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Lilly (LLY) Tops on Q1 Earnings, Raises '18 View, Stock Up
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Eli Lilly & Company (LLY - Free Report) reported first-quarter 2018 adjusted earnings per share of $1.34, which beat the Zacks Consensus Estimate of $1.13 per share by 18.6%. Earnings rose 37% from the year-ago quarter backed by robust volume-driven growth in new product sales and lower operating costs and tax rates.
Including asset impairment, restructuring, and other special charges, first-quarter earnings per share were $1.16 against a loss of 10 cents in the first-quarter of 2017.
Revenues in Detail
Quarterly revenues of $5.70 billion also beat the Zacks Consensus Estimate of $5.53 billion. Sales grew 9% year over year backed by strong performance of new drugs and favorable currency movement, which made up for lower sales of established products like Strattera, Cialis and Forteo.
Volumes rose 2% as increased demand for new products like Trulicity, Cyramza, Taltz, Basaglar, Jardiance and Lartruvo offset decline in sales of some established products. However, volume growth was softer than 4% in the previous quarter.
Higher realized prices for several drugs contributed 3% to sales growth in the quarter. Foreign exchange rate also had a favorable impact of 4%.
While U.S. revenues grew 8% to $3.16 billion, ex-U.S. revenues rose 11% to $2.55 billion.
Pharmaceutical revenues rose 11% in the quarter. However, decreased demand for food animal products continued to hurt sales in Lilly’s Animal Health segment.
Established products that recorded growth during the quarter include Humalog (up 12% year over year to $791.7 million), Humulin (up 4% to $325.9 million) and Trajenta (up 25% to $141.1 million). Sales of all other established products declined in the quarter.
Forteo sales declined 10% to $313.2 million due to decreased volume from unfavorable wholesale and retail buying patterns in the United States.
Cymbalta sales declined 3% to $169.6 million while Erbitux sales declined 3% to $149.6 million.
Alimta sales rose 2% to $499.6 million as higher sales in United States offset sales decline in international markets. In ex-U.S. markets, sales declined 3% to $254.3 million due to competitive pressure and loss of exclusivity in certain countries. However, sales of Alimta increased 8% to $245.3 million in the United States due to increased volume and higher realized prices.
Zyprexa sales declined 17% to $122.6 million due to loss of exclusivity in Japan.
Cialis sales declined 7% to $495.4 million hurt by lower demand in United States and loss of exclusivity in Europe.
Strattera sales declined 33% to $130.7 million due to loss of exclusivity.
Among the new products, Trulicity generated revenues of $678.3 million, up 82% year over year, with U.S. revenues benefiting from growth in the GLP-1 market and market share gains.
Cyramza revenues were $183.6 million, up 7% year over year, backed by strong demand. Cyramza’s ex-U.S. revenues increased 10%, benefiting from strong volumes and currency benefit, partially offset by lower realized prices. U.S. revenues increased 3% driven by increased volume and higher realized prices.
Jardiance sales surged 104% to $151 million, driven by increased market share within the growing SGLT2 class in the United States and increased volume outside the United States.
Basaglar recorded revenues of $166.0 million compared with $153.8 million in the previous quarter. It generated revenues of $126.7 million in the United States, which improved sequentially driven by increased demand as the drug gained Medicare Part D formulary access.
Taltz brought in sales of $146.5 million compared with $172.5 million in the previous quarter as higher ex-U.S. revenues were offset by lower U.S. sales, which were hurt by unfavorable specialty pharmacy buying patterns.
Lartruvo (olaratumab) generated revenues of $64.4 million in the quarter compared with $59.0 million in the previous quarter.
Olumiant (baricitinib) has been launched in select European countries and in Japan for moderate-to-severe rheumatoid arthritis. The drug generated sales of $32.2 million in the quarter backed by strong launch uptake in Germany, compared with $23.0 million in the previous quarter.
The drug is under review in the United States. Lilly and partner Incyte Corporation (INCY - Free Report) re-submitted the NDA for baricitinib in January. In a setback to the company, on Monday, Lilly informed that the FDA Advisory Committee has recommended approval of the 2-mg dose of the JAK inhibitor while not recommending the higher dose of 4-mg on the ground that its safety profile is not adequate to support an approval relative to its benefits. The final decision from the FDA is expected in June this year. Please note that in April last year, the FDA had issued a complete response letter (CRL) for the new drug application (NDA) for baricitinib on safety concerns.
Verzenio, which was launched in the Unites States in the fourth quarter of 2017, generated sales of $29.7 million in the quarter compared with $21 million in the previous quarter.
Elanco Animal Health segment sales declined 1% to $761.3 million due to decreased demand for food animal products.
Lilly is exploring strategic alternatives for this business including a sale, merger or creating a separate company through an initial public offer. A decision regarding the same is expected to be announced in July. Lilly might ultimately opt to retain the business.
Gross Margin & Operating Income
Adjusted gross margin of 75.1% in the quarter decreased 270 basis points as manufacturing efficiencies and higher realized prices were offset by negative product mix and the effect of foreign exchange rates on international inventories sold.
