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    Eli Lilly and Co (LLY)

    CFO Change
    Board Change

    Business Description

    Eli Lilly and Company (LLY) is a global pharmaceutical company involved in the discovery, development, manufacturing, and marketing of products across various therapeutic areas. The company boasts a diverse product portfolio, with significant contributions from its incretin medicines, including Mounjaro and Zepbound, which have demonstrated strong sales growth . In addition to these, Eli Lilly's Growth Products category, featuring Verzenio, Taltz, and Jardiance, plays a crucial role in its revenue generation . The company actively engages in business development activities, such as acquisitions and collaborations, to enhance its product pipeline and expand capabilities in fields like radiopharmaceuticals and immunology .

    1. Incretin Medicines - Focuses on incretin-based therapies, with Mounjaro and Zepbound driving significant revenue growth.
    2. Growth Products - Includes Verzenio, Taltz, and Jardiance, which are key contributors to the company's revenue.
    3. Business Development - Engages in acquisitions and collaborations to expand capabilities in radiopharmaceuticals and immunology.

    Q3 2024 Summary

    Initial Price$911.77July 1, 2024
    Final Price$884.48October 1, 2024
    Price Change$-27.29
    % Change-2.99%

    What went wrong

    • Payer access issues: Some employers are opting out of coverage for obesity medications, which could limit market growth for Zepbound, despite close to 90% commercial access.
    • Potential impact of the Inflation Reduction Act (IRA): The IRA's Part D reforms could affect products like Verzenio, and inclusion in price negotiations may impact profitability, although the exact impact is uncertain.
    • Competition from compounded drugs: Compounded versions of incretin medicines could impact demand for Lilly's products, and the FDA's stance on enforcing regulations adds uncertainty to the market.

    Q&A Summary

    1. Supply and Demand Dynamics
      Q: What's driving the acceleration from Q3 to Q4 sales?
      A: Sales are expected to accelerate in Q4 due to increased investments in direct-to-consumer efforts and healthcare provider promotions, as supply constraints have eased. We are confident in continued growth for Mounjaro and Zepbound, projecting a midpoint of 50% growth in Q4 compared to 42% prior, even exceeding that as we enhance demand-generating activities. This acceleration is supported by both U.S. demand and new country launches.

    2. Supply Capacity Expansion
      Q: How is supply capacity progressing for 2025?
      A: We are bringing online capacities announced in 2021-2023, expecting significant growth next year. Investments from previous years are coming to fruition, enabling increased supply of auto-injectors. We see acceleration in demand and anticipate strong growth, aligning with our capacity expansion efforts.

    3. Compounding Impact
      Q: Is compounding affecting demand and FDA's stance?
      A: We do not estimate a significant financial impact from compounded drugs on our business. Our major concern is patient safety, as unapproved medications pose risks. We believe the FDA is aware of the regulatory risks and is working to address the issue. We continue to collaborate with the FDA to expedite legitimate product delivery.

    4. Access and Payer Restrictions
      Q: How are access issues affecting growth into 2025?
      A: For Mounjaro, we have 93% access across commercial and Medicare plans. With Zepbound, we've achieved close to 90% commercial access. While some employers opt out, the overall trend favors opting in. We are optimistic about improved access in 2025, with continued progress in Medicaid—gaining six incremental states, including California and Massachusetts. Potential approvals in sleep apnea and other indications will further enhance employer opt-in and Medicare access.

    5. Operating Margin Outlook
      Q: Clarify the operating margin trajectory under your guidance.
      A: In the short term, we have grown our ratio due to significant growth and are ramping up investments in SG&A and R&D, which will continue into Q4 and 2025. We expect operating margin expansion in the short term, while justifying investments that drive long-term sustainable growth.

    6. Direct-to-Consumer Advertising
      Q: Why initiate DTC advertising for Zepbound now?
      A: With supply constraints easing, we are investing in DTC efforts to drive consumer awareness. Despite strong performance, obesity treatment penetration remains at a low 4–5%, indicating substantial growth potential. Increasing patient activation will serve us well. Unaided awareness for Zepbound is not very high, as we have done no advertising since launch nearly a year ago.

