Pharmaceuticals giant Eli Lilly (LLY: $730) blew past estimates during its fourth quarter results Monday night after the close, posting $9.4 billion in revenues, up 28% YoY, compared to $7.3 billion a year ago. Profit was $2.2 billion, or $2.49 per share, against $1.9 billion, or $2.09, driven by the strong response to its new anti-obesity drug, Zepbound, coupled with price increases for its blockbuster diabetes treatment, Mounjaro.
For the full year, the company produced $34.1 billion in revenues, up 20% YoY, from $28.5 billion during the same period last year. Profits for the year, however, took a dip, dropping from $7.2 billion, or $7.94 per share, to $5.7 billion, or $6.32. This was largely the result of various in-process research and development charges, most of which were acquired by the company over the past few quarters.
During the quarter, the company’s incretins, or drugs that work by mimicking hormones led the way in terms of growth, with Mounjaro posting sales of $2.2 billion during the quarter, up 700% YoY, followed by its GLP-1 candidate, Zepbound, at $176 million which was just introduced in the quarter. Other key growth drivers include Verzenio, Jardiance, and Tyvyt*, up 42%, 30%, and 98%, respectively. Please re-read the first sentence of this paragraph.
* a medication used to treat Hodgkin's disease
A few detractors included the likes of Trulicity, Humalog, and Alimta, down 14%, 33%, and 81% YoY, respectively. This was largely owing to lower realized prices, coupled with persistent supply constraints in recent months. The lower prices weren’t that surprising, with the company announcing last year that it would be cutting the prices of Humalog, and its other insulin products by as much as 70% going forward
The big story about the company, however, is its new obesity play, Zepbound, which has gained strong momentum within just a few months after its launch, and is already threatening Novo Nordisk’s dominance in this space. Lilly expects demand for this drug to far outstrip supply for 2024, as it grapples to build capacity with a fresh $3 billion commitment to expand manufacturing.
Given the pace at which incretins are expanding within the US and internationally, with the entire market expected to hit $50 billion in 2030, the drug now has 90% insurance coverage and Medicare Part D. Sales are only going to heat up from here, with Morgan Stanley projecting sales for Zepbound for 2024 to be $2.2 billion. As noted above, Zepbound did just $176 million last quarter. Barclays forecasts $7.3 billion in 2024 sales for Wegovy, which as you know is made by Novo Nordisk (NVO).
In addition, Eli Lilly is working to unveil its oral weight loss drug, Orforglipron. This could be very important as all of the weight-loss drugs on the market are injectables. When you can just take a pill, this market will explode.*
* https://www.nejm.org/doi/full/10.1056/NEJMoa2302392 Read this report from September 2023. If this doesn’t get you excited about owning Eli Lilly, there is nothing we can ever say that will do so.
Following a 60% rally in 2023, the stock is already up 20% so far this year, starting at $592 on January 2nd, and is showing no signs of cooling down. The new all-time highs hit by the stock this week and all of this year, are perfectly justified. How can I buy this stock at such a high price, you are asking yourself? Very easy. Think 2025, 2028, 2030. Then sit down at your computer and buy the stock!
In addition to investing in R&D and expanding its productive capacity, Eli Lilly is increasingly generous in returning capital, with its sixth consecutive yearly dividend increase, doubling it since 2018. It ended the quarter with $2.6 billion in cash and $20 billion in debt. Our Target is $665 and we would not sell Eli Lilly. Whoops. We have to raise our Target again. It hit $742 during the day yesterday, and closed at $705, up $37 for the day. If the stock market continues its bull market run this month and on into the spring and summer, we wouldn’t be surprised to see the stock with a 9 in front of it. Our new Target is $825.