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Why Is Lilly (LLY) Up 6.4% Since Last Earnings Report?
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It has been about a month since the last earnings report for Eli Lilly (LLY - Free Report) . Shares have added about 6.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lilly due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Q2 Earnings Beat, Mounjaro Powers Sales Growth
Lilly reported second-quarter 2023 adjusted earnings per share of $2.11, which beat the Zacks Consensus Estimate of $1.98. Earnings rose 69% year over year due to volume-driven revenue growth.
Revenues of $8.31 billion beat the Zacks Consensus Estimate of $7.55 billion. Sales rose 28% year over year driven by volume growth. Revenues also benefited from a contribution of $579.0 million from the sale of rights for Baqsimi.
Excluding COVID-19 antibodies and revenues from Baqsimi, revenue rose 22% on 23% volume growth.
The company witnessed strong volume growth of Mounjaro, Verzenio, Jardiance and Taltz, which made up for the decline in sales of Alimta due to the loss of exclusivity in the United States and no COVID revenues in the quarter.
Quarter in Detail
In the reported quarter, net realized prices were flat, while volumes rose 29%. The unfavorable impact of foreign exchange rates hurt sales by 1% in the quarter.
Key growth products (select products launched prior to 2022 like Cyramza, Emgality, Jardiance, Olumiant, Retevmo, Taltz, Trulicity, Tyvyt and Verzenio) grew 16% to $4.93 billion. Eli Lilly’s new products (products launched since 2022 like Mounjaro, Jaypirca and Omvoh) contributed $1.0 billion to revenues led by Mounjaro, which is benefiting from strong demand trends.
While U.S. revenues rose 41% to $5.53 billion, ex-U.S. revenues increased 9% to $2.78 billion.
Among the growth products, Trulicity generated revenues worth $1.81 billion, down 5% year over, due to the impact of price erosion in the United States as well as ex-U.S. markets, lower volumes in international markets and currency headwinds. In international markets, Trulicity volumes are being hurt due to the company’s measures to manage strong demand amid tight supply of incretin-based products. Trulicity missed the Zacks Consensus Estimate of $2.09 billion as well as our model estimate of $2.05 billion.
Lilly is investing in manufacturing capacity to increase supply of incretin-based products like Trulicity and Mounjaro to meet the rising demand.
Jardiance sales surged 45% to $668.3 million, driven by increased demand trends. Jardiance beat the Zacks Consensus Estimate of $655.0 million but slightly missed our model estimate of $682.9 million.
Taltz brought in sales of $703.9 million, up 16% year over year, as the drug’s worldwide sales benefited from increased demand. Taltz beat the Zacks Consensus Estimate of $673.0 million as well as our model estimate of $678.4 million.
Verzenio generated sales of $926.8 million in the reported quarter, up 57% year over year, on increased demand, driven by the approval and launch of the adjuvant indication, and partly due to higher realized prices. Verzenio sales beat the Zacks Consensus Estimate of $908 million as well as our model estimate of $897.1 million.
Emgality generated revenues of $169.3 million in the quarter, up 8% year over year driven by increased demand. Olumiant (baricitinib) generated sales of $218.9 million, up 18% on a year-over-year basis, driven by increased demand for the newly approved alopecia areata indication. However, revenues declined in ex-U.S. markets due to lower realized prices and currency headwinds. Retevmo generated sales of $65.4 million, up 45% year over year.
Cyramza revenues of $260.3 million were up 13% year over year. Tyvyt revenues in China were $103.6 million, up 41% year over.
Among the newer drugs, the new diabetes drug Mounjaro recorded sales of $979.7 million during the quarter, much higher than $568.5 million in the previous quarter. The reported sales figure exceeded our estimate of $741.6 million for the quarter.
Mounjaro generated $915.7 million in product sales in the United States and $64.0 million in international markets. Though Mounjaro’s sales growth was mostly driven by higher volumes, Lilly is experiencing intermittent delays fulfilling orders of certain Mounjaro doses, given significant demand. These delays may continue to hurt volumes in future quarters.
New drug, Jaypirca recorded $14.4 million in sales, all from the United States, compared with $5.1 million in the first quarter.
Among the established products, Alimta sales declined 73% to $60.9 million. Humalog sales declined 1% to $440.4 million.
In the reported quarter, Lilly did not record any revenues from COVID-19 therapies compared to $129.1 recorded in the year-ago quarter since the FDA rescinded the authorization granted to its COVID-19 antibody bebtelovimab last November.
Gross Margin & Operating Income
Adjusted gross margin was 79.8%, flat year over year, as the favorable impact of product mix (including onetime revenue from the sales of rightsto Baqsimi) was offset by higher manufacturing costs.
Operating income rose 69% year over year to $2.25 billion. Operating margin was 27% in the quarter, including a negative impact of approximately 115 basis points attributed to acquire in-process R&D and development milestone charges.