    7. Parasolimab Discontinuation
      Q: Why discontinue parasolimab development, and plans for a new PD-1 agonist?
      A: The Phase IIb study for parasolimab did not replicate the benefit-risk seen in Phase IIa. Based on the overall profile, including efficacy and safety, we decided not to pursue it further. Currently, we are not pursuing another PD-1 agonist for immunology and inflammation.

    8. Verzenio's Market Share and IRA Impact
      Q: How will you protect Verzenio's position given competitor approvals and IRA impact?
      A: Our expectations for Verzenio's market share in the adjuvant setting remain unchanged due to robust clinical data and treatment guideline preferences for high-risk patients. Part D reform may have a neutral net impact, balancing increased catastrophic coverage contributions and patient out-of-pocket caps. It's too early to speculate on inclusion in the negotiation list for 2027.

    9. Obesity Market Expansion with Orforglipron
      Q: How will orforglipron expand the obesity market?
      A: We see significant opportunity with orforglipron as the first oral treatment matching injectable efficacy, allowing for global scaling by avoiding cold chain requirements and addressing needle aversion in 20–25% of patients. We aim to expand treatment duration understanding through trials like ATTAIN-MAINTAIN, recognizing obesity as a chronic disease needing long-term management.

    10. Pricing Evolution
      Q: What's the outlook on pricing for Mounjaro and Zepbound?
      A: For Mounjaro, as we sunset last year's co-pay program, we see expected tailwinds on price year-over-year, stabilizing into Q4. With Zepbound, pricing remains stable, but increasing access and global launches may impact net pricing dynamics moving forward.

    Key Metrics

    View all financials →

    Executive Team

    NamePositionStart DateShort Bio
    David A. RicksChair, President, and Chief Executive Officer2017David A. Ricks has been with Eli Lilly for 27 years, holding various leadership roles, including Senior Vice President and President of Lilly Bio-Medicines. He also serves as a director on the board of Adobe Inc. .
    Anat AshkenaziExecutive Vice President and Chief Financial Officer2021Anat Ashkenazi succeeded Mr. Smiley as CFO on February 9, 2021. She previously held leadership positions such as Senior Vice President, Controller, and CFO of Lilly Research Laboratories .
    Eric DozierExecutive Vice President, Human Resources and Diversity2022Eric Dozier has been with Lilly for 26 years and previously served as senior vice president and chief commercial officer for Loxo@Lilly, and vice president, global ethics and compliance officer .
    Anat HakimExecutive Vice President, General Counsel and Secretary2020Before joining Lilly, Anat Hakim was the senior vice president, general counsel, and secretary of WellCare Health Plans, Inc. from 2016 to 2020. She is a citizen of the U.S. and Israel .
    Edgardo HernandezExecutive Vice President and President, Manufacturing Operations2021Edgardo Hernandez has held various leadership positions within Lilly, including senior vice president of global parenteral drug product, delivery devices, and regional manufacturing .
    Patrik JonssonExecutive Vice President and President, Lilly Diabetes and Obesity2024Patrik Jonsson has been with Eli Lilly for over three decades. He has served in roles such as Executive Vice President and President of Lilly Cardiometabolic Health and President of Lilly USA since 2024 .
    Johna NortonExecutive Vice President, Global Quality2017Johna Norton has been with Lilly for 34 years and is set to retire at the end of July 2024. She has held roles such as vice president of global quality assurance API manufacturing and product research and development .
    Diogo RauExecutive Vice President and Chief Information and Digital Officer2021Before joining Lilly, Diogo Rau was the Senior Director of Information Systems and Technology for retail and online stores at Apple Inc. from 2011 to 2021 .
    Daniel SkovronskyExecutive Vice President, Chief Scientific Officer and President, Lilly Research Laboratories and Lilly Immunology2024Daniel Skovronsky has been with Lilly for 13 years, contributing significantly to the advancement of innovative medicines and the company's product pipeline .
    Jacob Van NaardenExecutive Vice President and President, Loxo@Lilly2021Jacob Van Naarden joined Lilly in 2019 when the company acquired Loxo Oncology, Inc., where he was the Chief Operating Officer. He has served as Chief Executive Officer of Loxo Oncology at Lilly .
    Alonzo WeemsExecutive Vice President, Enterprise Risk Management, and Chief Ethics and Compliance Officer2021Alonzo Weems joined Lilly in 1997 and has held roles such as Vice President and Deputy General Counsel for Corporate Legal Functions from 2018 to 2021. He is set to retire at the end of the year .
    Anne WhiteExecutive Vice President and President, Lilly Neuroscience2021Anne White has been with Lilly since 1991 and has held roles such as senior vice president and president of Lilly Oncology from 2018 to 2021 .
    Ilya YuffaExecutive Vice President and President, Lilly International2021Ilya Yuffa has been with Lilly for 27 years and has held roles such as senior vice president and president of Lilly Bio-Medicines from 2020 to 2021 .
    Lucas MontarceExecutive Vice President and Chief Financial Officer2024Lucas Montarce joined Lilly in 2001 and has held various finance leadership roles. He was elected as CFO on September 9, 2024 .
    Jon MoellerBoard Member2024Jon Moeller was elected as a new member of the Board of Directors, effective December 1, 2024. He is the Chairman of the Board, President, and CEO of Procter & Gamble .

