 %
2,759.6
2,482.0
11 %
Jardiance(a)
798.1
612.3
30 %
2,744.7
2,066.0
33 %
Humalog(b)
366.6
548.3
(33) %
1,663.3
2,060.6
(19) %
Cyramza
253.6
277.8
(9) %
974.7
971.4
0 %
Olumiant(c)
243.5
205.8
18 %
922.6
830.5
11 %
Emgality
186.1
175.6
6 %
678.3
650.9
4 %
Tyvyt
113.6
57.5
98 %
393.4
293.3
34 %
Retevmo
73.4
64.6
14 %
253.6
191.9
32 %
Alimta
44.9
236.6
(81) %
217.5
927.7
(77) %
Zepbound
175.8
—
NM
175.8
—
NM
COVID-19
antibodies(d)
—
38.0
(100) %
—
2,023.5
(100) %
Total Revenue
9,353.4
7,301.8
28 %
34,124.1
28,541.4
20 %
(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 Q4 2023, worldwide Trulicity revenue decreased 14% compared with Q4 2022 to $1.67 billion. U.S. revenue decreased 18% to $1.26 billion, driven by decreased volume and lower realized prices. Lilly has experienced and continues to expect intermittent delays fulfilling orders of Trulicity. These delays have impacted and are expected to continue to impact volume. Revenue outside the U.S. increased 1% to $413.6 million, driven by increased volume and the favorable impact of foreign exchange rates, largely offset by lower realized prices. Volumes in international markets continue to be affected by actions Lilly has taken to manage demand amid tight supply, including measures to minimize impact to existing patients.
Mounjaro
For Q4 2023, worldwide Mounjaro revenue was $2.21 billion compared with $279.2 million in Q4 2022. U.S. revenue was $2.11 billion compared with $256.7 million in Q4 2022 reflecting higher realized prices due to decreased utilization of savings card programs as access continued to expand, as well as increased demand. U.S. revenue in Q4 2023 represented a sequential increase of $828.1 million, or 65%, compared with U.S. revenue of $1.28 billion in Q3 2023. Q4 2023 U.S. Mounjaro revenue also benefited from a favorable one-time change in estimates for rebates and discounts. Adjusting for this one-time change, sequential net sales would have grown by approximately 30% in Q4. Lilly has experienced and continues to expect intermittent delays fulfilling orders of certain Mounjaro doses given significant demand, which is expected to affect volume. Revenue outside the U.S. was $100.5 million compared with $22.5 million in Q4 2022.
Verzenio
For Q4 2023, worldwide Verzenio revenue increased 42% compared with Q4 2022 to $1.15 billion. U.S. revenue was $774.8 million, an increase of 40%, driven by increased demand and higher realized prices. Revenue outside the U.S. was $370.6 million, an increase of 45%, driven by increased demand and, to a lesser extent, the favorable impact of foreign exchange rates, partially offset by lower realized prices.
Taltz
For Q4 2023, worldwide Taltz revenue increased 11% compared with Q4 2022 to $784.6 million. U.S. revenue increased 5% to $537.8 million, driven by increased demand, partially offset by lower realized prices. Revenue outside the U.S. increased 26% to $246.8 million, driven by increased volume.
Jardiance
For Q4 2023, the company’s worldwide Jardiance revenue increased 30% compared with Q4 2022 to $798.1 million. U.S. revenue was $468.9 million, an increase of 29%, driven by increased demand. Revenue outside the U.S. was $329.1 million, an increase of 32%, driven by increased volume and, to a lesser extent, the favorable 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.
Humalog
For Q4 2023, worldwide Humalog revenue decreased 33% compared with Q4 2022 to $366.6 million. U.S. revenue was $167.6 million, a decrease of 50%, driven by lower realized prices primarily due to a one-time impact related to the implementation of list price decreases, partially offset by increased demand. Revenue outside the U.S. was $199.0 million, a decrease of 6%, driven by decreased volume, partially offset by the favorable impact of foreign exchange rates.
Olumiant
For Q4 2023, worldwide Olumiant revenue increased 18% compared with Q4 2022 to $243.5 million. U.S. revenue increased 53% to $66.7 million, driven by increased demand, partially offset by lower realized prices. Revenue outside the U.S. was $176.8 million, an increase of 9%, driven by increased volume.
Emgality
For Q4 2023, worldwide Emgality revenue increased 6% compared with Q4 2022 to $186.1 million. U.S. revenue decreased 3% to $128.3 million, driven by lower realized prices, largely offset by increased demand. Revenue outside the U.S. increased 33% to $57.8 million, driven by increased volume and higher realized prices.
Zepbound
For Q4 2023, worldwide Zepbound revenue was $175.8 million. Zepbound launched in the U.S. for the treatment of adult patients with obesity or overweight with weight-related comorbidities in November 2023.
2024 Financial Guidance
The company anticipates 2024 revenue to be in the range of $40.4 billion to $41.6 billion. The growth in revenue compared to 2023 is expected to be largely driven by New Products, partially offset by an expected continuation of the decline in Trulicity sales. The company continues to execute on its manufacturing expansion agenda, however, given strong demand and the time required to bring manufacturing capacity fully online, the company expects that demand for incretins is likely to outpace supply in 2024.
The company’s guidance now includes a new ratio calculated by subtracting research and development expenses and marketing, selling and administrative expenses from gross margin, and expressed as a percentage of revenue. The company anticipates this ratio to be 30% to 32% on a reported basis and 31% to 33% on a non-GAAP basis. Marketing, selling and administrative expenses are expected to continue growing in 2024, though at a pace slower than revenue growth with growth driven by marketing investments in recently launched and upcoming launch products. Research and development expenses are expected to increase at a higher rate than marketing, selling and administrative expenses in 2024, driven by investments in ongoing and new late-phase opportunities.
Consistent with 2023, the company is not including any potential or pending acquired IPR&D charges in its initial 2024 guidance and expects to update EPS guidance each quarter as acquired IPR&D charges are incurred.
Other income (expense) is expected to be expense in the range of $400 million to $500 million, primarily driven by higher interest expense.
The 2024 effective tax rate is expected to be approximately 14%. This rate does not assume deferral or repeal of the provision in the 2017 Tax Act requiring capitalization and amortization of research and development for tax purposes.
EPS for 2024 is expected to be in the range of $11.80 to $12.30 on a reported basis and $12.20 to $12.70 on a non-GAAP basis. The company’s 2024 financial guidance reflects adjustments shown in the reconciliation table below.
2024
Guidance
Earnings per share (reported)
$11.80 to $12.30
Amortization of intangible assets
.40
Earnings per share (non-GAAP)
$12.20 to $12.70
Numbers may not add due to rounding
The following table summarizes the company’s 2024 financial guidance:
2024 Guidance(1)
Revenue
$40.4 to $41.6 billion
(Gross Margin – OPEX(2)) / Revenue:
(reported)
30% to 32%
(non-GAAP)
31% to 33%
Other Income/(Expense)
($500) to ($400) million
Tax Rate
Approx. 14%
Earnings per Share (reported)
$11.80 to $12.30
Earnings per Share (non-GAAP)
$12.20 to $12.70
(1) Non-GAAP guidance reflects adjustments presented in the earnings per share reconciliation
table above.
(2) OPEX is defined as the sum of research and development expenses and marketing, selling
and administrative expenses.
Webcast of Conference Call
As previously announced, investors and the general public can access a live webcast of the Q4 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.