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Eli Lilly (LLY) Beats on Q1 Earnings, Ups Sales View, Stock Rises

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Eli Lilly and Company (LLY - Free Report) reported first-quarter 2022 adjusted earnings per share of $2.62, which beat the Zacks Consensus Estimate of $2.32. Earnings rose 63% year over year, driven by higher operating profits.

Revenues of $7.81 billion also beat the Zacks Consensus Estimate of $7.52 billion. Sales increased 15% year over year. In the reported quarter, Lilly recorded $1.47 billion of revenues from COVID-19 therapies.

Quarter in Detail

Net realized prices decreased 3% in the quarter while volumes rose 20%. The unfavorable impact of foreign exchange rates hurt sales by 2% in the quarter.

Key growth products (the ones launched since 2014) drove 13% of revenue growth and represented nearly 61% of total revenues, excluding revenues from COVID-19 antibodies. U.S. revenues rose 31% to $5.17 billion but ex-U.S. revenues decreased 8% to $2.64 billion.

Among the growth products, Trulicity generated revenues worth $1.74 billion, up 20% year over year, driven by increased demand in the United States and increased volume in ex-U.S markets, which offset the impact of lower realized prices and unfavorable wholesale and retail buying patterns in the United States.

Jardiance sales surged 34% to $419.4 million, driven by increased demand trends within the SGLT2 class of diabetes medicines in the United States and increased volume outside the United States, partially offset by currency headwinds.

Taltz brought in sales of $488.1 million, up 21% year over year, as U.S. sales benefited from increased demand and higher prices, which offset the impact of unfavorable specialty pharmacy buying patterns. Ex-U.S. sales rose on increased volume, which offset the impact of lower realized prices and currency headwinds.

Verzenio generated sales of $469.4 million in the reported quarter, up 74% year over year, on increased demand, driven by the approval and launch of the adjuvant indication, partially offset by currency headwinds.

Olumiant (baricitinib) generated sales of $255.6 million in the first quarter, up 32% on a year-over-year basis, driven by volume growth, partially offset by currency headwinds and lower realized prices. Lilly markets Olumiant in partnership with Incyte (INCY - Free Report) . The volume growth of this Incyte-partnered drug globally was partly due to the increased use of the drug for treating COVID-19.

Cyramza revenues of $230.3 million were down 4% year over year. Basaglar recorded revenues of $191.5 million, down 22% year over year

Emgality generated revenues of $149.3 million in the quarter, up 25% year over year, driven by increased demand, partly offset by lower realized prices in the United States. Revenues also rose in the international markets.

Tyvyt revenues in China were $85.5 million, down 22% year over year due to lower realized prices due to updated 2022 NRDL price reductions in China. Lilly markets Tyvyt in partnership with Innovent.

Among the newer drugs, cancer drug, Retevmo generated sales of $41.8 million in the quarter compared with $38.6 million in the previous quarter.

Among the established products, Forteo sales declined 31% to $137.4 million. Humalog sales were flat at $618.2 million. Humulin sales dropped 15% to $273.2 million. Alimta sales declined 38% to $343.9 million.

Lilly generated revenues of $1.47 billion from its COVID-19 therapies, bamlanivimab, bamlanivimab/etesevimab cocktail medicine and new COVID-19 antibody-drug, bebtelovimab, in the quarter compared with 1.06 billion in the previous quarter.

Adjusted gross margin was 76.1% in the quarter, up 70 basis points. Operating income rose 66% year over year to $2.61 billion. Lower upfront charges and development milestones related to acquired in-process research and development (IPR&D) boosted operating income in the quarter.

2022 Guidance

Lilly raised its revenue expectations for 2022 due to higher COVID-19 antibody revenues from the sales of bebtelovimab to the U.S. government.

The company now expects revenues to be between $28.8 billion and $29.3 billion, higher than the $27.8 billion and $28.3 billion expected previously.

