- Revenue Growth: 42% increase, excluding the impact of the olanzapine portfolio divestiture.
- New Product Revenue: Over $3 billion, led by Mounjaro and Zepbound.
- US Prescription Volume Growth: 25% sequential quarter-over-quarter for Mounjaro and Zepbound.
- Non-Incretin Revenue Growth: 17% in Q3, excluding olanzapine portfolio.
- Gross Margin: Increased to 82.2% of revenue.
- R&D Expenses: Increased 13% due to investment in early and late-stage portfolio.
- Acquired IPR&D Charges: $2.8 billion, primarily from Morphic Therapeutics acquisition.
- Marketing, Selling, and Administrative Expenses: Increased 16%.
- Operating Income: Nearly $1.8 billion.
- Effective Tax Rate: 37.6%, impacted by nondeductible acquired IPR&D charges.
- Earnings Per Share (EPS): $1.19, up from $0.10 in Q3 2023, including a $3.08 negative impact from acquired IPR&D charges.
- US Revenue Increase: 46%, with volume growth of 35%.
- Europe Revenue Growth: 39% in constant currency, excluding olanzapine portfolio divestiture.
- China Revenue Growth: 17% in constant currency.
- Japan Revenue Growth: 17% in constant currency.
- Mounjaro Sales: $3.1 billion globally, with $2.4 billion in the US.
- Zepbound Sales: Over $1.2 billion in the US.
- Trulicity Revenue Decline: 22%, driven by lower volume.
- Updated Revenue Guidance: $45.4 billion to $46 billion for the full year.
- Updated EPS Guidance: $12.05 to $12.55 on a reported basis, $13.02 to $13.52 on a non-GAAP basis.
Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Eli Lilly and Co (LLY, Financial) reported a strong revenue growth of 42% in Q3 2024, driven by new products like Mounjaro and Zepbound.
- The company achieved several key pipeline milestones, including approvals for Eliquis in the US and Kisunla in Japan and Great Britain.
- Eli Lilly and Co (LLY) invested nearly $2 billion to expand its manufacturing footprint in Ireland, contributing to a total of over $20 billion in commitments since 2020.
- The company returned over $1.6 billion to shareholders through dividends and share repurchases.
- Eli Lilly and Co (LLY) is on track to exceed its production target of incretin medicines by at least 1.5 times in the second half of 2024 compared to the same period in 2023.
Negative Points
- The company faced channel inventory decreases, impacting Q3 sales of Mounjaro and Zepbound by mid-single digits.
- R&D expenses increased by 13%, driven by continued investment in both early and late-stage portfolios.
- The effective tax rate was high at 37.6%, reflecting the unfavorable impact of nondeductible acquired IPR&D charges.
- There were concerns about the impact of compounded drugs on demand, although the financial impact was deemed minimal.
- Eli Lilly and Co (LLY) faced challenges with supply and channel dynamics, affecting quarter-by-quarter revenue growth in 2024.
Q & A Highlights
Q: Can you explain the substantial step-up in sales from Q3 to Q4 and the efforts to accelerate demand generation?
A: David Ricks, CEO, explained that the company is investing heavily in direct-to-consumer (DTC) efforts and healthcare provider promotions, including providing samples. The focus is on ensuring a good consumer experience, which was a challenge earlier due to supply issues. With improved supply, they are now fully leaning into demand generation activities.
Q: Why was there a significant drawdown in Q3 despite strong script demand?
A: David Ricks, CEO, noted that there was lumpiness in channel stocking, with wholesalers and retailers making independent decisions on stock levels. The company has adjusted its stock levels to better align with demand-stimulating activities, which were paused earlier due to supply constraints.
Q: How is the compounding issue affecting demand, and what is the FDA's stance on it?
A: Joe Fletcher, SVP of Investor Relations, stated that compounding has not had a significant financial impact on the company. The main concern is safety, as compounded drugs are not FDA-approved. David Ricks added that the FDA is likely concerned about maintaining regulatory integrity and is working to address the issue.
Q: How do you view the potential resolution of the compounding issue with the availability of an oral small molecule?
A: David Ricks, CEO, mentioned that while oral products could serve a large market, the current compounding issue is not a crisis for Lilly. The FDA's product-by-product analysis should address compounding, and Lilly is focused on reducing demand for semaglutide by increasing availability of their own products.
Q: What are your thoughts on access and demand generation for obesity treatments into 2025?
A: Patrik Jonsson, EVP, highlighted that Mounjaro has 93% access, and Zepbound is close to 90% commercial access. The company is optimistic about improving access further, including Medicaid, and expects the approval of new indications to aid in gaining Medicare access.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
