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Eli Lilly (LLY) Q3 Earnings Miss, COVID Drugs Drive Sales

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Eli Lilly & Company (LLY - Free Report) reported third-quarter 2021 adjusted earnings per share of $1.94, which missed the Zacks Consensus Estimate of $1.98. Earnings however rose 38% year over year, driven by higher revenues and operating profits.

Revenues of $6.77 billion beat the Zacks Consensus Estimate of $6.56 billion. Sales increased 18% year over year as volume increases offset the impact of flat realized prices

In the quarter, Lilly recorded $423.5 million of revenues from COVID-19 therapies. We note that Lilly’s antibody cocktail, bamlanivimab and etesevimab together, was granted emergency use authorization (EUA) by the FDA to treat mild-to-moderate COVID-19 in high-risk patients in February. Baricitinib (marketed as Olumiant) had been granted EUA by the FDA for treating COVID-19 (hospitalized patients) in November 2020. Excluding COVID therapies, total revenues rose 11% in the quarter.

Lilly’s stock has risen 45.1% this year so far compared with an increase of 11.6% for the industry.


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Quarter in Detail

Net realized prices were flat in the quarter. Volumes rose 17%. Foreign exchange had a positive impact of 1% on revenue growth in the quarter.

Key growth products (the ones launched since 2014) drove 17% of revenue growth and represented nearly 58% of total revenues, excluding revenues from COVID-19 antibodies. U.S. revenues climbed 26% to $3.99 billion while ex-U.S. revenues increased 8% to $2.78 billion.

Among the growth products, Trulicity generated revenues worth $1.60 billion, up 45% year over year driven by higher volumes and higher realized prices to some extent.

Cyramza revenues of $253.4 million were flat year over year as decreased demand in the United States was offset by increased volume outside the U.S. market.

Jardiance sales rose 26% to $390.4 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 $192.8 million, down 22% year over year due to lower realized prices and weak demand caused by competitive pressure in the United States. Basaglar sales rose in international markets.

Taltz brought in sales of $593.1 million, up 33% year over year, as U.S. sales benefited from increased demand, which offset the impact of lower realized prices driven by increased rebates to gain broad commercial access. Ex-U.S. sales rose driven by increased volume.

Olumiant (baricitinib) generated sales of $406.9 million in the quarter, much higher than $208.4 million in the previous quarter, backed by increased use of the drug in the United States for treating COVID-19 amid rising infection rates. Lilly markets Olumiant in partnership with Incyte (INCY - Free Report) .

Verzenio generated sales of $335.5 million in the reported quarter, up 43% year over year, driven by increased demand, partially offset by lower realized prices.

Emgality generated revenues of $140.8 million in the quarter, up 53% year over year driven by increased demand and higher realized prices in the United States. Revenues also rose in the international market.

Tyvyt revenues in China were $125.6 million, up 53% year over year driven by increased demand. Lilly markets Tyvyt in partnership with Innovent.

Among the newer drugs, Retevmo generated sales of $33.6 million in the quarter compared with $25.7 million in the previous quarter.

Among the established products, Forteo sales declined 25% to $200.9 million. Humalog sales were down 6% to $626.7 million. Humulin sales dropped 6% to $286.7 million. Alimta sales declined 21% to $457.0 million.

Lilly generated revenues of $217.1 million from its COVID-19 therapies, bamlanivimab and bamlanivimab/etesevimab cocktail medicine, in the quarter compared with $148.9 million in the previous quarter. In September, the FDA expanded the EUA for cocktail antibody medicine, bamlanivimab plus etesevimab, to include the post-exposure prevention (prophylaxis) for COVID-19 indication.

Adjusted gross margin was 79% in the quarter, down 10 basis points. Operating income rose 37% year over year to $2.06 billion.

2021 Guidance Upped

Lilly expects adjusted earnings per share in the range of $7.95 to $8.05 in 2021, up from the prior expectation of $7.80-$8.00, which indicates growth in the range of 17%-18% (previously 15%-18%).

Revenues in 2021 are expected in the range of $27.2 billion-$27.6 billion, compared with $26.8 billion-$27.4 billion expected previously.

Lilly expects revenues of $1.3 billion from COVID-19 therapies compared with the prior range of $1.0-$1.1 billion.

The gross margin is expected to be approximately 79% (maintained). The adjusted tax rate is expected to be approximately 13% (maintained). Adjusted operating margin is expected to be 30% (maintained).

Marketing, selling and administrative expense are expected to be in the range of $6.2 billion to $6.4 billion (maintained). Research and development expense is expected to be in the range of $6.9 billion to $7.1 billion (maintained).

Our Take

Lilly’s third-quarter results were mixed as it missed estimates for earnings but beat the same for sales. Importantly, higher revenues from Lilly’s COVID-19 therapies benefited sales as the spread of Delta variant led to a sharp rise in infection rates in the quarter. Also, sales of its newer medicines grew more than 35% in the quarter.

Lilly also raised its previous sales and earnings forecast for 2021 due to additional expected revenues from its COVID-19 antibody medicines.

Lilly has made significant pipeline progress. Along with the earnings release, it announced that it has submitted regulatory applications in the United States and Europe seeking approval of tirzepatide for type II diabetes. Also, it has initiated a rolling submission for another key candidate donanemab for early Alzheimer's disease. In the quarter, Lilly also gained U.S. approvals for new indications for both Verzenio and Jardiance. However, Lilly and partner Pfizer (PFE - Free Report) discontinued the development of tanezumab, which was being developed for osteoarthritis pain.

Eli Lilly and Company Price, Consensus and EPS Surprise

Eli Lilly and Company Price, Consensus and EPS Surprise

Eli Lilly and Company price-consensus-eps-surprise-chart | Eli Lilly and Company Quote

Lilly currently has a Zacks Rank #3 (Hold). A better-ranked large drugmaker is Regeneron (REGN - Free Report) , which sports a Zacks Rank of 1 (Strong Buy). Its earnings estimate for 2021 has gone up from $54.15 to $62.36 over the past 60 days while that for 2022 has increased from $44.11 to $46.70 per share. The stock is up 19.3% this year so far.

You can see the complete list of today’s Zacks #1 Rank stocks here.