    Questions to Ask Management

    1. With the approval of Novartis's competitor in early breast cancer, how does Lilly plan to protect Verzenio's market share in the high-risk patient segment and mitigate potential erosion due to new entrants?
    2. Given some employers are opting out of coverage for Mounjaro and Zepbound, what strategies does Lilly have to address payer restrictions and improve access, especially as you ramp up demand generation activities?
    3. How do you anticipate the Inflation Reduction Act will impact key brands like Verzenio, and what preparations are you making for potential inclusion on the drug negotiation list in 2027?
    4. After terminating the Phase IIb study of parasolimab in rheumatoid arthritis due to benefit-risk concerns, how will this affect your immunology pipeline, and what lessons have been learned for future development efforts?
    5. Considering the issues with compounding pharmacies and the upcoming introduction of oral GLP-1 therapies like orforglipron, how is Lilly addressing the compounding crisis, and what are your expectations for FDA actions to resolve this on a product-by-product basis?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateMay 2021
    End Date/DurationN/A
    Total additional amount$5.00 billion
    Remaining authorization$1.98 billion
    DetailsN/A

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Revenue Guidance: $45.4 billion to $46 billion, with approximately 50% growth in Q4 2024 compared to the same quarter last year .
      2. Gross Margin: Unchanged ratio of gross margin less operating expenses divided by revenue on both a reported and a non-GAAP basis .
      3. Other Income and Expense: $425 million to $325 million of expense on a reported basis, unchanged on a non-GAAP basis .
      4. Effective Tax Rate: Approximately 17% .
      5. Earnings Per Share (EPS): $12.05 to $12.55 on a reported basis and $13.02 to $13.52 on a non-GAAP basis .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Revenue Guidance: Raised by $3 billion to $45.4 billion to $46.6 billion .
      2. Revenue Growth: 38% in the second half of the year, compared to 31% in the first half .
      3. Gross Margin and Operating Expenses: 36% to 38% on a reported basis and 37% to 39% on a non-GAAP basis .
      4. Other Income and Expense: $525 million to $425 million of expense on a reported basis, and $400 million to $300 million on a non-GAAP basis .
      5. Effective Tax Rate: Approximately 15% .
      6. Earnings Per Share (EPS): $15.10 to $15.60 on a reported basis and $16.10 to $16.60 on a non-GAAP basis .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Revenue: Increased by $2 billion to $42.4 billion to $43.6 billion .
      2. Gross Margin: 32% to 34% on a reported basis and 33% to 35% on a non-GAAP basis .
      3. Earnings Per Share (EPS): $13.05 to $13.55 on a reported basis and $13.50 to $14 on a non-GAAP basis .
      4. Tax Rate: Reaffirmed guidance considering Q1 results .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. Revenue: $40.4 billion to $41.6 billion, with 20% growth or 29% growth for the core business .
      2. Revenue Growth Phasing: Acceleration expected in the second half of the year .
      3. Pricing: High single-digit percent price decline expected .
      4. Margin After Planned Costs: 31% to 33% on a non-GAAP basis .
      5. Gross Margin: Approximately 80% on a non-GAAP basis .
      6. Marketing and Administrative Expenses: Expected to grow but at a slower pace than revenues .
      7. R&D Expenses: Expected to increase with a higher rate than marketing, selling, and administrative expenses .
      8. Other Income and Expense: $400 million to $500 million of expense .
      9. Effective Tax Rate: Approximately 14% on a non-GAAP basis .
      10. Earnings Per Share (EPS): $12.20 to $12.70 on a non-GAAP basis .
      11. Diluted Weighted Average Shares Outstanding: Approximately 903 million .

