On December 13, 2022 Eli Lilly and Company (NYSE: LLY) reported its 2023 financial guidance, highlighted by expected volume-based revenue growth and increased investments to maximize future value (Press release, Eli Lilly, DEC 13, 2022, View Source [SID1234625198]). The company will review potential key events for the upcoming year, including important data readouts for several investigational medicines in its clinical pipeline and the possibility of multiple regulatory submissions and approvals, in a call with investors today.

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"Lilly is exiting 2022 with momentum. Our approved and available medicines are early in their life cycles and showed accelerated growth during the year, led by a strong Mounjaro launch. In addition, several of our late-stage medicines for serious diseases were submitted for approval this year, and will hopefully launch in 2023," said David A. Ricks, Lilly’s chair and CEO. "We continue to innovate and are beginning new pivotal studies for the next group of potential breakthrough treatments. In the decade ahead, we are well-positioned to create significant value for patients with challenging conditions, health systems struggling to manage chronic disease, and of course, our shareholders."

Anat Ashkenazi, Lilly’s executive vice president and chief financial officer, outlined the company’s expectations for its growth prospects: "We believe we have the potential to deliver top-tier, volume-driven revenue growth through at least 2030 with groundbreaking medicines. In addition to the tremendous on-going launch of Mounjaro in type 2 diabetes and expected future opportunities to treat obesity and obesity-related metabolic outcomes with tirzepatide, we plan to invest in our four significant potential new launches next year. With limited patent expirations this decade, we believe these potential new medicines and the continued scaling of our key growth products will fuel our next wave of growth. Lilly is committed to maximizing long-term value for stakeholders and we look forward to delivering further in 2023."

2022 Financial Guidance

The company reaffirmed its 2022 financial guidance on both a reported and non-GAAP basis. The company’s 2022 financial guidance reflects adjustments shown in the reconciliation table below.

2022

Expectations

% Change vs
2021

Earnings per share (reported)

$6.50 to $6.65

6% to 9%

Net losses on investments in equity securities(1)

.52

Amortization of intangible assets

.51

Asset impairment, restructuring, and other special charges

.17

Earnings per share (non-GAAP)

$7.70 to $7.85

4% to 6%

Numbers may not add due to rounding

Acquired IPR&D and development milestone charges(2)

$.67

(1) The company’s guidance does not reflect the impact of net gains or losses on
investments in equity securities during Q4 2022.

(2) The company’s guidance does not include any acquired IPR&D or development
milestone charges incurred during Q4 2022.

The company reaffirmed its 2022 financial guidance, as set forth in the following table:

2022 Guidance

Revenue

$28.5 to $29.0 billion

Gross Margin % of Revenue (reported)

Approx. 76%

Gross Margin % of Revenue (non-GAAP)

Approx. 78%

Marketing, Selling & Administrative

$6.4 to $6.6 billion

Research & Development

$7.1 to $7.3 billion

Acquired IPR&D & Development Milestones

Approx. $670 million

Other Income/(Expense) (reported)

$(700) to $(600) million

Other Income/(Expense) (non-GAAP)

$(100) million to $0

Tax Rate

Approx. 13% to 14%

Earnings per Share (reported)

$6.50 to $6.65

Earnings per Share (non-GAAP)

$7.70 to $7.85

Operating Margin % (reported)

Approx. 26%

Operating Margin % (non-GAAP)

Approx. 29%

Non-GAAP guidance reflects adjustments presented in the earnings per share table above.

2023 Financial Guidance

Earnings per share (EPS) for 2023 is expected to be in the range of $7.65 to $7.85 on a reported basis and $8.10 to $8.30 on a non-GAAP basis. The company’s 2023 financial guidance reflects the adjustment shown in the reconciliation table below.

2023

Expectations

Earnings per share (reported)

$7.65 to $7.85

Amortization of intangible assets

.45

Earnings per share (non-GAAP)

$8.10 to $8.30

Numbers may not add due to rounding.

The company’s 2023 financial guidance does not include any impact from potential
or pending business development transactions or potential development milestone
charges.

The company anticipates 2023 revenue between $30.3 billion and $30.8 billion, driven by volume increases from key growth products. This growth is expected to be partially offset by lower revenue for Alimta due to its loss of patent exclusivity, no anticipated COVID-19 antibody revenue, and the continued negative impact of foreign exchange rates.

Gross margin as a percent of revenue for 2023 is expected to be approximately 77% on a reported basis and approximately 79% on a non-GAAP basis.

Marketing, selling and administrative expenses for 2023 are expected to be in the range of $6.9 billion to $7.1 billion. Research and development expenses are expected to be in the range of $8.2 billion to $8.4 billion.

Consistent with 2022, the company is not including any potential or pending acquired in-process research and development (IPR&D) and development milestone charges in its initial 2023 guidance and expects to update EPS guidance each quarter as acquired IPR&D and development milestone charges are incurred.

Other income (expense) is expected to be expense in the range of $100 million to $200 million on both a reported and non-GAAP basis.

The 2023 effective tax rate is expected to be approximately 16% on both a reported basis and non-GAAP basis. This assumes the provision in the 2017 Tax Act that requires capitalization and amortization of research and development expenses for tax purposes is deferred or repealed by U.S. Congress this year, effective for the full year 2022 as well as 2023. The tax rate increase also includes the impact from recently enacted Puerto Rico legislation that will become effective starting in 2023, as well as the impact from an expected increase in the proportion of earnings in higher tax jurisdictions.

The following table summarizes the company’s 2023 financial guidance:

2023 Guidance

Revenue

$30.3 to $30.8 billion

Gross Margin % of Revenue (reported)

Approx. 77%

Gross Margin % of Revenue (non-GAAP)

Approx. 79%

Marketing, Selling & Administrative

$6.9 to $7.1 billion

Research & Development

$8.2 to $8.4 billion

Other Income/(Expense)

$(200) million to $(100) million

Tax Rate

Approx. 16%

Earnings per Share (reported)

$7.65 to $7.85

Earnings per Share (non-GAAP)

$8.10 to $8.30

Non-GAAP guidance reflects adjustments presented in the earnings per share table above.

Webcast of Conference Call

As previously announced, investors and the general public can access a live webcast of the 2023 financial guidance 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.

Non-GAAP Financial Measures

The company uses non-GAAP financial measures that differ from financial statements reported in conformity with U.S. generally accepted accounting principles ("GAAP"), and this press release and related materials includes a description of certain non-GAAP items that may affect the company’s financial expectations for 2022 and 2023. The company’s non-GAAP financial measures adjust reported results to exclude amortization of intangibles and items that are typically highly variable, difficult to predict, and/or of a size that could have a substantial impact on the company’s reported operations for a period. The company believes that these non-GAAP financial measures provide useful information to investors in evaluating the company’s performance. They can assist in making meaningful period-over-period comparisons and in identifying operating trends that would otherwise be masked or distorted by the items subject to the adjustments. Management uses these non-GAAP financial measures internally to evaluate the performance of the company’s business, including to allocate resources and to evaluate results relative to incentive compensation targets. Investors should consider these non-GAAP financial measures in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP.