On August 8, 2023 Eli Lilly and Company (NYSE: LLY) reported its financial results for the second quarter of 2023 (Press release, Eli Lilly, AUG 8, 2023, View Source [SID1234633966]).
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
"Lilly’s financial results in Q2 were led by Mounjaro sales and a strong performance from Growth Products," said David A. Ricks, Lilly’s chair and CEO. "Exciting scientific breakthroughs, such as TRAILBLAZER-ALZ 2 in Alzheimer’s disease and SURMOUNT-3 and -4 in obesity, encourage us to continue to make significant investments that support our new medicines including multiple launches expected by the end of 2023 to help more patients around the world."
Lilly had numerous updates recently on key regulatory, clinical, business development and other events, including:
Positive Phase 3 TRAILBLAZER-ALZ 2 results, which showed donanemab significantly slowed cognitive and functional decline in people with early symptomatic Alzheimer’s disease, as well as donanemab’s submissions for traditional approval to the U.S. Food and Drug Administration (FDA) and European Medicines Agency with regulatory action expected in the U.S. by the end of 2023;
The completed submission of tirzepatide in chronic weight management to the FDA and positive Phase 3 SURMOUNT-3 and -4 results, which showed the highest level of weight loss observed in the SURMOUNT program to date;
The approval of mirikizumab in the European Union and re-submission in the U.S.;
The announcements of agreements to acquire DICE Therapeutics, Inc., Sigilon Therapeutics, Inc. and Versanis Bio, which would advance Lilly’s research and expertise in treatments for autoimmune and cardiometabolic diseases;
FDA approval of Jardiance to lower blood sugar along with diet and exercise in children 10 years and older with type 2 diabetes; and
Allocation of an additional $50 million to the company’s now $300 million Social Impact Venture Capital Portfolio, aimed at making a positive impact on patients and society through for-profit investments.
For additional information on important public announcements, visit the news section of Lilly’s website.
Financial Results
$ in millions, except
per share data
Second Quarter
2023
2022
% Change
Revenue
$8,312.1
$6,488.0
28 %
Net Income – Reported
1,763.2
952.5
85 %
EPS – Reported
1.95
1.05
86 %
Net Income – Non-GAAP
1,904.4
1,131.3
68 %
EPS – Non-GAAP
2.11
1.25
69 %
A discussion of the non-GAAP financial measures is included below under "Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information (Unaudited)."
Second-Quarter Reported Results
In Q2 2023, worldwide revenue was $8.31 billion, an increase of 28% compared with Q2 2022, driven by a 29% increase in volume, slightly offset by a 1% decrease from the unfavorable impact of foreign exchange rates. Realized prices remained relatively flat compared with Q2 2022. The volume increase was driven by growth from Mounjaro, Verzenio, Jardiance, and Taltz, as well as $579.0 million from the sale of rights for Baqsimi, partially offset by lower volume from Alimta due to the loss of patent exclusivity. Excluding revenue from Baqsimi, and $129.1 million from the sales of COVID-19 antibodies in 2022, revenue in Q2 2023 increased 22% and worldwide volume increased 23%. New Products contributed $1.00 billion to revenue in Q2 2023. Growth Products revenue increased 16% to $4.93 billion in Q2 2023.
Revenue in the U.S. increased 41% to $5.53 billion, driven by a 39% increase in volume and a 2% increase due to higher realized prices. The increase in U.S. volume was driven by Mounjaro, Verzenio, Jardiance, Trulicity and Taltz, as well as the sale of rights for Baqsimi, partially offset by decreased volume from Alimta and the complete reduction of revenue from COVID-19 antibodies. The higher realized prices in the U.S. were primarily driven by Mounjaro, partially offset by lower realized prices for Trulicity. When excluding Mounjaro, price declined low-single digits for the quarter.
Revenue outside the U.S. increased 9% to $2.78 billion, driven by a 14% increase in volume, partially offset by a 3% decrease from the unfavorable impact of foreign exchange rates and a 3% decrease due to lower realized prices. The increase in volume outside the U.S. was largely driven by Verzenio, Jardiance and Mounjaro. The lower realized prices were primarily driven by Verzenio, Olumiant and Trulicity.