Total operating expenses increased 14% in the quarter.
In the quarter, Lilly recognized acquired in-process research and development (IPR&D) and development milestone charges of $97.1 million ($0.09 per share) compared with $440.4 million in the year-ago quarter.
Marketing, selling and administrative expenses rose 18% to $1.93 billion to support the launch of new products and indications. R&D expense increased 32% to $2.36 billion in the quarter due to higher costs for late-stage as well as early-stage candidates.
Adjusted effective tax rate was 16.1%, compared with 14.2% in the year-ago quarter.
2023 Guidance Updated
Lilly raised the financial guidance for 2023.
The company raised its revenue guidance to a range of $33.4 billion to $33.9 billion from the previously expected range of $31.2 billion-$31.7 billion. Sales of rights to some products (olanzapine portfolio, including Zyprexa, to Cheplapharm Arzneimittel and Baqsimi to Amphastar) coupled with an improved underlying performance led to the guidance increase. Lilly does not expect to record any COVID-19 antibody revenues for 2023.
Management now expects to record 2023 earnings per share in the range of $9.70-$9.90, a rise from the previously provided range of $8.65-$8.85 per share.
Adjusted gross margin is expected to be approximately 80% (previously 79%) driven by the sales of rights for the olanzapine portfolio and Baqsimi.
The company raised its guidance for operating expenses. Marketing, selling and administrative expenses are expected to be $7.2 to $7.4 billion, compared with $7.0-$7.2 billion previously as the company prepares for new launches in the second half of the year. Research and development expense is now expected to be in the range of $8.9 billion to $9.1 billion, higher than the previously expected range of $8.3 billion to $8.5 billion.
The tax rate is expected to be around 14% to 15% for the full year (previously around 13%).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 22.06% due to these changes.
VGM Scores
Currently, Lilly has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Lilly has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Lilly belongs to the Zacks Large Cap Pharmaceuticals industry. Another stock from the same industry, Merck (MRK - Free Report) , has gained 0.4% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Merck reported revenues of $15.04 billion in the last reported quarter, representing a year-over-year change of +3%. EPS of -$2.06 for the same period compares with $1.87 a year ago.
For the current quarter, Merck is expected to post earnings of $1.95 per share, indicating a change of +5.4% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.4% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Merck. Also, the stock has a VGM Score of D.
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Why Is Lilly (LLY) Up 6.4% Since Last Earnings Report?
It has been about a month since the last earnings report for Eli Lilly (LLY - Free Report) . Shares have added about 6.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lilly due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Q2 Earnings Beat, Mounjaro Powers Sales Growth
Lilly reported second-quarter 2023 adjusted earnings per share of $2.11, which beat the Zacks Consensus Estimate of $1.98. Earnings rose 69% year over year due to volume-driven revenue growth.
Revenues of $8.31 billion beat the Zacks Consensus Estimate of $7.55 billion. Sales rose 28% year over year driven by volume growth. Revenues also benefited from a contribution of $579.0 million from the sale of rights for Baqsimi.
Excluding COVID-19 antibodies and revenues from Baqsimi, revenue rose 22% on 23% volume growth.
The company witnessed strong volume growth of Mounjaro, Verzenio, Jardiance and Taltz, which made up for the decline in sales of Alimta due to the loss of exclusivity in the United States and no COVID revenues in the quarter.
Quarter in Detail
In the reported quarter, net realized prices were flat, while volumes rose 29%. The unfavorable impact of foreign exchange rates hurt sales by 1% in the quarter.
Key growth products (select products launched prior to 2022 like Cyramza, Emgality, Jardiance, Olumiant, Retevmo, Taltz, Trulicity, Tyvyt and Verzenio) grew 16% to $4.93 billion. Eli Lilly’s new products (products launched since 2022 like Mounjaro, Jaypirca and Omvoh) contributed $1.0 billion to revenues led by Mounjaro, which is benefiting from strong demand trends.
While U.S. revenues rose 41% to $5.53 billion, ex-U.S. revenues increased 9% to $2.78 billion.
Among the growth products, Trulicity generated revenues worth $1.81 billion, down 5% year over, due to the impact of price erosion in the United States as well as ex-U.S. markets, lower volumes in international markets and currency headwinds. In international markets, Trulicity volumes are being hurt due to the company’s measures to manage strong demand amid tight supply of incretin-based products. Trulicity missed the Zacks Consensus Estimate of $2.09 billion as well as our model estimate of $2.05 billion.
Lilly is investing in manufacturing capacity to increase supply of incretin-based products like Trulicity and Mounjaro to meet the rising demand.
Jardiance sales surged 45% to $668.3 million, driven by increased demand trends. Jardiance beat the Zacks Consensus Estimate of $655.0 million but slightly missed our model estimate of $682.9 million.
