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Eli Lilly & Company (LLY - Free Report) announced its financial guidance for 2023 on December 13. Shares have traded down since then as the company’s 2023 earnings projections were below analyst expectations.
But the stock had some room to give back. This year, Lilly’s shares had risen about 30% compared with the industry’s 10%+ rise.
The primary reason LLY is in the cellar of the Zacks Rank is that analysts responded to the guidance by lowering 2023 EPS estimates 7.3% from $9.14 to $8.47, representing only 9% growth. As recently as 90 days ago, the full-year estimate called for $9.37.
2023 Earnings Guidance Misses Expectations
Lilly expects 2023 revenues to be between $30.3 billion and $30.8 billion, while adjusted earnings per share are expected to be between $8.10 and $8.30. However, the company’s earnings expectations are below both our model estimates and Zacks Consensus Estimate of $9.07 and $9.14 per share, respectively.
With regard to sales, our model estimates and the Zacks Consensus Estimate of $30.5 billion and $30.6 billion, respectively, are within the company’s guidance range.
Eli Lilly’s 2023 sales are expected to be driven by volume increases from key growth products. However, lower revenues from the cancer drug Alimta due to its loss of patent exclusivity and the negative impact of foreign exchange rates are expected to offset some of the top-line gains. Management does not expect to record any revenue from sales of COVID therapies.
The adjusted gross margin is expected to be approximately 79%.
Marketing, selling and administrative expenses are expected to be $6.9-$7.1 billion. Research and development expense is expected to be in the range of $8.2 billion to $8.4 billion. The tax rate is expected to be around 16% for the full year.
Adjusted other income (expenses) for 2022 is expected to be in the range of $200-$100 million.
Maintains 2022 Guidance
Lilly maintained its previously issued guidance for revenues and earnings. The company expects revenues to be between $28.5-$29.0 billion.
Adjusted earnings per share are expected to be between $7.70 and $7.85, indicating growth in the range of 4% to 6% year over year.
The adjusted gross margin is expected to be approximately 78%, while the adjusted operating margin is expected to be around 29%.
Marketing, selling and administrative expenses are expected to be in the range of $6.4-$6.6 billion. Research and development expense is expected in the range of $7.1-$7.3 billion. The tax rate for the full year is expected to be approximately 13% to 14%.
New Product Launches
Eli Lilly expects to launch four new drugs – donanemab, mirikizumab, lebrikizumab and pirtobrutinib – targeting Alzheimer's disease (AD), atopic dermatitis, ulcerative colitis and mantle cell lymphoma (MCL) indications, respectively. These drugs are currently under regulatory review in the United States and some other countries.
A final decision from the FDA on donanemab is expected in early 2023. Donanemab is expected to be a key competitor to Biogen’s (BIIB Quick QuoteBIIB - Research Report) controversial Alzheimer’s drug Aduhelm (aducanumab), which was approved by the FDA last year in June. Aduhelm’s FDA approval faced a lot of criticism about its mixed efficacy results, the FDA selection of the accelerated approval path, and the regulatory process in general.
All these issues affected demand, patient access and reimbursement of this key new drug for Biogen, which has resulted in a slow launch. Biogen’s launch of the drug also suffered after Medicare limited coverage for Aduhelm only for patients enrolled in CMS-approved studies.
This year, Eli Lilly launched its diabetes drug, Mounjaro, which has shown an impressive initial uptake, recording $203.3 million in revenues since its launch this May. Earlier this year, management announced data from a late-stage study which showed that treatment with the drug also led up to 22.5% weight loss in adults with obesity.
A regulatory submission seeking label expansion for Mounjaro in obesity is also planned by this year’s end. An expansion in the obesity indication would help Lilly rake in billions of dollars from Mounjaro sales.
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Bear of the Day: Eli Lilly (LLY)
Eli Lilly & Company (LLY - Free Report) announced its financial guidance for 2023 on December 13. Shares have traded down since then as the company’s 2023 earnings projections were below analyst expectations.
But the stock had some room to give back. This year, Lilly’s shares had risen about 30% compared with the industry’s 10%+ rise.
The primary reason LLY is in the cellar of the Zacks Rank is that analysts responded to the guidance by lowering 2023 EPS estimates 7.3% from $9.14 to $8.47, representing only 9% growth. As recently as 90 days ago, the full-year estimate called for $9.37.
2023 Earnings Guidance Misses Expectations
Lilly expects 2023 revenues to be between $30.3 billion and $30.8 billion, while adjusted earnings per share are expected to be between $8.10 and $8.30. However, the company’s earnings expectations are below both our model estimates and Zacks Consensus Estimate of $9.07 and $9.14 per share, respectively.
With regard to sales, our model estimates and the Zacks Consensus Estimate of $30.5 billion and $30.6 billion, respectively, are within the company’s guidance range.
Eli Lilly’s 2023 sales are expected to be driven by volume increases from key growth products. However, lower revenues from the cancer drug Alimta due to its loss of patent exclusivity and the negative impact of foreign exchange rates are expected to offset some of the top-line gains. Management does not expect to record any revenue from sales of COVID therapies.
The adjusted gross margin is expected to be approximately 79%.
Marketing, selling and administrative expenses are expected to be $6.9-$7.1 billion. Research and development expense is expected to be in the range of $8.2 billion to $8.4 billion. The tax rate is expected to be around 16% for the full year.
Adjusted other income (expenses) for 2022 is expected to be in the range of $200-$100 million.
Maintains 2022 Guidance
Lilly maintained its previously issued guidance for revenues and earnings. The company expects revenues to be between $28.5-$29.0 billion.
Adjusted earnings per share are expected to be between $7.70 and $7.85, indicating growth in the range of 4% to 6% year over year.
The adjusted gross margin is expected to be approximately 78%, while the adjusted operating margin is expected to be around 29%.
Marketing, selling and administrative expenses are expected to be in the range of $6.4-$6.6 billion. Research and development expense is expected in the range of $7.1-$7.3 billion. The tax rate for the full year is expected to be approximately 13% to 14%.
New Product Launches
Eli Lilly expects to launch four new drugs – donanemab, mirikizumab, lebrikizumab and pirtobrutinib – targeting Alzheimer's disease (AD), atopic dermatitis, ulcerative colitis and mantle cell lymphoma (MCL) indications, respectively. These drugs are currently under regulatory review in the United States and some other countries.
A final decision from the FDA on donanemab is expected in early 2023. Donanemab is expected to be a key competitor to Biogen’s (BIIB Quick QuoteBIIB - Research Report) controversial Alzheimer’s drug Aduhelm (aducanumab), which was approved by the FDA last year in June. Aduhelm’s FDA approval faced a lot of criticism about its mixed efficacy results, the FDA selection of the accelerated approval path, and the regulatory process in general.
All these issues affected demand, patient access and reimbursement of this key new drug for Biogen, which has resulted in a slow launch. Biogen’s launch of the drug also suffered after Medicare limited coverage for Aduhelm only for patients enrolled in CMS-approved studies.
This year, Eli Lilly launched its diabetes drug, Mounjaro, which has shown an impressive initial uptake, recording $203.3 million in revenues since its launch this May. Earlier this year, management announced data from a late-stage study which showed that treatment with the drug also led up to 22.5% weight loss in adults with obesity.
A regulatory submission seeking label expansion for Mounjaro in obesity is also planned by this year’s end. An expansion in the obesity indication would help Lilly rake in billions of dollars from Mounjaro sales.