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Eli Lilly (LLY) Q4 Earnings Top, COVID-19 Antibody Boosts Sales

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Eli Lilly & Company (LLY - Free Report) reported fourth-quarter 2020 adjusted earnings per share of $2.75, which beat the Zacks Consensus Estimate of $2.35. Earnings rose 59% year over year owing to higher revenues, which partially offset the impact of higher R&D costs to make COVID-19 treatments.

Revenues of $7.44 billion also beat the Zacks Consensus Estimate of $7.23 billion. Sales increased 22% year over year as volume increases were offset by the impact of lower realized prices of several of its drugs. Lilly’s newly approved COVID-19 antibody drug, bamlanivimab was a key driver of sales growth in the fourth quarter. Excluding bamlanivimab, sales rose 7%.

Quarter in Detail

Lower realized prices had a negative impact of 4% on sales mainly due to changes in estimates for rebates and discounts in the United States, most notably impacting Trulicity. Volumes rose 22%. Foreign exchange had a positive impact of 1% on revenue growth in the quarter under review.

Key growth products (products launched since 2014) drove 12% of revenue growth and represented nearly 55% total revenues, excluding bamlanivimab. U.S. revenues climbed 31% to $4.6 billion while ex-U.S. revenues increased 10% to $2.84 billion.

Among the growth products, Trulicity generated revenues worth $1.50 billion, up 24% year over year driven by higher volumes, which offset decline in prices.

Cyramza revenues of $284.2 million were up 16% year over year, primarily boosted by higher realized prices and solid demand in the United States and increased volumes in the ex-U.S. markets.

Jardiance sales rose 17% to $313.6 million driven by increased demand trends within the SGLT2 class of diabetes medicines in the United States and increased volume outside the United States.

Basaglar recorded revenues of $282.1 million, down 8% year over year due to lower realized prices and weak demand caused by competitive pressure. However, Basaglar sales rose in international markets.

Taltz brought in sales of $495.3 million, up 18% year over year as U.S. sales gained from higher demand, which offset the impact of lower realized prices. Ex-U.S. sales were driven by increased volume.

Olumiant generated sales of $192.2 million in the quarter, up 50% year over year backed by increased volume in international markets. Lilly markets Olumiant in partnership with Incyte (INCY - Free Report)

Verzenio generated sales of $281.6 million in the reported quarter, up 57% year over year, driven by increased demand.

Emgality generated revenues of $109.9 million in the quarter compared with $91.5 million in the earlier quarter.

Among the newer drugs, Baqsimi generated revenues of $23.8 million in the quarter compared with $20.9 million in the earlier quarter. Retevmo, launched last year, generated sales of $18.7 million in the quarter compared with $11.6 million in the third quarter.

Among the established products, Forteo sales declined 29% to $254.4 million while Humalog sales declined 6% to $718.1 million. Humulin sales decreased 7% to $324.4 million while Alimta sales were up 23% to $652.7 million.

Importantly, in the quarter, Lilly generated revenues of $871.2 million from its COVID-19 therapy, bamlanivimab that was granted approval for emergency use by the FDA in November for the treatment of mild-to-moderate COVID-19 in patients who are at high risk of progressing to severe COVID-19. The FDA also granted emergency use approval to Olumiant for use in combination with Gilead’s (GILD - Free Report) remdesivir to treat hospitalized COVID-19 patients. Meanwhile, other studies are ongoing on bamlanivimab in other patient populations and also in combination with Lilly’s another COVID-19 antibody candidate, etesevimab.

Lilly supplied the U.S. government with 950,000 doses of bamlanivimab and has signed another agreement this week to deliver 500,000 additional doses by March end.

Adjusted gross margin was 78.6% in the quarter, down 130 basis points. Operating income rose 53% year over year to $2.5 billion.

2020 Results

Full-year 2020 sales rose 10% to $24.5 billion, beating the Zacks Consensus Estimate of $24.4 billion. Sales were within the guided range of $24.2-$24.7 billion.

Adjusted earnings for 2020 were $7.93 per share, which surpassed the Zacks Consensus Estimate of $7.57 as well as the guided range of $7.45- $7.65.  Earnings rose 31% year over year.

2021 Guidance

Lilly maintained its financial guidance for 2021, which it had issued in December. Lilly expects adjusted earnings in the range of $7.75-$8.40 per share in 2021. Revenues in 2021 are expected in the range of $26.5 billion-$28.0 billion. Lilly expects its revenue growth to be driven by higher demand for key products including Trulicity, Taltz, Verzenio, Jardiance, Olumiant, Cyramza, Emgality and Retevmo. Importantly, Lilly expects revenues in the range of $1-$2 billion from COVID-19 therapies.

However, generic competition for several drugs, rising pricing pressure in the United States due to rebates and legislated increases in Medicare Part D cost sharing and price declines in some international markets like China, Japan and Europe will continue to remain top-line headwinds in 2021. In the United States, prices are expected to decline in a low-to-mid-single digit range.

Gross margin is expected to be approximately 79%. Adjusted tax rate is expected to be approximately 15%. Adjusted operating margin is expected to be 32% in 2021.

Marketing, selling and administrative expense are expected to be in the range of $6.2 billion to $6.4 billion. Research and development expense is expected to be in the range of $6.5 billion to $6.7 billion, which includes investment of approximately $300 million to $400 million in developing COVID-19 therapies.

Our Take

Lilly’s fourth-quarter results were strong as it beat estimates for both earnings and sales. The stock was up around 3% in pre-market trading in response. Lilly’s stock has risen 47.3% in the past year compared with an increase of 6.4% for the industry.


Volume-based revenue growth of its newest drugs and initial sales of its COVID-19 antibody therapies drove sales and profits in the quarter. Meanwhile, Lilly made significant pipeline progress in the quarter, announcing positive data from studies on three of its most important pipeline assets; tirzepatide (diabetes), LOXO-305 (cancer) and donanemab (Alzheimer's disease).

Lilly currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A better-ranked large drugmaker is Merck (MRK - Free Report) , which has a Zacks Rank of 2 (Buy). Its shares have risen 3.6% in the past three months.

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