Taltz brought in sales of $703.9 million, up 16% year over year, as the drug’s worldwide sales benefited from increased demand. Taltz beat the Zacks Consensus Estimate of $673.0 million as well as our model estimate of $678.4 million.
Verzenio generated sales of $926.8 million in the reported quarter, up 57% year over year, on increased demand, driven by the approval and launch of the adjuvant indication, and partly due to higher realized prices. Verzenio sales beat the Zacks Consensus Estimate of $908 million as well as our model estimate of $897.1 million.
Emgality generated revenues of $169.3 million in the quarter, up 8% year over year driven by increased demand. Olumiant (baricitinib) generated sales of $218.9 million, up 18% on a year-over-year basis, driven by increased demand for the newly approved alopecia areata indication. However, revenues declined in ex-U.S. markets due to lower realized prices and currency headwinds. Retevmo generated sales of $65.4 million, up 45% year over year.
Cyramza revenues of $260.3 million were up 13% year over year. Tyvyt revenues in China were $103.6 million, up 41% year over.
Among the newer drugs, the new diabetes drug Mounjaro recorded sales of $979.7 million during the quarter, much higher than $568.5 million in the previous quarter. The reported sales figure exceeded our estimate of $741.6 million for the quarter.
Mounjaro generated $915.7 million in product sales in the United States and $64.0 million in international markets. Though Mounjaro’s sales growth was mostly driven by higher volumes, Lilly is experiencing intermittent delays fulfilling orders of certain Mounjaro doses, given significant demand. These delays may continue to hurt volumes in future quarters.
New drug, Jaypirca recorded $14.4 million in sales, all from the United States, compared with $5.1 million in the first quarter.
Among the established products, Alimta sales declined 73% to $60.9 million. Humalog sales declined 1% to $440.4 million.
In the reported quarter, Lilly did not record any revenues from COVID-19 therapies compared to $129.1 recorded in the year-ago quarter since the FDA rescinded the authorization granted to its COVID-19 antibody bebtelovimab last November.
Gross Margin & Operating Income
Adjusted gross margin was 79.8%, flat year over year, as the favorable impact of product mix (including onetime revenue from the sales of rightsto Baqsimi) was offset by higher manufacturing costs.
Operating income rose 69% year over year to $2.25 billion. Operating margin was 27% in the quarter, including a negative impact of approximately 115 basis points attributed to acquire in-process R&D and development milestone charges.
Total operating expenses increased 14% in the quarter.
In the quarter, Lilly recognized acquired in-process research and development (IPR&D) and development milestone charges of $97.1 million ($0.09 per share) compared with $440.4 million in the year-ago quarter.
Marketing, selling and administrative expenses rose 18% to $1.93 billion to support the launch of new products and indications. R&D expense increased 32% to $2.36 billion in the quarter due to higher costs for late-stage as well as early-stage candidates.
Adjusted effective tax rate was 16.1%, compared with 14.2% in the year-ago quarter.
2023 Guidance Updated
Lilly raised the financial guidance for 2023.
The company raised its revenue guidance to a range of $33.4 billion to $33.9 billion from the previously expected range of $31.2 billion-$31.7 billion. Sales of rights to some products (olanzapine portfolio, including Zyprexa, to Cheplapharm Arzneimittel and Baqsimi to Amphastar) coupled with an improved underlying performance led to the guidance increase. Lilly does not expect to record any COVID-19 antibody revenues for 2023.
Management now expects to record 2023 earnings per share in the range of $9.70-$9.90, a rise from the previously provided range of $8.65-$8.85 per share.
Adjusted gross margin is expected to be approximately 80% (previously 79%) driven by the sales of rights for the olanzapine portfolio and Baqsimi.
The company raised its guidance for operating expenses. Marketing, selling and administrative expenses are expected to be $7.2 to $7.4 billion, compared with $7.0-$7.2 billion previously as the company prepares for new launches in the second half of the year. Research and development expense is now expected to be in the range of $8.9 billion to $9.1 billion, higher than the previously expected range of $8.3 billion to $8.5 billion.
The tax rate is expected to be around 14% to 15% for the full year (previously around 13%).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 22.06% due to these changes.
VGM Scores
Currently, Lilly has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Lilly has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Lilly belongs to the Zacks Large Cap Pharmaceuticals industry. Another stock from the same industry, Merck (MRK - Free Report) , has gained 0.4% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Merck reported revenues of $15.04 billion in the last reported quarter, representing a year-over-year change of +3%. EPS of -$2.06 for the same period compares with $1.87 a year ago.
For the current quarter, Merck is expected to post earnings of $1.95 per share, indicating a change of +5.4% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.4% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Merck. Also, the stock has a VGM Score of D.