Eli Lilly and Company (NYSE: $LLY) is a multinational pharmaceutical company based in Indianapolis, IN, that works to develop and deliver trusted medication and diagnostics. Founded in 1876, Lilly is best known for Zyprexa, an antipsychotic medication, and its clinical depression drugs, Cymbalta and Prozac.
It released its fourth-quarter results to a positive market reception on Tuesday, February 6, 2024, before markets opened.
Q4 Financial Highlights
Lilly reported impressive fourth-quarter results, surpassing Wall Street estimates. Revenue increased 28% year over year to $9.35 billion, driven by new products revenue growth of $2.19 billion to $2.49; 16% of the revenue growth was due to higher realized prices, 11% due to an increase in volumes, and 1% due to favorable FX rates. Full-year revenue increased 20% to $34.12 billion.
Lilly’s Q423 diluted EPS rose 13% to $2.42 on a reported basis, while adjusted non-GAAP EPS increased 19% to $2.49. However, on a reported basis, full-year EPS dropped 16% to $5.80 from $6.90 in fiscal 2022, while full-year non-GAAP EPS declined 20.40% to $6.32 from $7.94 the previous year.
Fourth-quarter non-GAAP gross margin, on a reported basis, increased by 31% to $7.57 billion and 80.9% as a percentage of revenue from 78.8% in Q422. The non-GAAP gross margin was 82.3%, a 1.8 percentage point rise from last year, driven by higher realized prices, partially offset by increased labor costs and capacity expansion. The full-year non-GAAP gross margin was 80.7 %, compared to 78.8 % in fiscal 2022.
Operating Expenses
In Q4, Lilly ramped up investments to fuel long-term growth. Research and development costs grew by 28% to $2.56 billion, reflecting substantial pipeline development activities and support for late-stage assets. The company also recorded $622.6 million in acquired in-process research and development (IPR&D) charges related to recent business development deals in oncology.
Marketing expenses rose 17% in Q423 to $1.92 billion, driven by new product launches, upcoming product launches, and increased incentive compensation costs.
Total operating expenses for the quarter were $5.18 billion on a reported basis and $5.11 billion on a non-GAAP basis, representing a non-GAAP Y/Y increase of 32%. For the full year, the total operating expense was $20.58 billion, and $20.52 billion on a non-GAAP basis, a 41% Y/Y increase on a non-GAAP basis.
.Lilly enters 2024 with solid momentum driven by new product traction and an innovative pipeline.
New Product Sales Take Off
New products generated sales of $2.49 billion compared to $2.19 billion in Q4 2023, driven by the rapid uptake of Mounjaro and Zepbound. Mounjaro brought in an impressive $2.21 billion globally, with over $2 billion coming from the US market. The obesity drug Zepbound, which hit the US market in November, chipped in $175.8 million.
Among the growth products launched before 2022, Verzenio and Jardiance stood out with 42% and 30% sales growth, respectively. Humalog was the exception, recording a 33% revenue decline amidst lower realized prices.
2024 Guidance Calls for Continued Growth
For 2024, Lilly forecasts revenue of $40.4-$41.6 billion, representing robust top-line growth compared to 2023. The company expects new products to continue fueling gains. However, it stated that demand could outstrip supply capacity for incretin-based medications. EPS is projected at $11.80-$12.30 on a reported basis and $12.20-$12.70 on a non-GAAP basis.
Lilly plans to ramp up investments in R&D and marketing efforts around recent and upcoming launches to support the ambitious growth plans. At the same time, it intends to keep administrative costs low.
Regulatory and Pipeline Progress
The quarter also saw significant pipeline advancements, including FDA approvals for Zepbound, used for chronic weight management, and Jaypirca, used for certain blood cancers. Late-stage asset tirzepatide delivered positive Phase 2 results in patients with nonalcoholic steatohepatitis, hitting the primary endpoint.
Lilly closed the POINT Biopharma and Mablink Biosciences acquisitions, which gave them access to new oncology technologies. The company also announced plans for a $ 2.5 billion manufacturing facility in Germany to expand injectable manufacturing capacity.
Dividend Growth Continues
For fiscal 2023, Lilly bought back $750 million worth of stock. The company also announced a dividend increase of 15% to $1.13 for Q423, bringing the total dividend for FY23 to $4.52, which was a 15% increase Y/Y. It marked the sixth year in a row Lilly has increased its dividend by 15% since more than doubling its dividend payout in 2018. In Q4, the company distributed over $1 billion in dividends to its shareholders.
Fueled by new launches and an impressive pipeline, Lilly is perfectly positioned for growth heading into 2024 and beyond. However, the company must show execution, delivering on the steep revenue and earnings growth guidance.
Eli Lilly and Company (LLY) Stock Performance
Lilly (LLY) stock surged over 6% during the early morning session to $711.88 on Tuesday, February 6, 2024. In the past 52 weeks, LLY stock has grown by 107.56%, up 19.05% year-to-date. It closed trading on Tuesday 0.17% lower at $705.03 per share. Its closing price is close to its 52-week high of $742. The stock’s closing price is significantly above its 50-day and 200-day moving averages of $608.91 and $530.44, respectively.
The early morning surge was driven by its impressive fourth-quarter results. Demand for the stock was further driven by Lilly’s robust guidance for fiscal 2024. Tuesday’s early morning performance continued the positive growth LLY experienced in 2023 on the back of several regulatory and commercial triumphs. Another factor that has contributed to its overall strong performance is the share buyback program.
Looking Ahead
Lilly’s robust outlook for fiscal year 2024 points to management’s confidence in the company’s ability to sustain commercial momentum. However, the company could face challenges expanding its manufacturing capacity to meet demand. There is also the risk of increased competition from generics.
Its ability to maintain momentum from recent product launches, boost pipeline turnover, and grow in-house research and development through strategic acquisitions will determine if it meets its guidance targets.
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