Q4 2024 Earnings Summary
- Strong confidence in the growth potential of the obesity market, with high demand for medications like tirzepatide and plans to expand manufacturing capacity to meet global demand, including developing scalable oral medications like Orforglipron. Eli Lilly remains very bullish on this market opportunity.
- Multiple upcoming catalysts in 2025, including data readouts from key trials like Orforglipron in obesity and diabetes, the tirzepatide cardiovascular outcomes trial (SURPASS-CVOT), and first data from triple-acting incretin retatrutide, which could bolster Eli Lilly's pipeline and future growth prospects.
- Anticipated increased payer coverage and access for products like Zepbound, with expectations of gaining Medicare coverage in the second half of the year, potentially driving prescription growth and expanding the market.
- Concerns about overestimation of the obesity market size and potential overcapacity in manufacturing investments. Several data points suggest questioning the size of the addressable and accessible obesity market, including slowing prescription trends, Lilly meeting demand earlier than anticipated, instituting direct-to-consumer advertising and extending co-pay cards despite supply challenges, launching in international markets despite U.S. demand challenges, significant stocking fluctuations, and difficulties in guiding future expectations.
- Discontinuation of late-stage programs due to disappointing clinical results. The cancellation of heart failure and chronic kidney disease programs for the long-acting relaxin candidate due to disappointing Phase II results raises concerns about the robustness of the pipeline and future growth prospects.
- Limitations on future operating margin expansion due to reinvestment needs. Management indicates that achieving operating margins in the high 40% to 50% range is not aligned with sustainable growth strategies, as they prioritize reinvestment in research and development. This suggests future profitability expansion may be limited, potentially disappointing investors expecting higher margins.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +45% YoY | The increase was driven by strong volume growth from products like Mounjaro and Zepbound, as well as higher realized prices on certain established brands. The absence of one-time revenue items from previous periods, such as the olanzapine portfolio sale, was more than offset by new product launches. These trends reflect robust market demand and successful commercialization efforts. |
Cost of Goods Sold | +34% YoY | Higher manufacturing costs associated with increased production volume for newly launched and fast-growing products contributed to the rise. Although product mix shifted toward higher-margin therapies, escalating input and labor costs outweighed these benefits in the short term. Going forward, further capacity expansions may continue affecting COGS. |
SG&A | +26% YoY | The increase stemmed from promotional activities and patient support programs tied to new indications and product launches, particularly for Mounjaro and Zepbound. Rising compensation and benefits costs also played a role. Continued investments in commercial efforts are likely as the company focuses on sustaining momentum for newly introduced therapies. |
R&D | +18% YoY | Ongoing pipeline development and late-stage clinical trials drove higher R&D expenses. Some inherited in-process research and development (IPR&D) costs carried over from prior acquisitions, although slightly lower than previous periods. These investments reflect a strategic push to expand the product pipeline, potentially yielding more innovative therapies in the long run. |
Operating Income (EBIT) | +105% YoY | EBIT growth outpaced revenue thanks to favorable product mix, price increases, and managed expense growth relative to revenue gains. Lower overall IPR&D charges compared to prior periods also assisted. Strong contributions from new blockbuster candidates hint at continued margin expansion, provided the company balances future R&D and commercialization spend. |
Net Income | +101% YoY | The jump in net income was primarily due to robust top-line growth and improved operating leverage. A lower effective tax rate compared to certain non-deductible charges in the prior year also boosted results. As the company continues launching new therapies while phasing out legacy products, maintaining efficient cost controls will be key. |
EPS (Diluted) | +101% YoY | Stronger profitability, coupled with fewer extraordinary charges relative to the prior period, significantly accelerated EPS. Gains in share price may reflect the market's optimism about the pipeline and commercial performance. Sustaining EPS momentum will likely hinge on delivering on product launches and managing R&D investments in a competitive environment. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | FY 2024 | $45.4B to $46B | No current guidance | no current guidance |
Gross Margin Less OpEx ÷ Revenue | FY 2024 | Remains unchanged (reported & non-GAAP) | No current guidance | no current guidance |
Other Income and Expense | FY 2024 | $425M to $325M of expense (reported) | No current guidance | no current guidance |
Effective Tax Rate | FY 2024 | 17% | No current guidance | no current guidance |
EPS | FY 2024 | $12.05 to $12.55 (reported), $13.02 to $13.52 (non-GAAP) | No current guidance | no current guidance |
Operating Margin Expansion | FY 2025 | No prior guidance | 340 basis points expansion | no prior guidance |
Operating Margin | FY 2025 | No prior guidance | Low 40% range | no prior guidance |
Prescription Growth | FY 2025 | No prior guidance | Continuation of total prescription growth | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue | FY 2024 | $45.4B to $46B | $45.04B (sum of Q1–Q4: 8,768.0+ 11,302.8+ 11,439.1+ 13,532.8) | Missed |
