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We expect Eli Lilly & Company (LLY - Free Report) to beat expectations when it reports fourth-quarter and full-year 2023 results on Feb 6, before the market open. In the last reported quarter, the company delivered an earnings surprise of 225.0%.
 

Factors to Note

This time around the focus will be on the sales number of Lilly’s FDA-approved tirzepatide medicines, which include diabetes drug Mounjaro and newly launched weight loss medicine, Zepbound.

Zepbound was approved in November 2023 and launched in December. Mounjaro was approved in May 2022 for treating type II diabetes and generated impressive sales of $2.96 billion in the first nine months of 2023. Mounjaro's impressive sales growth trend is expected to have continued in the fourth quarter.

Both Mounjaro and Zepbound include the same compound tirzepatide, a dual GIP and GLP-1 receptor agonist (GIP/GLP-1 RA). The GLP-1 segment is a very important class of drugs for multiple cardiometabolic diseases and is gaining significant popularity.

It is important to note that though Mounjaro’s sales volumes are likely to have been high, Lilly has been experiencing intermittent delays in fulfilling orders of certain Mounjaro doses, given significant demand. These delays may have hurt volumes in the fourth quarter. The Zacks Consensus Estimate for Mounjaro/Tirzepatide is $1.76 billion, while our model estimate is $1.77 billion.

Higher demand and volume growth for Lilly’s key growth drugs (select products launched prior to 2022 like Cyramza, Emgality, Jardiance, Olumiant, Retevmo, Taltz, Trulicity, Tyvyt and Verzenio) are likely to have provided top-line support.  While volumes are expected to have increased for most drugs, lower realized prices are likely to have continued hurting sales of some drugs like Trulicity.

Trulicity international volumes were hurt by the company’s measures to manage strong demand amid a tight supply of incretin-based products. In the third quarter, lower prices due to changes to estimates for rebates and discounts, unfavorable segment mix, and higher contracted rebates hurt Trulicity’s international sales. It remains to be seen if the trend improved in the fourth quarter.

Lilly has been investing in manufacturing capacity to increase the supply of incretin-based products like Trulicity and Mounjaro to meet rising demand.

The Zacks Consensus Estimate for Trulicity, Taltz, Verzenio, Jardiance, Olumiant, and Emgality is $1.74 billion, $777.0 million, $1.19 billion, $755.0 million, $241.0 million and $186.0 million, respectively.

Our estimates for Trulicity, Taltz, Verzenio, Jardiance, Olumiant, and Emgality are $1.76 billion, $757.3 million, $1.17 billion, $755.7 million, $236.5 million, and $183.3 million, respectively.

Newer products (products launched from 2022 onwards) like Retevmo, Jaypirca, and Omvoh (tirzepatide) are likely to have contributed to sales growth.

Omvoh/mirikizumab was approved for its first inflammatory bowel disease (IBD) indication, ulcerative colitis, in the United States, Europe, and Japan in 2023. Lilly expects to file a regulatory application seeking approval for Omvoh/mirikizumab for its second IBD indication, Crohn's disease, in 2024. Lilly’s BTK inhibitor Jaypirca was approved for mantle cell lymphoma in the United States in January 2023 and for the second indication, chronic lymphocytic leukemia, in December.

Sales of most established drugs like Forteo, Humalog, and Humulin are likely to have declined in the quarter. The entry of multiple generics due to the loss of exclusivity of Alimta in the United States is expected to have hurt the drug’s sales in the fourth quarter.

Higher marketing, selling, and administrative expenses to support the launch of new products and indications are likely to have hurt operating profits in the quarter.
 

Earnings Surprise History

This large drugmaker’s performance has been mixed, with the company missing earnings expectations in one of the last four quarters while beating in three. Lilly delivered a four-quarter earnings surprise of 59.86%, on average.
 

Eli Lilly and Company Price and EPS Surprise

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

Lilly’s stock has risen 87.5% in the past year compared with an increase of 19.4% for the industry.

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Earnings Whispers

Our proven model predicts an earnings beat for Lilly in the to-be-reported quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) for a likely positive surprise. This is the case here, as elaborated below.

Earnings ESP: Lilly’s Earnings ESP is +0.19% as the Zacks Consensus Estimate of $2.76 is lower than the Most Accurate Estimate of $2.77 per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Lilly has a Zacks Rank #3 currently.

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