Why Eli Lilly Earnings Are So Dynamic

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Eli Lilly and Co. (NYSE: LLY) released its second-quarter earnings report before the markets opened on Tuesday. Currently this company is in the middle of a very dynamic product launch, with its new medicines making a sizable contribution to its revenue growth. As one of the largest pharmaceutical companies on the street, Eli Lilly helps to set the tempo for the industry. And after this quarter things are continuing to look brighter in the health care sector.

The company said that it had $0.86 in earnings per share (EPS) on $5.40 billion in revenue. This compares to Thomson Reuters consensus estimates of $0.86 in EPS on revenue of $5.15 billion. In the same period of last year, Eli Lilly posted EPS of $0.90 and $4.98 billion in revenue.

The increase in revenue for this quarter was driven by an 8% increase in volume, as realized prices and the impact of foreign exchange rates remained relatively flat compared with the second quarter of 2015. The increase in worldwide volume was driven by new pharmaceutical products, including Trulicity and Cyramza, as well as Humalog. Revenue in the U.S. increased 14%, primarily driven by increased volume for several pharmaceutical products, including Trulicity and Humalog, and to a lesser extent, higher realized prices, primarily for Cialis and Forteo.

In terms of the product revenues (when compared to last year’s second quarter), the company reported:

  • Humalog revenues increased 7% to $701.9 million.
  • Cialis revenues increased 11% to $630.5 million.
  • Alimta revenues decreased 9% to $607.1 million.
  • Humulin revenues increased 5% to $332.3 million.
  • Forteo revenues increased 12% to $367.6 million.
  • Cymbalta revenues decreased 14% to $236.5 million.
  • Zyprexa revenues decreased 17% to $210.7 million.
  • Strattera revenues increased 17% to $224.6 million.
  • Erbitux revenues increased 34% to $180.6 million.
  • Effient revenues increased 5% to $135.1 million.

During this quarter, the U.S. Food and Drug Administration (FDA) approved once-daily Jentadueto XR tablets as an adjunct to diet and exercise for the treatment of type 2 diabetes in adults. Jentadueto XR is part of the company’s alliance with Boehringer Ingelheim. At the same time, Eli Lilly received approval of Cyramza in Japan for the treatment of advanced or recurrent colorectal cancer and non-small cell lung cancer (for patients who have received prior platinum therapy). These are just a few of the regulatory wins that this company had during the quarter.

Chairman, President and CEO John C. Lechleiter, Ph.D., commented:

We’ve made great progress building an R&D engine that has the potential to launch 20 new products in 10 years beginning in 2014 and extending through 2023. Because of our confidence in our future growth prospects, we are providing updated financial expectations through the balance of the decade, including at least 5 percent average annual revenue growth driven by volume and an increase in gross margin as a percent of revenue. We are also returning to annual dividend increases for shareholders and reaffirming our commitment to achieve an OPEX-to-revenue ratio of 50 percent or less in 2018.

Shares of Eli Lilly traded up 1% at $82.79 Tuesday morning, with a consensus analyst price target of $95.90 and a 52-week trading range of $67.88 to $92.85.

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