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Lilly (LLY) Up 7.5% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Eli Lilly (LLY - Free Report) . Shares have added about 7.5% 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 drivers.
Q4 Earnings Beat, Mounjaro, Zepbound Drive Sales
Lilly reported fourth-quarter 2023 adjusted earnings per share (“EPS”) of $2.49, which beat the Zacks Consensus Estimate of $2.46 per share. Earnings rose 19% year over year.
Revenues of $9.35 billion beat the Zacks Consensus Estimate of $8.86 billion. Sales rose 28% year over year, driven by exceptionally strong demand Mounjaro and newly launched weight loss medicine, Zepbound.
The company witnessed strong sales growth of Mounjaro, Verzenio, Jardiance and Taltz, which made up for the decline in the sales of key diabetes drug Trulicity in the quarter.
Quarter in Detail
In the reported quarter, net realized prices rose 16%, while volumes rose 11%. The favorable impact of foreign exchange rates was 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 9% to $5.27 billion led by Verzenio and Jardiance. Eli Lilly’s new products (products launched since 2022 like Ebglyss, Jaypirca, Mounjaro, Omvoh and Zepbound) contributed $2.49 billion to revenues, led by Mounjaro and Zepbound.
While U.S. revenues rose 39% to $6.46 billion, ex-U.S. revenues increased 10% to $2.90 billion.
Among the newer drugs, Mounjaro recorded sales of $2.21 billion during the quarter, much higher than $1.41 billion in the previous quarter. The reported sales figure beat the Zacks Consensus Estimate of $1.79 billion, as well as our model estimate of $1.77 billion.
Mounjaro sales benefited from increased demand and higher realized prices due to decreased utilization of savings card programs. Fourth-quarter revenues also benefited from a favorable one-time change in estimates for rebates and discounts. Excluding this one-time charge, sales rose 30% sequentially.
However, intermittent delays in fulfilling orders of certain Mounjaro doses, given significant demand, continued to hurt volumes in the fourth quarter.
Zepbound, which was approved in November 2023 and launched in December, recorded sales of $175.8 million in the fourth quarter, with approximately three-fourths of that coming from initial channel stocking. On the conference call, Lilly said that the initial prescription trends of Zepbound are encouraging. Weight loss drugs are not reimbursed under Medicare Part D plans.
New drug Jaypirca recorded $32.8 million in sales compared with $22.7 million in the previous quarter.
Among the growth products, Trulicity generated revenues worth $1.67 billion, down 14% year over due to lower volumes and pricing in the United States. Volumes were low in the United States as the company faced intermittent delays in fulfilling orders of Trulicity. In international markets, sales rose 1% as higher volumes were largely offset by lower realized prices. Volumes in international markets continued to be affected by the company’s measures to manage strong demand amid tight supply. Sales of Trulicity missed the Zacks Consensus Estimate of $1.72 billion as well as our model estimate of $1.76 billion. Trulicity sales are expected to continue to decline in 2024.
Jardiance sales surged 30% to $798.1 million, driven by increased demand trends. Jardiance beat the Zacks Consensus Estimate of $756.0 million as well as our model estimate of $755.7 million. Jardiance growth could be slower in 2024 as strong demand may be somewhat dampened by pricing dynamics in the United States.
Taltz brought in sales of $784.6 million, up 11% year over year, as the benefit from increased demand was partially offset by lower realized prices in the United States and outside. Taltz beat the Zacks Consensus Estimate of $779.0 million as well as our model estimate of $757.3 million.
Verzenio generated sales of $1.15 billion in the reported quarter, up 42% year over year. Sales rose 40% in the United States on increased demand, driven by the launch of the early breast cancer indication, steady performance in the metastatic indication and partly due to higher realized prices. In outside U.S. markets, sales rose 45%, driven by increased demand, which was partially offset by lower realized prices. Verzenio sales slightly missed the Zacks Consensus Estimate as well as our model estimate of $1.17 billion. In 2024, Lilly expects continued growth from Verzenio driven by the early breast cancer indication.
Emgality generated revenues of $186.1 million in the quarter, up 6% year over year. Olumiant (baricitinib) generated sales of $243.5 million, up 18% on a year-over-year basis, driven by increased demand for the newly approved alopecia areata indication, partially offset by lower realized prices. Retevmo generated sales of $73.4 million, up 14% year over year.
Cyramza revenues of $253.6 million were down 9% year over year. Tyvyt revenues in China were $113.6 million, up 98% year over.
Among the established products, Alimta sales declined 81% to $44.9 million. Humalog sales declined 33% to $366.6 million.