Operating income increased 29% year over year to $1.60 billion due to lower operating costs. Total operating expenses (including research and development and marketing, selling and administrative expenses), as a percent of revenues, declined 710 basis points in the quarter to 46.9% due to the company’s cost saving efforts.
2018 EPS Guidance Upped
Lilly raised its previously issued outlook for adjusted earnings as well as sales.
Adjusted earnings per share are now expected in the range of $5.10 to $5.20, higher than $4.81 to $4.91 expected previously, to reflect the expected benefit from higher operating profits and lower tax rates.
The revenue range was also slightly upped to $23.7 billion to $24.2 billion from $23.0 billion to $23.5 billion expected previously.
Gross margin is expected to be approximately 75%, same as previously expected. Adjusted tax rate is expected to be approximately 17% (previously approximately 18%).
Marketing, selling and administrative expense guidance was tightened to a range of $6.2–$6.3 billion compared with $6.1–$6.4 billion previously. Research and development expense guidance was slightly increased to a range of $5.2–$5.4 billion compared with $5.0–$5.2 billion previously due to increased funding requirement for pipeline development.
Our Take
Lilly’s first-quarter results were impressive as it beat estimates for both earnings and sales and also raised its 2018 guidance for both metrics. Shares of the drug giant rose more than 2% in pre-market trading.
However, year-to-date, Lilly’s shares have declined 5% compared with the industry’s decline of 4.7%.
Going forward, Lilly’s new products like Trulicity, Taltz, Basaglar, Cyramza, Jardiance, Lartruvo, Verzenio and Olumiant are expected to continue to drive revenues.
However, competitive pressure on Lilly’s drugs is expected to rise this year. Challenges remain for the company in the form of loss of patent exclusivity for products like Cialis this year and the impact of generic competition for Strattera, Effient and Axiron. The latest baricitinib setback was a disappointment.
Other top-ranked large-cap pharma stocks include Merck (MRK - Free Report) and Pfizer (PFE - Free Report) . Both carry a Zacks Rank #2.
While Merck’s shares have risen 7.1% this year so far, its earnings estimates for 2018 and 2019 increased 1.7% and 0.7%, respectively over the past 90 days.
Pfizer’s earnings estimates for 2018 and 2019 rose 6.9% and 5.5%, respectively over the past 90 days. The stock has gone up by 1.6% this year so far.
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With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Lilly (LLY) Tops on Q1 Earnings, Raises '18 View, Stock Up
Eli Lilly & Company (LLY - Free Report) reported first-quarter 2018 adjusted earnings per share of $1.34, which beat the Zacks Consensus Estimate of $1.13 per share by 18.6%. Earnings rose 37% from the year-ago quarter backed by robust volume-driven growth in new product sales and lower operating costs and tax rates.
Including asset impairment, restructuring, and other special charges, first-quarter earnings per share were $1.16 against a loss of 10 cents in the first-quarter of 2017.
Revenues in Detail
Quarterly revenues of $5.70 billion also beat the Zacks Consensus Estimate of $5.53 billion. Sales grew 9% year over year backed by strong performance of new drugs and favorable currency movement, which made up for lower sales of established products like Strattera, Cialis and Forteo.
Volumes rose 2% as increased demand for new products like Trulicity, Cyramza, Taltz, Basaglar, Jardiance and Lartruvo offset decline in sales of some established products. However, volume growth was softer than 4% in the previous quarter.
Higher realized prices for several drugs contributed 3% to sales growth in the quarter. Foreign exchange rate also had a favorable impact of 4%.
While U.S. revenues grew 8% to $3.16 billion, ex-U.S. revenues rose 11% to $2.55 billion.
Pharmaceutical revenues rose 11% in the quarter. However, decreased demand for food animal products continued to hurt sales in Lilly’s Animal Health segment.
Established products that recorded growth during the quarter include Humalog (up 12% year over year to $791.7 million), Humulin (up 4% to $325.9 million) and Trajenta (up 25% to $141.1 million). Sales of all other established products declined in the quarter.
Forteo sales declined 10% to $313.2 million due to decreased volume from unfavorable wholesale and retail buying patterns in the United States.
Cymbalta sales declined 3% to $169.6 million while Erbitux sales declined 3% to $149.6 million.
Alimta sales rose 2% to $499.6 million as higher sales in United States offset sales decline in international markets. In ex-U.S. markets, sales declined 3% to $254.3 million due to competitive pressure and loss of exclusivity in certain countries. However, sales of Alimta increased 8% to $245.3 million in the United States due to increased volume and higher realized prices.
Zyprexa sales declined 17% to $122.6 million due to loss of exclusivity in Japan.
Cialis sales declined 7% to $495.4 million hurt by lower demand in United States and loss of exclusivity in Europe.
Strattera sales declined 33% to $130.7 million due to loss of exclusivity.
Among the new products, Trulicity generated revenues of $678.3 million, up 82% year over year, with U.S. revenues benefiting from growth in the GLP-1 market and market share gains.