Gross margin increased 29% to $6.50 billion in Q2 2023. Gross margin as a percent of revenue was 78.3%, an increase of 0.3 percentage points. The increase in gross margin percent was primarily driven by product mix, including the sale of rights for Baqsimi, and the amortization of intangible assets, largely offset by increased manufacturing expenses related to labor costs and investments in capacity expansion.
In Q2 2023, research and development expenses increased 32% to $2.36 billion, or 28% of revenue, primarily driven by higher development expenses for late-stage assets and additional investments in early-stage research.
Marketing, selling and administrative expenses increased 18% to $1.93 billion in Q2 2023, primarily driven by costs associated with launches of new products and indications.
In Q2 2023, the company recognized acquired in-process research and development (IPR&D) charges of $97.1 million. In Q2 2022, the company recognized acquired IPR&D charges of $440.4 million.
Other income (expense) was expense of $36.8 million in Q2 2023 compared with expense of $119.2 million in Q2 2022. The decrease in expense was primarily driven by lower net losses on investments in equity securities in Q2 2023 compared with Q2 2022.
The effective tax rate was 15.6% in Q2 2023 compared with 12.7% in Q2 2022. The effective tax rate in Q2 2023 reflected the tax impacts of the new Puerto Rico tax regime and the sale of rights for Baqsimi. The effective tax rate in Q2 2022 was impacted by non-deductible acquired IPR&D charges.
In Q2 2023, net income and earnings per share (EPS) were $1.76 billion and $1.95, respectively, compared with $952.5 million and $1.05 in Q2 2022. EPS in Q2 2023 is inclusive of $0.43 of EPS associated with the sale of rights for Baqsimi and $0.09 of acquired IPR&D charges compared with $0.46 of acquired IPR&D charges in Q2 2022.
Second-Quarter Non-GAAP Measures
On a non-GAAP basis, Q2 2023 gross margin increased 28% to $6.63 billion. Gross margin as a percent of revenue remained relatively flat compared with Q2 2022 at 79.8% as the favorable impact from product mix, including the sale of rights for Baqsimi, was offset by increased manufacturing expenses related to labor costs and investments in capacity expansion.
The effective tax rate on a non-GAAP basis was 16.1% in Q2 2023 compared with 14.2% in Q2 2022. The effective tax rate for Q2 2023 reflected the tax impacts of the new Puerto Rico tax regime and the sale of rights for Baqsimi. The effective tax rate in Q2 2022 was impacted by non-deductible acquired IPR&D charges.
On a non-GAAP basis, Q2 2023 net income and EPS were $1.90 billion and $2.11, respectively, compared with $1.13 billion and $1.25 in Q2 2022. Non-GAAP EPS in Q2 2023 was inclusive of $0.43 of EPS associated with the sale of rights for Baqsimi and $0.09 of acquired IPR&D charges compared with $0.46 of acquired IPR&D charges in Q2 2022.
For further detail on non-GAAP measures, see the reconciliation below as well as the "Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information (Unaudited)" table later in this press release.
Second Quarter
2023
2022
% Change
Earnings per share (reported)
$ 1.95
$ 1.05
86 %
Amortization of intangible assets
.11
.11
Net losses on investments in equity securities
.05
.09
Earnings per share (non-GAAP)
$ 2.11
$ 1.25
69 %
Numbers may not add due to rounding.