In the reported quarter, Lilly did not record any revenues from COVID-19 therapies compared to $38 million recorded in the year-ago quarter as the FDA rescinded the authorization granted to its COVID-19 antibody bebtelovimab last November.
Gross Margin & Operating Income
Adjusted gross margin was 82.3%, up 1.8 percentage points year over year, driven by higher realized prices, which were partially offset by higher manufacturing costs.
Operating income rose 29.3% year over year to $2.58 billion. Operating margin was 29.9% in the quarter, up 2.5 percentage points year over year.
In the quarter, Lilly recognized acquired in-process research and development (IPR&D) and development milestone charges of 62 cents per share compared with 23 cents in the year-ago quarter.
Marketing, selling and administrative expenses rose 17% to $1.92 billion to support the launch of new products and indications. R&D expense increased 28% to $2.56 billion in the quarter due to higher costs for late-stage as well as early-stage candidates. Higher incentive compensation costs also led to increased marketing, selling and administrative and R&D costs in the quarter.
The adjusted effective tax rate was 13.1%, much higher than 7.3% in the year-ago quarter due to non-deductible acquired IPR&D charges.
2023 Results
Full-year 2023 sales rose 20% to $34.1 billion, beating the Zacks Consensus Estimate of $33.63 billion. Sales came in ahead of the guided range of $33.4 billion to $33.9 billion.
Adjusted earnings for 2023 were $6.32 per share, down 20% year over year. Earnings missed the Zacks Consensus Estimate of $6.34 per share. Earnings also fell short of the guided range of $6.50 to $6.70 per share.
2024 Guidance
The company issued upbeat guidance for 2024 despite the expectation of continued supply constraints for incretin-based products like Trulicity and Mounjaro this year. The company expects demand for these products to outpace supply in 2024. Lilly is investing in new advanced manufacturing plants and lines in the United States and in Europe to increase supply. However, it will take time to bring the increased capacity fully online. Lilly expects production for incretin-based products to increase from the second half of 2024.
In 2024, Lilly expects revenues in the range of $40.4 to $41.6 billion. The mid-point of this range indicates growth of approximately 20% (29% for the core business, excluding the impact of divestures).
Lilly expects revenue growth to be driven by its new products while Trulicity sales continue to decline. Lilly expects better revenue growth in the second half with the potential increased availability of incretin doses.
Lilly expects high single-digit percent price decline for its core business in 2024
Marketing, selling and administrative expenses are expected to continue to increase in 2024, though at a slower pace than revenue growth. Research and development expenses are expected to increase at a higher rate than marketing, selling and administrative expenses in 2024.
Adjusted gross margin is expected to be approximately 80%. Lilly provided guidance for a new ratio, which represents margin after subtracting R&D costs and marketing and administrative costs from gross margin and dividing that figure by revenues. This ratio is expected to be in the range of 31% to 33% in 2024.
Adjusted other income (expense) is expected to be in the range of $400 to $500 million, primarily due to higher interest expense. The adjusted tax rate is expected to be approximately 14%.
Management expects to record 2024 earnings per share in the range of $12.20 to $12.70.
Pipeline Update
Lilly announced that the phase II SYNERGY-NASH study evaluating tirzepatide in nonalcoholic steatohepatitis (NASH) met its primary endpoint. NASH is also known as metabolic dysfunction-associated steatohepatitis (MASH). The data from the study showed that up to 74% of participants treated with tirzepatide achieved an absence of MASH with no worsening of fibrosis at 52 weeks versus nearly 13% of participants on placebo.
Lilly also announced data from the phase III CYCLONE-2 study evaluating Verzenio added to abiraterone in men with metastatic castration-resistant prostate cancer. Data from the study showed that Verzenio added to abiraterone did not meet the primary endpoint of improved radiographic progression-free survival.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
VGM Scores
At this time, Lilly has a poor Growth Score of F, a grade with the same score on the momentum front. 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
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 is part of the Zacks Large Cap Pharmaceuticals industry. Over the past month, Novo Nordisk (NVO - Free Report) , a stock from the same industry, has gained 5.1%. The company reported its results for the quarter ended December 2023 more than a month ago.
Novo Nordisk reported revenues of $9.51 billion in the last reported quarter, representing a year-over-year change of +44%. EPS of $0.71 for the same period compares with $0.42 a year ago.
For the current quarter, Novo Nordisk is expected to post earnings of $0.78 per share, indicating a change of +21.9% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.3% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Novo Nordisk. Also, the stock has a VGM Score of C.