Cyramza revenues were $183.6 million, up 7% year over year, backed by strong demand. Cyramza’s ex-U.S. revenues increased 10%, benefiting from strong volumes and currency benefit, partially offset by lower realized prices. U.S. revenues increased 3% driven by increased volume and higher realized prices.
Jardiance sales surged 104% to $151 million, driven by increased market share within the growing SGLT2 class in the United States and increased volume outside the United States.
Basaglar recorded revenues of $166.0 million compared with $153.8 million in the previous quarter. It generated revenues of $126.7 million in the United States, which improved sequentially driven by increased demand as the drug gained Medicare Part D formulary access.
Taltz brought in sales of $146.5 million compared with $172.5 million in the previous quarter as higher ex-U.S. revenues were offset by lower U.S. sales, which were hurt by unfavorable specialty pharmacy buying patterns.
Lartruvo (olaratumab) generated revenues of $64.4 million in the quarter compared with $59.0 million in the previous quarter.
Olumiant (baricitinib) has been launched in select European countries and in Japan for moderate-to-severe rheumatoid arthritis. The drug generated sales of $32.2 million in the quarter backed by strong launch uptake in Germany, compared with $23.0 million in the previous quarter.
The drug is under review in the United States. Lilly and partner Incyte Corporation (INCY - Free Report) re-submitted the NDA for baricitinib in January. In a setback to the company, on Monday, Lilly informed that the FDA Advisory Committee has recommended approval of the 2-mg dose of the JAK inhibitor while not recommending the higher dose of 4-mg on the ground that its safety profile is not adequate to support an approval relative to its benefits. The final decision from the FDA is expected in June this year. Please note that in April last year, the FDA had issued a complete response letter (CRL) for the new drug application (NDA) for baricitinib on safety concerns.
Verzenio, which was launched in the Unites States in the fourth quarter of 2017, generated sales of $29.7 million in the quarter compared with $21 million in the previous quarter.
Elanco Animal Health segment sales declined 1% to $761.3 million due to decreased demand for food animal products.
Lilly is exploring strategic alternatives for this business including a sale, merger or creating a separate company through an initial public offer. A decision regarding the same is expected to be announced in July. Lilly might ultimately opt to retain the business.
Gross Margin & Operating Income
Adjusted gross margin of 75.1% in the quarter decreased 270 basis points as manufacturing efficiencies and higher realized prices were offset by negative product mix and the effect of foreign exchange rates on international inventories sold.
Operating income increased 29% year over year to $1.60 billion due to lower operating costs. Total operating expenses (including research and development and marketing, selling and administrative expenses), as a percent of revenues, declined 710 basis points in the quarter to 46.9% due to the company’s cost saving efforts.
2018 EPS Guidance Upped
Lilly raised its previously issued outlook for adjusted earnings as well as sales.
Adjusted earnings per share are now expected in the range of $5.10 to $5.20, higher than $4.81 to $4.91 expected previously, to reflect the expected benefit from higher operating profits and lower tax rates.
The revenue range was also slightly upped to $23.7 billion to $24.2 billion from $23.0 billion to $23.5 billion expected previously.
Gross margin is expected to be approximately 75%, same as previously expected. Adjusted tax rate is expected to be approximately 17% (previously approximately 18%).
Marketing, selling and administrative expense guidance was tightened to a range of $6.2–$6.3 billion compared with $6.1–$6.4 billion previously. Research and development expense guidance was slightly increased to a range of $5.2–$5.4 billion compared with $5.0–$5.2 billion previously due to increased funding requirement for pipeline development.
Our Take
Lilly’s first-quarter results were impressive as it beat estimates for both earnings and sales and also raised its 2018 guidance for both metrics. Shares of the drug giant rose more than 2% in pre-market trading.
However, year-to-date, Lilly’s shares have declined 5% compared with the industry’s decline of 4.7%.
Going forward, Lilly’s new products like Trulicity, Taltz, Basaglar, Cyramza, Jardiance, Lartruvo, Verzenio and Olumiant are expected to continue to drive revenues.
However, competitive pressure on Lilly’s drugs is expected to rise this year. Challenges remain for the company in the form of loss of patent exclusivity for products like Cialis this year and the impact of generic competition for Strattera, Effient and Axiron. The latest baricitinib setback was a disappointment.
Lilly carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Eli Lilly and Company Price, Consensus and EPS Surprise
Eli Lilly and Company Price, Consensus and EPS Surprise | Eli Lilly and Company Quote
Stocks to Consider
Other top-ranked large-cap pharma stocks include Merck (MRK - Free Report) and Pfizer (PFE - Free Report) . Both carry a Zacks Rank #2.
While Merck’s shares have risen 7.1% this year so far, its earnings estimates for 2018 and 2019 increased 1.7% and 0.7%, respectively over the past 90 days.
Pfizer’s earnings estimates for 2018 and 2019 rose 6.9% and 5.5%, respectively over the past 90 days. The stock has gone up by 1.6% this year so far.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>