01—Abstract
Summary
Summary of the 8-K filed August 8, 2024. Cited figures are marked; the original filing is the authoritative source.
Eli Lilly reported strong second-quarter 2024 results, with revenue up 36% year over year to $11.30 billiona, driven by volume growth of 27%.
Excluding the $579.0 millionb Baqsimi rights sale in Q2 2023, revenue grew 46%. Growth was led by Mounjaro ($3.09 billion, up from $979.7 million) and Zepbound ($1.24 billion in U.S. sales), while Trulicity declined 31%. Reported EPS rose 68% to $3.28, and non-GAAP EPS rose 86% to $3.92, both including $0.14 of acquired IPR&D charges.
Gross margin expanded to 80.8% of revenue on a reported basis, and 82.0% on a non-GAAP basis, reflecting favorable product mix and higher realized prices. Lilly raised its full-year 2024 revenue guidance by $3.0 billion to $45.4c–$46.6 billion, and raised reported EPS guidance by $2.05 to $15.10–$15.60 and non-GAAP EPS guidance by $2.60 to $16.10–$16.60. Management attributed the revenue raise to Mounjaro and Zepbound performance, non-incretin medicines, and improved clarity on production expansion timing.
Investors should note that the U.S. incretin results were partly supported by channel stocking, which the company estimated at high-teens to mid-20s percent of U.S. Mounjaro and Zepbound sales, and that management flagged possible periodic supply tightness for certain presentations. Q2 results also included a $435.0 milliond charge for anticipated litigation payments, which is excluded from non-GAAP results but reflected in reported figures and guidance.
Other expense rose to $197.6 million, reflecting larger net losses on equity investments and higher net interest expense. The filing also highlighted FDA approval of Kisunla for Alzheimer's disease, positive Phase 3 SUMMIT data for tirzepatide in heart failure with preserved ejection fraction, the pending Morphic Holding acquisition, a $5.3 billion Indiana manufacturing investment, and a public warning about counterfeit and compounded tirzepatide products.
02—Key points
Key Highlights
- Q2 2024 revenue rose 36% to $11.30 billion (46% excluding the prior-year Baqsimi rights sale), with U.S. revenue up 42% to $7.84 billion and ex-U.S. revenue up 25% to $3.47 billion.
- Mounjaro reached $3.09 billion in Q2 sales (vs. $979.7 million a year earlier), and Zepbound generated $1.24 billion in U.S. sales in its first full quarter of meaningful contribution.
- Reported EPS was $3.28 (up 68%) and non-GAAP EPS was $3.92 (up 86%); reported gross margin improved to 80.8% of revenue.
- Full-year 2024 revenue guidance raised $3.0 billion to $45.4–$46.6 billion; reported EPS guidance raised to $15.10–$15.60 and non-GAAP EPS guidance to $16.10–$16.60.
- A $435.0 million charge for anticipated litigation payments hit reported Q2 results and is included in reported guidance, but excluded from non-GAAP figures.
- Q2 U.S. incretin sales were aided by channel stocking estimated at high-teens to mid-20s percent of U.S. Mounjaro and Zepbound sales, while Trulicity sales fell 31% amid competition and supply constraints.
- Pipeline and corporate updates include FDA approval of Kisunla for Alzheimer's disease, positive SUMMIT Phase 3 data for tirzepatide in HFpEF, the pending Morphic Holding acquisition, and an additional $5.3 billion Indiana manufacturing investment.
03—Questions
Frequently Asked Questions
How strong was Lilly's Q2 2024 growth, and what drove it?
Revenue grew 36% to $11.30 billion, with volume up 27% and realized prices up 10%, partially offset by a 1% FX headwind. The main drivers were Mounjaro, Zepbound, and Verzenio, while Trulicity declined. Excluding the $579.0 million Baqsimi rights sale recorded in Q2 2023, growth was 46%, and non-incretin revenue grew 17% globally and 25% in the U.S.
Did Lilly raise its 2024 guidance, and by how much?
Yes. Full-year revenue guidance rose $3.0 billion to $45.4–$46.6 billion. Reported EPS guidance increased $2.05 to $15.10–$15.60, and non-GAAP EPS guidance increased $2.60 to $16.10–$16.60. The raise reflects strong Mounjaro and Zepbound performance, non-incretin medicines, and better visibility into production and international Mounjaro launches. The guidance includes $0.24 of acquired IPR&D charges incurred through Q2 2024 and excludes any future IPR&D charges.
Is the strong incretin performance sustainable, or was it inflated by inventory stocking?
Some of the Q2 U.S. strength was due to channel stocking, which Lilly estimates at high-teens to mid-20s percent of U.S. Mounjaro and Zepbound sales. The company also said supply and demand are now better balanced, but expected demand increases may cause periodic supply tightness for certain presentations and doses. Investors should therefore distinguish between underlying patient demand and one-time channel inventory effects when assessing future quarters.
What was the $435 million charge, and how does it affect earnings?
The $435.0 million asset impairment, restructuring, and other special charge was related to anticipated litigation payments. It reduced reported EPS by $0.38 in Q2 2024. Lilly excludes this charge from non-GAAP results, but it is included in reported EPS and in reported 2024 EPS guidance.
Why did reported and non-GAAP margins and expenses differ, and what should investors watch?
The main differences come from amortization of acquired intangibles, the litigation charge, and net losses on equity investments, which are excluded from non-GAAP results. Reported gross margin was 80.8% of revenue and non-GAAP was 82.0%. Other expense rose to $197.6 million, mainly from equity investment losses and higher net interest expense, and the company now expects 2024 other expense of $525–$425 million on a reported basis. Investors should monitor R&D spending, which rose 15% to 24% of revenue, and the operating efficiency ratio, now guided to 36–38% reported and 37–39% non-GAAP.
04—Continue