Acquired IPR&D
.09
.46
(80) %
Selected Revenue Highlights
(Dollars in millions)
Second Quarter
Year-to-Date
Selected Products
2023
2022
% Change
2023
2022
% Change
Trulicity
$ 1,812.5
$ 1,911.9
(5) %
$ 3,789.6
$ 3,653.2
4 %
Verzenio
926.8
588.5
57 %
1,677.7
1,057.9
59 %
Mounjaro
979.7
16.0
NM
1,548.2
16.0
NM
Jardiance(a)
668.3
461.0
45 %
1,245.8
880.4
42 %
Taltz
703.9
606.2
16 %
1,230.8
1,094.3
12 %
Humalog(b)
440.4
447.1
(1) %
901.4
1,065.3
(15) %
Cyramza
260.3
231.3
13 %
497.0
461.5
8 %
Olumiant(c)
218.9
186.2
18 %
447.8
441.8
1 %
Emgality
169.3
157.5
8 %
323.6
306.7
6 %
Tyvyt
103.6
73.6
41 %
164.6
159.0
4 %
Alimta
60.9
227.7
(73) %
119.1
571.7
(79) %
Retevmo
65.4
45.0
45 %
116.8
86.8
35 %
COVID-19 antibodies(d)
—
129.1
(100) %
—
1,598.9
(100) %
Total Revenue
8,312.1
6,488.0
28 %
15,272.1
14,298.0
7 %
(a) Jardiance includes Glyxambi, Synjardy and Trijardy XR
(b) Humalog includes Insulin Lispro
(c) Olumiant includes sales of baricitinib that were made pursuant to Emergency Use Authorization (EUA) or similar
regulatory authorizations
(d) COVID-19 antibodies include sales for bamlanivimab administered alone, for bamlanivimab and etesevimab
administered together, and for bebtelovimab, and were made pursuant to EUAs or similar regulatory authorizations
NM – not meaningful
Trulicity
For Q2 2023, worldwide Trulicity revenue decreased 5% compared with Q2 2022 to $1.81 billion. U.S. revenue decreased 4% to $1.37 billion, driven by lower realized prices due to unfavorable segment mix and higher contracted rebates, partially offset by increased demand. Revenue outside the U.S. decreased 8% to $441.2 million, driven by decreased volume, lower realized prices and the unfavorable impact of foreign exchange rates. Volumes in international markets were affected by actions Lilly has taken to manage strong demand amid tight supply, including measures to minimize existing patient impact.
Verzenio
For Q2 2023, worldwide Verzenio revenue increased 57% compared with Q2 2022 to $926.8 million. U.S. revenue was $588.6 million, an increase of 53%, driven by increased demand and, to a lesser extent, higher realized prices. Revenue outside the U.S. was $338.2 million, an increase of 66%, driven by increased demand, partially offset by lower realized prices and the unfavorable impact of foreign exchange rates.
Mounjaro
For Q2 2023, worldwide Mounjaro revenue was $979.7 million. U.S. revenue was $915.7 million reflecting increased volume and, to a lesser extent, higher realized prices due to decreased utilization of savings card programs as access continues to expand. Lilly has experienced and continues to expect intermittent delays fulfilling orders of certain Mounjaro doses given significant demand. These delays have impacted, and may continue to impact, volume. Mounjaro launched in the U.S. for the treatment of type 2 diabetes in June 2022. Revenue outside the U.S. was $64.0 million.
Jardiance
For Q2 2023, worldwide Jardiance revenue increased 45% compared with Q2 2022 to $668.3 million. U.S. revenue was $386.1 million, an increase of 54%, primarily driven by increased demand. Revenue outside the U.S. was $282.2 million, an increase of 34%, driven by increased volume.
Jardiance is part of the company’s alliance with Boehringer Ingelheim. Lilly reports as revenue royalties received on net sales of Jardiance.
Taltz
For Q2 2023, worldwide Taltz revenue increased 16% compared with Q2 2022 to $703.9 million. U.S. revenue increased 15% to $472.3 million, primarily driven by increased demand. Revenue outside the U.S. increased 19% to $231.6 million, driven by increased volume.
Humalog
For Q2 2023, worldwide Humalog revenue decreased 1% compared with Q2 2022 to $440.4 million. U.S. revenue was $229.8 million, a decrease of 4%, primarily driven by lower realized prices, partially offset by increased demand. Revenue outside the U.S. was $210.6 million, an increase of 1%.
Olumiant
For Q2 2023, worldwide Olumiant revenue increased 18% compared with Q2 2022 to $218.9 million. U.S. revenue increased to $50.8 million, driven by increased demand due to utilization for the treatment of alopecia areata. Revenue outside the U.S. was $168.1 million, a decrease of 4%, driven by lower realized prices and the unfavorable impact of foreign exchange rates, partially offset by increased volume.
