Eli Lilly, the pharmaceutical giant, has reported better-than-expected sales and profit for the fourth quarter of the year. This success can be attributed to the wider insurance coverage for its newer diabetes and obesity medications. The company revealed that approximately 90% of Type 2 diabetes patients in the US with commercial insurance or Medicare Part D prescription-drug plans now have access to Lilly’s diabetes drug, Mounjaro. Additionally, about one-third of individuals with private health plans have coverage for the company’s obesity drug, Zepbound, which was approved in the US in late 2023.
The increased access to Mounjaro has resulted in a decline in patients’ use of savings card programs, leading to higher prices and driving sales growth for Lilly in the fourth quarter. Net income rose to $2.19 billion, or $2.42 per share, compared to $1.94 billion, or $2.14 per share, in the same period the previous year. Adjusted earnings per share of $2.49 surpassed the FactSet consensus of $2.30. Revenue also saw a significant jump of 28.1% to $9.35 billion, exceeding the FactSet consensus of $8.95 billion. The majority of this growth was fueled by higher realized prices. In the US, revenue grew by 39% to $6.46 billion, while sales outside of the US increased by 10% to $2.9 billion.
However, excluding Mounjaro, Lilly experienced a decline in realized prices for its other diabetes drugs, Humalog and Trulicity, resulting in a “high-single digits” percentage decrease in US realized prices. The company also faced delays in filling orders for Trulicity, impacting volume. Despite these challenges, Lilly remains optimistic about its future prospects.
Lilly’s drug Tirzepatide, which is the active ingredient in both Mounjaro and Zepbound, has shown promise as a treatment for metabolic dysfunction-associated steatohepatitis (MASH), a fatty liver disease. Trial results released by Lilly revealed that up to 74% of participants treated with tirzepatide achieved an absence of MASH at 52 weeks, compared to only 13% of participants on placebo. This positive news caused the stocks of other drugmakers working on MASH treatments, such as Madrigal Pharmaceuticals Inc. and 89bio Inc., to decline.
Further clinical trial results for tirzepatide are expected later this year, including data from late-stage studies of the drug in obstructive sleep apnea and heart failure. Chief Scientific Officer Dr. Daniel Skovronsky believes that these additional indications for tirzepatide could be crucial in expanding insurance coverage and patient access to the medication. The effectiveness of anti-obesity medications like Zepbound and Mounjaro in treating cardiovascular and other conditions may play a significant role in persuading employers to cover these drugs.
As demand for incretin drugs continues to surge, Lilly is working diligently to ensure an adequate supply. The company’s manufacturing organization is embarking on its most ambitious expansion agenda in history, according to Chief Financial Officer Anat Ashkenazi. Despite these efforts, Lilly anticipates that demand will still outpace supply in 2024. However, significant production increases are expected in the second half of this year. Additionally, Lilly is investing in manufacturing capacity for its experimental oral obesity drug, orforglipron, which is currently in late-stage trials. CEO David Ricks believes that if orforglipron proves to be a strong product, it could potentially change the supply dynamics in this category.
Looking ahead, Lilly has provided its financial outlook for 2024. The company expects adjusted earnings per share of $12.20 to $12.70, which aligns with the current FactSet consensus of $12.39. Revenue is projected to rise to between $40.4 billion and $41.6 billion, compared to $34.12 billion in 2023. The FactSet revenue consensus is $39.3 billion.
Despite the positive financial results, Lilly’s stock experienced a slight decline of 1.2% following the announcement. However, it has still gained 19.8% year-to-date, outperforming the S&P 500, which has gained 3.6%.
In conclusion, Eli Lilly’s strong fourth-quarter performance can be attributed to the expanded insurance coverage for its diabetes and obesity medications. The company’s focus on developing innovative treatments and its commitment to meeting the growing demand for these drugs have positioned it for continued success. With promising trial results for tirzepatide and ongoing efforts to increase supply, Lilly is well-positioned to make a significant impact in the healthcare industry.