EPS (Reported) | FY 2024 | $12.05 to $12.55 | $11.76 (Q1: 2.49+ Q2: 3.29+ Q3: 1.08+ Q4: 4.9) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Obesity market (tirzepatide, orforglipron, pipeline) | Q1 & Q2 2024: Highlighted as a major growth driver, with bullish views on market size and pipeline success. Bearish concerns included manufacturing scale and safety/tolerability. | Q4 2024: Remains highly optimistic; executives emphasize market “huge opportunity,” robust demand, ongoing bullish and some short-term caution on supply. | Consistent recurring topic with continued bullish outlook. |
Expansion of manufacturing capacity | Q1 & Q2 2024: Discussed large-scale investments in new sites (Indiana, Wisconsin, Europe) to meet soaring demand. | Q4 2024: Further facility expansions and confidence in long-term capacity building for obesity injectables and oral therapies. | Consistent; remains a key priority for meeting demand. |
Reimbursement and Medicare coverage | Q1 & Q2 2024: Reimbursement expanding for Mounjaro/Zepbound; partial Medicare coverage, with broad commercial adoption and optimism for additional indications. | Q4 2024: Zepbound OSA indication could aid Medicare Part D coverage by 2H 2025; ongoing push for broader reimbursement of obesity meds. | Consistent; steady progress toward broader coverage. |
Discontinuation of relaxin candidate | Q1 & Q2 2024: No mention [––]. | Q4 2024: Discontinued late-stage relaxin after disappointing Phase II results in heart failure/CKD. | Topic no longer mentioned post-discontinuation. |
Retatrutide (triple-acting incretin) | Q1 & Q2 2024: Mentioned as part of broad pipeline but not highlighted as a major driver. | Q4 2024: Presented as a potential significant pipeline asset, with high weight-loss expectations and a key trial (Triumph 4) due. | Newly emphasized in Q4 as a major future growth driver. |
Operating margin expectations | Q2 2024: Optimistic margin expansion, though balanced by reinvestment in R&D and promotion. | Q4 2024: More cautious stance due to significant reinvestment needs; executives expect margins in low 40% range. | Shift in sentiment from bullish to more cautious. |
Oral GLP-1 Orforglipron & expanded obesity pipeline | Q1 & Q2 2024: Viewed as a complement to injectables; Phase III trials ongoing, expected to ease capacity constraints. | Q4 2024: Remains central to long-term strategy; Phase III readouts in 2025 for obesity and diabetes, seen as a “relief valve” for high global demand. | High-impact future topic promising scalable growth. |
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Prescription Uptake and 2025 Guidance
Q: Does 2025 guidance require prescription acceleration?
A: Management expects to meet the 2025 guidance with a continuation of the total prescription growth seen in 2024, without requiring acceleration. -
Orforglipron Positioning and Efficacy
Q: Discuss Orforglipron's potential positioning and efficacy expectations.
A: Orforglipron is an oral single GLP-1 agonist, expected to provide efficacy comparable to injectable GLP-1 therapies like Ozempic, particularly in type 2 diabetes patients where weight loss is typically less. Management sees an opportunity to serve patients who prefer oral medication or do not need the greater weight loss offered by dual-acting agents like Tirzepatide. -
Expanding Orforglipron Studies
Q: What gives confidence in running wide-ranging Orforglipron programs?
A: Management grows more confident in Orforglipron's safety profile as trials progress uninterrupted. Despite not having unblinded data yet, they believe in the asset's potential, supporting the launch of studies across various indications beyond obesity and type 2 diabetes. -
Obesity Market Size and Demand
Q: Is there concern about overestimating the obesity market size?
A: Management remains very bullish on the obesity market, believing it's in early stages with significant global demand. They acknowledge turbulence and prediction challenges but are confident that more capacity is needed to meet demand, especially with upcoming oral options like Orforglipron. -
Kisunla Alzheimer's Drug Launch
Q: How is the Kisunla launch progressing compared to peers?
A: Kisunla's launch is progressing positively, with over 800 prescribers and P&T approvals over 80% in key accounts. The focus is on system readiness and increasing diagnostic capacity, leveraging Kisunla's profile to address capacity constraints. -
Operating Margin Expansion Sustainability
Q: Can high operating margins be sustained long-term?
A: Management believes that maintaining operating margins in the low 40% range is appropriate for sustainable growth. Reaching margins near 50% may not be ideal, as they prioritize investing in R&D to drive future innovation and growth. -
GLP-1 Pricing Trends
Q: What are the expectations for GLP-1 pricing in 2025?
A: The company anticipates single-digit erosion in GLP-1 pricing trends continuing into 2025, similar to past periods. They have strong access for Mounjaro, with over 90% coverage in commercial and Part D plans. -
Zepbound Payer Dynamics and Access
Q: Elaborate on Zepbound's payer dynamics and OSA label impact.
A: Commercial access for Zepbound remains strong, with employer opt-in rates north of 50%. The OSA label presents an opportunity to gain Medicare coverage, with CMS confirming potential reimbursement under Part D plans. Some Medicare coverage is anticipated by the second half of the year. -
Sleep Apnea Treatment Strategy
Q: How is the approach for the new obstructive sleep apnea treatment?
A: The company is partnering with advocacy organizations and healthcare providers for education, aiming to expand beyond sleep specialists to primary care. This addresses the large undiagnosed patient population and helps drive medical education. -
Retatrutide Osteoarthritis Trial
Q: Can Retatrutide's OA trial be a comp for obesity studies?
A: The osteoarthritis trial is shorter and in a different population than broader obesity studies. While it may provide insights, efficacy in OA patients may not directly reflect expected results in the general obesity population, where better outcomes are anticipated.