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • AbbVie Inc.; Amgen Inc.; AstraZeneca PLC; Biogen Inc.; Bristol-Myers Squibb Company; Gilead Sciences Inc.; GlaxoSmithKline plc; Johnson & Johnson; Merck & Co., Inc.; Novartis AG; Novo Nordisk A/S; Pfizer Inc.; Roche Holding AG; Sanofi S.A.; and Takeda Pharmaceutical Company Limited (These companies are part of the peer group used for performance benchmarking and executive compensation purposes for 2023) .

    Latest news

    Recent developments and announcements about LLY.

    Financial Reporting

      Earnings Report

      ·
      3 days ago

      Eli Lilly and Company (LLY) Earnings Update

      On January 14, 2025, Eli Lilly and Company provided updates on its financial performance and guidance:

      1. 2024 Revenue Guidance:

        • Full-year revenue is expected to be approximately $45.0 billion, representing a 32% growth compared to 2023.
        • Q4 2024 revenue is projected at $13.5 billion, which is $400 million below the low end of the previously issued guidance. This shortfall is attributed to slower-than-expected growth in the U.S. incretin market and lower channel inventory at year-end.

      2. 2025 Revenue Guidance:

        • Revenue is anticipated to range between $58.0 billion and $61.0 billion, reflecting a 32% growth at the midpoint compared to 2024.

      3. Key Product Performance:

        • Mounjaro® and Zepbound® contributed significantly to Q4 2024 revenue, with sales of $3.5 billion and $1.9 billion, respectively.
        • Non-incretin revenue grew by 20% compared to Q4 2023, driven by strong performance in oncology, immunology, and neuroscience medicines.

      4. 2025 Growth Drivers:

        • Revenue growth is expected from new medicines such as Jaypirca®, Ebglyss™, Omvoh®, and Kisunla™, as well as new indications for existing products.
        • Expansion of Mounjaro into additional markets and potential launches of new medicines like imlunestrant for metastatic breast cancer are also anticipated to contribute.

      5. Operational Updates:

        • Lilly plans to increase manufacturing capacity, producing 60% more salable doses of incretins in the first half of 2025 compared to the same period in 2024.

      6. Upcoming Events:

        • Full Q4 2024 financial results and 2025 guidance will be shared on February 6, 2025.

      This update highlights Eli Lilly's strong growth trajectory, driven by its incretin portfolio and new product launches, despite minor setbacks in Q4 2024 revenue expectations.

      Sources:

    Corporate Leadership

      Board Change

      ·
      Nov 19, 2024, 12:00 AM

      Jon Moeller has been elected as a new member of Eli Lilly and Company's board of directors, effective December 1, 2024. Additionally, Karen Walker will resign from the board effective December 31, 2024 .

      CFO Change

      ·
      Sep 9, 2024, 12:00 AM

      Eli Lilly and Company has appointed Lucas Montarce as the new executive vice president and chief financial officer (CFO), effective immediately as of September 9, 2024. Montarce has been with the company since 2001 and has held various finance leadership roles. His most recent position was as president and general manager for the Spain, Portugal, and Greece hub. Montarce will receive an annualized base salary of $1,000,000 and is eligible for an annualized target bonus of $1,000,000 .