10-QPeriod: Q1 FY2021

ELI LILLY & Co Quarterly Report for Q1 Ended Mar 31, 2021

Filed April 30, 2021For Securities:LLY

Summary

Eli Lilly and Company reported robust revenue growth of 16% for the first quarter of 2021, reaching $6.81 billion, up from $5.86 billion in the prior year period. This increase was primarily driven by higher sales volumes, particularly from its COVID-19 antibody treatments and key growth products like Trulicity and Verzenio. Despite the strong top-line performance, net income saw a decline of 7% to $1.36 billion, translating to diluted EPS of $1.49, down from $1.60 in Q1 2020. This decrease in profitability is largely attributable to significant increases in research and development expenses, higher acquired in-process R&D charges related to strategic acquisitions, and increased asset impairment and restructuring costs. The company's strategic acquisitions of Prevail Therapeutics and Dermira are beginning to impact the financial statements, with substantial acquired in-process R&D recognized in the current quarter. While the company is managing its liquidity effectively, with cash and cash equivalents at $3.00 billion, investors should note the impact of increased R&D spending on future growth and the ongoing challenges related to patent expirations for key products like Alimta.

Financial Highlights

50 data points
Beta

Revenue

$6.81B

72.4% Gross Margin

Net Income

$1.36B

19.9% Net Margin

EPS (Diluted)

$1.49

Total Assets

$46.84B

Cash & Equivalents

$3.00B

Free Cash Flow

$1.70B

Financial Statements
Beta
Revenue$6.81B
Cost of Revenue$1.88B
Gross Profit$4.93B
R&D Expenses$1.67B
SG&A Expenses$1.58B
Interest Expense$87.80M
Net Income$1.36B
EPS (Basic)$1.49
EPS (Diluted)$1.49
Shares Outstanding (Basic)908.80M
Shares Outstanding (Diluted)912.40M

Key Highlights

  • 1Revenue increased by 16% to $6.81 billion in Q1 2021, driven by strong volume growth and COVID-19 antibody sales.
  • 2Net income decreased by 7% to $1.36 billion, with diluted EPS falling to $1.49 from $1.60 year-over-year.
  • 3Research and development expenses rose significantly, up 21% to $1.68 billion, largely due to investments in COVID-19 therapies and late-stage assets.
  • 4Acquired in-process R&D charges increased substantially to $299.3 million from $52.3 million, reflecting recent acquisitions.
  • 5Asset impairment, restructuring, and other special charges increased to $211.6 million from $59.9 million, primarily due to the decision to sell Qbrexza and integration costs from the Prevail acquisition.
  • 6Key product Trulicity showed strong performance with revenue up 18% to $1.45 billion globally.
  • 7The company updated its 2021 financial guidance, anticipating full-year EPS between $7.03 and $7.23 and revenue between $26.6 billion and $27.6 billion.

Frequently Asked Questions

Revenue growth was primarily driven by increased sales volumes, particularly from newly authorized COVID-19 antibody treatments. Key products such as Trulicity, Verzenio, Jardiance, and Olumiant also contributed significantly to the top-line increase. Favorable foreign exchange rates also played a role in international revenue growth.

The decrease in net income was primarily due to a significant increase in operating expenses. Research and development expenses rose by 21% due to investments in COVID-19 therapies and late-stage pipeline assets. Additionally, acquired in-process R&D charges more than quadrupled, and asset impairment and restructuring charges also increased substantially, impacting profitability.

The acquisitions of Prevail Therapeutics and Dermira have led to a notable increase in acquired in-process R&D expenses, with $299.3 million recognized in Q1 2021. Prevail Therapeutics' gene therapy program for neurodegenerative diseases and Dermira's pipeline, including lebrikizumab, are key strategic additions to Lilly's portfolio, though they contribute to higher R&D costs in the short term.

Key risks include the upcoming loss of patent exclusivity for products like Alimta, which is expected to lead to a rapid and severe decline in revenue. The company also faces ongoing pricing pressures, reimbursement challenges, and increased regulatory scrutiny in the pharmaceutical industry. The demand for COVID-19 antibody treatments is also subject to uncertainty due to evolving treatments, vaccine availability, and potential virus mutations.