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Lilly (LLY) Q4 Earnings and Sales Top Estimates, Stock Up

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Eli Lilly & Company LLY reported fourth-quarter 2019 adjusted earnings per share of $1.73, which comprehensively beat the Zacks Consensus Estimate of $1.52. Earnings rose 31% year over year as higher operating costs were offset by higher revenues, lower tax rate and reduction in shares outstanding due to buybacks.

Quarter in Detail

Revenues of $6.11 billion beat the Zacks Consensus Estimate of $6.07 billion. Sales grew 8% year over year, backed by strong volume trends for its newer drugs, namely Trulicity, Taltz, Jardiance, Basaglar, Emgality, and Verzenio, which compensated for lower sales of older products like Cialis and Forteo and the impact of Lartruvo’s product withdrawal. Lilly suspended promotion of its advanced soft tissue sarcoma drug, Lartruvo due to the failure of the ANNOUNCE confirmatory study.

Lower realized prices had a negative impact of 1% on sales due to rebates and legislated increases in Medicare Part D cost sharing in the United States and price cuts in some international markets. Volumes rose 10%.

New pharma products (products launched since 2014) drove 14% of revenue growth and represented nearly 46% total revenues, up from 44% in the previous quarter. U.S. revenues rose 7%to $3.52 billion while ex-U.S. revenues rose 10% to $2.6billion.

Among the established products, Forteo sales declined 18%to $360.2million. Alimta declined 5%to $530.7million. Humalog sales dropped 1% to $763.4million. Humulin sales rose 3% to $348.0million.

Cialis sales declined 44% to $197.8 million as U.S. sales were hurt by entry of generic products. Outside U.S. sales were hurt by currency headwinds, which offset the impact of higher realized prices.

Among the new products, Trulicity generated revenues of $1.21 billion, up 31% year over year driven by higher demand in the United States and higher volumes in ex-U.S. markets, which offset the impact of lower realized prices and changes in segment mix.

Cyramza revenues were $245.1 million, up 11% year over year driven by higher sales in both U.S. and international markets.

Jardiance sales rose 39% to $268.0 million, driven by increased demand trends within the SGLT2 class of diabetes medicines in the United States and increased volume outside the United States, which offset the negative impact of currency.

Basaglar recorded revenues of $307.2 million, up 32% year over year. In the United States, sales rose 34%, benefiting from higher demand and the impact of higher realized prices. Outside U.S. sales growth of 28% was driven by increased volume.

Taltz brought in sales of $420.1 million, up 37% year over year as U.S. sales gained from higher demand, which offset the impact of lower realized prices due to changes in estimates for rebates and discounts. Ex-U.S. sales were driven by increased volume from launches in new countries.

New rheumatoid arthritis drug, Olumiant generated sales of $127.8 million in the quarter compared with $114.6 million in the previous quarter backed by increased demand in international markets. In the United States, Olumiant recorded sales of $13.0 million compared with $12.1 million in the previous quarter. Revenues outside the United States were $114.9 million compared with $102.5 million in the previous quarter.

New advanced breast cancer treatment medicine, Verzenio generated sales of $179.1 million in the quarter, up from $157.2 million in the previous quarter driven by increased demand in the United States.

New CGRP antibody, Emgality generated revenues of $66.3 million in the quarter compared with $47.7 million in the previous quarter. In the United States, Emgality sales were $63.1 million compared with $45.8 million in the previous quarter. Emgality was launched in some international markets in the first quarter, which brought sales of $3.2 million in the fourth quarter.

Amgen’s AMGN Aimovig and Teva’s TEVA Ajovy were two other CGRP antibodies launched last year, which pose strong competition to Emgality.

Adjusted gross margin of 79.9% in the quarter was down 70 basis points. Operating income rose 10% year over year to $1.61 billion.

2019 Results

Full-year 2019 sales rose 4% to $22.32 billion, beating the Zacks Consensus Estimate of $22.29 billion by a slight margin. However, sales were within the guided range of $22.0 billion - $22.5 billion

Adjusted earnings of $6.04 per share beat Zacks Consensus Estimate of $5.80 and came ahead of the guided range of $5.75 to $5.85. Earnings rose 11% year over year.

2020 Guidance

Lilly re-affirmed its 2020 adjusted earnings guidance in the range of $6.70-$6.80 per share, which it had issued in December last year. The earnings guidance represents growth in the range of 11%-13%. However, the company slightly raised its 2020 revenue guidance from a range of $23.6 billion-$24.1 billion to $23.7 billion-$24.2 billion. Lilly expects new products to help it achieve the sales growth target as the headwind from Cialis LOE and Lartruvo will abate in 2020.

Gross margin guidance was maintained at approximately 81%. Adjusted tax rate is expected to be approximately 15%. Adjusted operating margin is expected to be 31% in 2020 (maintained).

Marketing, selling and administrative expense are expected to be in the range of $6.2 to $6.4 billion compared with $6.1 billion to $6.3 billion previously  Research and development expense is still expected to be in the range of $5.6 billion to $5.9 billion.

Our Take

Lilly reported strong fourth-quarter results, beating estimates on both counts. The stock was up more than 1% in pre-market trading. In the past year, Lilly’s stock has risen 19.6% compared with the industry’s increase of 14%.

 

 

Going forward, Lilly’s revenue growth is expected to be driven by higher demand for its newer drugs including Trulicity, Jardiance, Taltz, Verzenio, Basaglar, Emgality as well as newly launched glucagon nasal powder, Baqsimi and potential launch of newly approved oral tablets to treat acute migraine, Reyvow. However, generic competition for several drugs including the expected generic entry of Forteo, rising pricing pressure in the United States due to rebates and legislated increases in Medicare Part D cost sharing, and price cuts in some international markets like China, Japan and Europe are some top-line headwinds expected in 2020. In the United States, prices are expected to decline in a low-single digit range.

Nonetheless, Lilly is making significant pipeline progress with several positive late-stage data readouts, multiple approvals and regulatory submissions scheduled for 2020.

Lilly is also regularly adding promising new pipeline assets through business development deals. Earlier this month, Lilly announced a definitive deal to buy dermatology company, Dermira DERM for $18.75 per share in cash or approximately $1.1 billion. The deal will add Dermira’s promising interleukin inhibitor in late-stage development for atopic dermatitis/eczema, lebrikizumab, thereby expanding Lilly’s immunology pipeline.

Zacks Rank

Lilly currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Eli Lilly and Company Price, Consensus and EPS Surprise

 

Eli Lilly and Company Price, Consensus and EPS Surprise
Eli Lilly and Company Price, Consensus and EPS Surprise

Eli Lilly and Company price-consensus-eps-surprise-chart | Eli Lilly and Company Quote

 

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