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Lilly (LLY) Up 7.5% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Eli Lilly (LLY - Free Report) . Shares have added about 7.5% 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 drivers.
Q4 Earnings Beat, Mounjaro, Zepbound Drive Sales
Lilly reported fourth-quarter 2023 adjusted earnings per share (“EPS”) of $2.49, which beat the Zacks Consensus Estimate of $2.46 per share. Earnings rose 19% year over year.
Revenues of $9.35 billion beat the Zacks Consensus Estimate of $8.86 billion. Sales rose 28% year over year, driven by exceptionally strong demand Mounjaro and newly launched weight loss medicine, Zepbound.
The company witnessed strong sales growth of Mounjaro, Verzenio, Jardiance and Taltz, which made up for the decline in the sales of key diabetes drug Trulicity in the quarter.
Quarter in Detail
In the reported quarter, net realized prices rose 16%, while volumes rose 11%. The favorable impact of foreign exchange rates was 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 9% to $5.27 billion led by Verzenio and Jardiance. Eli Lilly’s new products (products launched since 2022 like Ebglyss, Jaypirca, Mounjaro, Omvoh and Zepbound) contributed $2.49 billion to revenues, led by Mounjaro and Zepbound.
While U.S. revenues rose 39% to $6.46 billion, ex-U.S. revenues increased 10% to $2.90 billion.
Among the newer drugs, Mounjaro recorded sales of $2.21 billion during the quarter, much higher than $1.41 billion in the previous quarter. The reported sales figure beat the Zacks Consensus Estimate of $1.79 billion, as well as our model estimate of $1.77 billion.
Mounjaro sales benefited from increased demand and higher realized prices due to decreased utilization of savings card programs. Fourth-quarter revenues also benefited from a favorable one-time change in estimates for rebates and discounts. Excluding this one-time charge, sales rose 30% sequentially.
However, intermittent delays in fulfilling orders of certain Mounjaro doses, given significant demand, continued to hurt volumes in the fourth quarter.
Zepbound, which was approved in November 2023 and launched in December, recorded sales of $175.8 million in the fourth quarter, with approximately three-fourths of that coming from initial channel stocking. On the conference call, Lilly said that the initial prescription trends of Zepbound are encouraging. Weight loss drugs are not reimbursed under Medicare Part D plans.
New drug Jaypirca recorded $32.8 million in sales compared with $22.7 million in the previous quarter.
Among the growth products, Trulicity generated revenues worth $1.67 billion, down 14% year over due to lower volumes and pricing in the United States. Volumes were low in the United States as the company faced intermittent delays in fulfilling orders of Trulicity. In international markets, sales rose 1% as higher volumes were largely offset by lower realized prices. Volumes in international markets continued to be affected by the company’s measures to manage strong demand amid tight supply. Sales of Trulicity missed the Zacks Consensus Estimate of $1.72 billion as well as our model estimate of $1.76 billion.
Trulicity sales are expected to continue to decline in 2024.
Jardiance sales surged 30% to $798.1 million, driven by increased demand trends. Jardiance beat the Zacks Consensus Estimate of $756.0 million as well as our model estimate of $755.7 million. Jardiance growth could be slower in 2024 as strong demand may be somewhat dampened by pricing dynamics in the United States.
Taltz brought in sales of $784.6 million, up 11% year over year, as the benefit from increased demand was partially offset by lower realized prices in the United States and outside. Taltz beat the Zacks Consensus Estimate of $779.0 million as well as our model estimate of $757.3 million.
Verzenio generated sales of $1.15 billion in the reported quarter, up 42% year over year. Sales rose 40% in the United States on increased demand, driven by the launch of the early breast cancer indication, steady performance in the metastatic indication and partly due to higher realized prices. In outside U.S. markets, sales rose 45%, driven by increased demand, which was partially offset by lower realized prices. Verzenio sales slightly missed the Zacks Consensus Estimate as well as our model estimate of $1.17 billion. In 2024, Lilly expects continued growth from Verzenio driven by the early breast cancer indication.
Emgality generated revenues of $186.1 million in the quarter, up 6% year over year. Olumiant (baricitinib) generated sales of $243.5 million, up 18% on a year-over-year basis, driven by increased demand for the newly approved alopecia areata indication, partially offset by lower realized prices. Retevmo generated sales of $73.4 million, up 14% year over year.
Cyramza revenues of $253.6 million were down 9% year over year. Tyvyt revenues in China were $113.6 million, up 98% year over.
Among the established products, Alimta sales declined 81% to $44.9 million. Humalog sales declined 33% to $366.6 million.
In the reported quarter, Lilly did not record any revenues from COVID-19 therapies compared to $38 million recorded in the year-ago quarter as the FDA rescinded the authorization granted to its COVID-19 antibody bebtelovimab last November.
Gross Margin & Operating Income
Adjusted gross margin was 82.3%, up 1.8 percentage points year over year, driven by higher realized prices, which were partially offset by higher manufacturing costs.
Operating income rose 29.3% year over year to $2.58 billion. Operating margin was 29.9% in the quarter, up 2.5 percentage points year over year.
In the quarter, Lilly recognized acquired in-process research and development (IPR&D) and development milestone charges of 62 cents per share compared with 23 cents in the year-ago quarter.
Marketing, selling and administrative expenses rose 17% to $1.92 billion to support the launch of new products and indications. R&D expense increased 28% to $2.56 billion in the quarter due to higher costs for late-stage as well as early-stage candidates. Higher incentive compensation costs also led to increased marketing, selling and administrative and R&D costs in the quarter.
The adjusted effective tax rate was 13.1%, much higher than 7.3% in the year-ago quarter due to non-deductible acquired IPR&D charges.
2023 Results
Full-year 2023 sales rose 20% to $34.1 billion, beating the Zacks Consensus Estimate of $33.63 billion. Sales came in ahead of the guided range of $33.4 billion to $33.9 billion.
Adjusted earnings for 2023 were $6.32 per share, down 20% year over year. Earnings missed the Zacks Consensus Estimate of $6.34 per share. Earnings also fell short of the guided range of $6.50 to $6.70 per share.
2024 Guidance
The company issued upbeat guidance for 2024 despite the expectation of continued supply constraints for incretin-based products like Trulicity and Mounjaro this year. The company expects demand for these products to outpace supply in 2024. Lilly is investing in new advanced manufacturing plants and lines in the United States and in Europe to increase supply. However, it will take time to bring the increased capacity fully online. Lilly expects production for incretin-based products to increase from the second half of 2024.
In 2024, Lilly expects revenues in the range of $40.4 to $41.6 billion. The mid-point of this range indicates growth of approximately 20% (29% for the core business, excluding the impact of divestures).
Lilly expects revenue growth to be driven by its new products while Trulicity sales continue to decline. Lilly expects better revenue growth in the second half with the potential increased availability of incretin doses.
Lilly expects high single-digit percent price decline for its core business in 2024
Marketing, selling and administrative expenses are expected to continue to increase in 2024, though at a slower pace than revenue growth. Research and development expenses are expected to increase at a higher rate than marketing, selling and administrative expenses in 2024.
Adjusted gross margin is expected to be approximately 80%. Lilly provided guidance for a new ratio, which represents margin after subtracting R&D costs and marketing and administrative costs from gross margin and dividing that figure by revenues. This ratio is expected to be in the range of 31% to 33% in 2024.
Adjusted other income (expense) is expected to be in the range of $400 to $500 million, primarily due to higher interest expense. The adjusted tax rate is expected to be approximately 14%.
Management expects to record 2024 earnings per share in the range of $12.20 to $12.70.
Pipeline Update
Lilly announced that the phase II SYNERGY-NASH study evaluating tirzepatide in nonalcoholic steatohepatitis (NASH) met its primary endpoint. NASH is also known as metabolic dysfunction-associated steatohepatitis (MASH). The data from the study showed that up to 74% of participants treated with tirzepatide achieved an absence of MASH with no worsening of fibrosis at 52 weeks versus nearly 13% of participants on placebo.
Lilly also announced data from the phase III CYCLONE-2 study evaluating Verzenio added to abiraterone in men with metastatic castration-resistant prostate cancer. Data from the study showed that Verzenio added to abiraterone did not meet the primary endpoint of improved radiographic progression-free survival.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
VGM Scores
At this time, Lilly has a poor Growth Score of F, a grade with the same score on the momentum front. 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
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 is part of the Zacks Large Cap Pharmaceuticals industry. Over the past month, Novo Nordisk (NVO - Free Report) , a stock from the same industry, has gained 5.1%. The company reported its results for the quarter ended December 2023 more than a month ago.
Novo Nordisk reported revenues of $9.51 billion in the last reported quarter, representing a year-over-year change of +44%. EPS of $0.71 for the same period compares with $0.42 a year ago.
For the current quarter, Novo Nordisk is expected to post earnings of $0.78 per share, indicating a change of +21.9% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.3% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Novo Nordisk. Also, the stock has a VGM Score of C.