The FDA granted Emergency Use Authorization (EUA) to bebtelovimab in February. In the same month, Lilly also announced an agreement to supply the U.S. government up to 600,000 doses of bebtelovimab for at least $720 million. Per the deal, Lilly supplied 600,000 doses of bebtelovimab to the U.S. government in the first quarter of 2022. The government also has an option to purchase an additional 500,000 doses of bebtelovimab no later than Jul 31, 2022. However, the guidance does not include any additional revenues from this option arrangement.

Lilly issued its guidance for acquired IPR&D and development milestone charges, which are expected to be approximately $520 million in 2022.

Lilly lowered its earnings per share guidance due to the 55 cents per share negative impact of acquired IPR&D and development milestone charges. Earnings per share are expected to be between $8.15 and $8.30, down from $8.50 and $8.65 previously.

The gross margin is expected to be approximately 78% (previously 80%). The adjusted operating margin is expected to be approximately 30% (previously 32%). The operating margin was lowered due to the negative impact attributable to acquired IPR&D and development milestone charges.

Marketing, selling and administrative expenses are expected to be in the range of $6.4 billion to $6.6 billion (same as before). Research and development expense is expected to be in the range of $7.1 billion to $7.3 billion (previously $7.0 billion to $7.2 billion).

Tirzepatide Achieves Weight Reduction in Phase III Obesity Study

In a separate press release Lilly announced that tirzepatide, its dual GIP and GLP-1 receptor agonist, showed “superior weight loss” in the 72-week phase III SURMOUNT-1 study. In the study, treatment with tirzepatide led to up to 22.5% (52 lb or 24 kg) weight loss in adults with obesity or overweight with at least one comorbidity, who do not have diabetes. Moreover, 63% of participants given tirzepatide 15 mg experienced at least 20% body weight reduction, which was a key secondary endpoint.

Our Take

Lilly’s first-quarter results were better than expected as it beat estimates for both sales and earnings. Other than revenues from its COVID-19 antibodies, Lilly’s volume-driven sales growth was led by higher demand for drugs like Trulicity, Taltz, Verzenio and others despite pricing pressure.

Lilly also raised its revenue expectations for the year. Though the company lowered its earning guidance, it was only due to an accounting change.

Lilly’s shares were up more than 6% in pre-market trading in response to the better-than-expected results and the increase in revenue guidance. The impressive body weight reductions delivered by tirzepatide in the late-stage study also caught investor attention. It is the first drug to achieve more than 20% weight loss on average in a phase III study. Shares of Lilly have risen 3.6% this year so far compared with the industry’s increase of 4.3%.

 

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Lilly has an exciting pipeline of potential new medicines including tirzepatide for type II diabetes and donanemab for early Alzheimer's disease. Both candidates, which are expected to be launched in a couple of years, have multibillion-dollar sales potential.

Zacks Rank & Other Key Picks

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

Some other drug/biotech stocks with the same Zacks Rank as Lilly are Vertex Pharmaceuticals (VRTX - Free Report) and Deciphera Pharmaceuticals (DCPH - Free Report) .

Vertex Pharmaceuticals’ stock has risen 21.7% this year. Estimates for Vertex Pharmaceuticals’ 2022 earnings have gone up from $14.52 to $14.56 per share, while those for 2023 have increased from $15.31 to $15.35 per share over the past 30 days.

Vertex Pharmaceuticals’ earnings performance has been strong, with the company beating expectations in each of the last four quarters. Vertex Pharmaceuticals has a four-quarter earnings surprise of 10.01%, on average.

Deciphera Pharmaceuticals’ loss estimates have narrowed from $2.94 to $2.84 per share for 2022 and from $2.38 to $2.27 per share for 2023 over the past 30 days. The stock is up 10.1% this year so far.

Deciphera Pharmaceuticals’ earnings performance has been rather weak, with the company missing expectations in three of the last four quarters. Deciphera Pharmaceuticals has a four-quarter negative earnings surprise of 2.73%, on average.