Emgality
For Q2 2023, worldwide Emgality revenue increased 8% compared with Q2 2022 to $169.3 million. U.S. revenue increased 9% to $118.8 million, primarily driven by increased demand. Revenue outside the U.S. increased 3% to $50.5 million, primarily driven by increased volume, partially offset by lower realized prices and the unfavorable impact of foreign exchange rates.
2023 Financial Guidance
The company updated its 2023 financial guidance on both a reported and non-GAAP basis.
Revenue guidance increased by $2.2 billion to the range of $33.4 to $33.9 billion. Approximately $1.5 billion of this increase is driven by business development activity, including the sales of rights for the olanzapine portfolio, which closed in July 2023, and Baqsimi, with the remainder reflecting strong underlying business performance.
Gross margin as a percent of revenue guidance increased 1% on both a reported and non-GAAP basis to approximately 78% and 80%, respectively, driven by the sales of rights for the olanzapine portfolio and Baqsimi.
The company’s guidance for marketing, selling and administrative expenses increased by $200 million to the range of $7.2 to $7.4 billion, driven by additional investments in recent launches and preparations for key launches expected in the second half of 2023.
Research and development expenses guidance increased by $600 million to the range of $8.9 to $9.1 billion. Research and development expenses are expected to be impacted by additional investments in the company’s late-stage portfolio and in early-stage research, and incremental expense from previously announced business development activities.
Acquired IPR&D guidance increased by $97 million to $202 million, reflecting charges through Q2 2023.
Other income (expense) guidance was updated to the range of $75 million of expense to $25 million of income on a reported basis, and $0 to $100 million of income on a non-GAAP basis. The reported and non-GAAP guidance updates both reflect increases driven by the interest impact of higher cash balances, and the reported guidance also incorporates net losses on investments in equity securities through Q2 2023.
The estimated effective tax rate increased to 14% to 15%, reflecting the impacts of the sales of rights for the olanzapine portfolio and Baqsimi.
Based on these changes, EPS guidance increased to the range of $9.20 to $9.40 on a reported basis and $9.70 to $9.90 on a non-GAAP basis. The company’s 2023 financial guidance reflects adjustments shown in the reconciliation table below.
2023
Expectations
Earnings per share (reported)
$9.20 to $9.40
Amortization of intangible assets
.44
Net losses on investments in equity securities
.07
Earnings per share (non-GAAP)
$9.70 to $9.90
Numbers may not add due to rounding
The following table summarizes the company’s updated 2023 financial guidance:
2023 Guidance(1)
Prior
Updated
Revenue
$31.2 to $31.7 billion
$33.4 to $33.9 billion
Gross Margin % of Revenue (reported)
Approx. 77%
Approx. 78%
Gross Margin % of Revenue (non-GAAP)
Approx. 79%
Approx. 80%
Marketing, Selling & Administrative
$7.0 to $7.2 billion
$7.2 to $7.4 billion
Research & Development
$8.3 to $8.5 billion
$8.9 to $9.1 billion
Acquired IPR&D
$105 million
$202 million(2)
Other Income/(Expense) (reported)
$(200) to $(100) million
$(75) to $25 million
Other Income/(Expense) (non-GAAP)
$(200) to $(100) million
$0 to $100 million
Tax Rate
Approx. 13%
14% to 15%
Earnings per Share (reported)
$8.18 to $8.38
$9.20 to $9.40
Earnings per Share (non-GAAP)
$8.65 to $8.85
$9.70 to $9.90
(1) Non-GAAP guidance reflects adjustments presented in the earnings per share reconciliation table above.
(2) Guidance does not include acquired IPR&D either incurred, or that may potentially be incurred, after Q2 2023.
Webcast of Conference Call
As previously announced, investors and the general public can access a live webcast of the Q2 2023 financial results conference call through a link on Lilly’s website at investor.lilly.com/webcasts-and-presentations. The conference call will begin at 9 a.m. Eastern time today and will be available for replay via the website.