10-QPeriod: Q1 FY2023

ELI LILLY & Co Quarterly Report for Q1 Ended Mar 31, 2023

Filed April 27, 2023For Securities:LLY

Summary

Eli Lilly and Company reported a decrease in revenue for the first quarter of 2023, down 11% year-over-year to $7.0 billion, primarily due to the cessation of COVID-19 antibody sales and lower realized prices. Net income also saw a significant decline of 29% to $1.34 billion, or $1.49 per diluted share. This downturn was partially offset by strong growth in key products like Mounjaro and Verzenio, and a notable improvement in gross margin percentage, driven by the shift away from lower-margin COVID-19 antibody sales. Despite the top-line decrease, the company continues to invest heavily in research and development, with expenses up 23% driven by late-stage asset development. The company also announced significant divestiture agreements for the olanzapine portfolio (Zyprexa) and Baqsimi, which are expected to close in April 2023, generating substantial cash proceeds. Eli Lilly's financial position remains robust, with an increase in cash and cash equivalents and continued share repurchases, indicating confidence in future growth prospects, particularly from its innovative pipeline.

Financial Highlights

50 data points
Beta

Revenue

$6.96B

76.6% Gross Margin

Net Income

$1.34B

19.3% Net Margin

EPS (Diluted)

$1.49

Total Assets

$53.16B

Cash & Equivalents

$3.55B

Free Cash Flow

$1.73B

Financial Statements
Beta
Revenue$6.96B
Cost of Revenue$1.63B
Gross Profit$5.33B
R&D Expenses$1.99B
SG&A Expenses$1.75B
Interest Expense$102.80M
Net Income$1.34B
EPS (Basic)$1.49
EPS (Diluted)$1.49
Shares Outstanding (Basic)901.00M
Shares Outstanding (Diluted)903.30M

Key Highlights

  • 1Revenue declined 11% to $7.0 billion, primarily due to the absence of COVID-19 antibody sales from the prior year, partially offset by strong performance from Mounjaro and Verzenio.
  • 2Net income decreased 29% to $1.34 billion, with diluted EPS falling to $1.49 from $2.10 in the prior year's quarter.
  • 3Gross margin percentage improved to 76.6% from 73.5%, as the company's revenue mix shifted away from lower-margin COVID-19 antibody sales.
  • 4Research and development expenses increased significantly by 23% to $1.99 billion, reflecting continued investment in late-stage pipeline assets.
  • 5Mounjaro, a key growth driver, generated $568.5 million in revenue, underscoring its strong market uptake for type 2 diabetes.
  • 6Eli Lilly announced agreements to sell the olanzapine portfolio for up to $1.355 billion and Baqsimi for up to $625 million, both expected to close in April 2023.
  • 7The company's cash and cash equivalents increased to $3.55 billion, and it continued its share repurchase program, buying back $750 million in stock during the quarter.

Frequently Asked Questions

The primary driver for the 11% decrease in revenue was the significant reduction in sales of COVID-19 antibodies compared to the prior year's quarter. Lower realized prices, particularly for products like Humalog, also contributed to the decline, although this was partially offset by strong volume growth from key products such as Mounjaro and Verzenio.

Eli Lilly's R&D expenses increased by 23% to $1.99 billion. This increase is primarily attributed to higher development expenses for late-stage assets, reflecting the company's commitment to advancing its innovative pipeline and bringing new medicines to market. The company views this investment as crucial for long-term success.

The company is experiencing strong demand for its incretin products, Mounjaro and Trulicity. While Mounjaro saw significant uptake, Trulicity demand has remained strong, leading to intermittent delays in fulfilling certain U.S. orders. Eli Lilly anticipates tight supplies for these products will persist until additional manufacturing capacity becomes operational, with significant expansion expected in 2023 and beyond.

The Inflation Reduction Act is expected to significantly impact Eli Lilly's business. The IRA allows the government to negotiate prices for certain high-cost drugs starting nine years after FDA approval. This could accelerate revenue erosion for some of Eli Lilly's key products prior to patent expiry. The company is actively monitoring the evolving impact of the IRA and adapting its strategies accordingly.