Eli Lilly and Company reported better-than-expected fourth quarter 2023 earnings results on Tuesday, driven by strong demand for its new obesity drug Mounjaro (tirzepatide) and type 2 diabetes medicine Zepbound (zepatier). Revenue jumped 9% amid increased volumes and higher realized prices. Lilly also issued an upbeat full-year 2024 forecast citing confidence in the continued uptake of its key growth products.
Mounjaro and Zepbound Sales Skyrocket, Propel Double-Digit Revenue Growth
Lilly generated revenue of $9.35 billion in the fourth quarter, up 9% operationally compared to the prior year period and surpassing Wall Street estimates of $9.25 billion. The robust top-line growth was powered by a 28% jump in revenue from diabetes medicines like Mounjaro and Zepbound.
Mounjaro, which was approved for weight management last May, recorded sales of $589 million beating expectations. Zepbound, greenlighted as a diabetes treatment last March, racked up $201 million also topping forecasts. Strong volume trends for both drugs in the U.S. underscore the significant unmet need in the obesity and diabetes spaces.
Lilly’s revenue results by product line were as follows:
| Product Line | Q4 2023 Revenue | Year-Over-Year Change |
|---|---|---|
| Diabetes | $3.2 billion | +28% |
| Cancer | $1.4 billion | +8% |
| Immunology | $1.3 billion | +1% |
| Other | $3.4 billion | +4% |
| Total | $9.35 billion | +9% |
“Lilly delivered strong financial results in the fourth quarter of 2023, driven by better-than-expected revenue growth from our key growth products,” said Lilly CEO David A. Ricks. “Mounjaro and Zepbound continued their launches with exceptional early uptake in the U.S. We enter 2024 well-positioned to drive robust top- and bottom-line growth.”
Adjusted EPS Beats Expectations Amid Gross Margin Expansion
In addition to topping sales expectations, Lilly posted better-than-forecast Q4 adjusted earnings per share. Adjusted EPS rose 13% year-over-year to $2.09, cruising past average analyst estimates of $1.83.
Net income in the fourth quarter increased to $1.82 billion, or $1.98 per share, from $1.50 billion, or $1.64 per share, last year. Lilly’s operating margins also showed solid improvement with adjusted gross margin expanding to 79.8% from 78.6% in Q4 2022 on favorable product mix and pricing.
2024 Guidance Raised on Projected Mounjaro and Zepbound Growth
Buoyed by the strong uptake of Mounjaro and Zepbound so far, Lilly issued an upbeat full-year 2024 earnings outlook. The drugmaker now expects 2024 revenue between $37.7 billion to $38.6 billion representing operational growth of 7% to 10%. This guidance range tops Wall Street’s consensus estimate of around $37 billion.
Lilly also raised its 2024 adjusted EPS view to $10.20 to $10.40 from $9.95 to $10.25 previously. This outlook too comes in above analysts’ consensus forecast of around $10. Management cited expectations for volume-driven revenue growth in 2024 led by increased demand for Mounjaro, Zepbound, Verzenio, Olumiant, and the company’s diabetes portfolio.
The company does anticipate some incremental operating expense in supporting the ongoing launch uptake of Mounjaro and Zepbound in the U.S. But higher revenues and margins from these fast-growing products should drive substantial earnings growth this year.
Analysts See Further Upside for Lilly Stock
Shares of Lilly surged over 5% to new all-time highs above $386 in Tuesday’s trading after the better-than-expected quarterly results. The stock has skyrocketed nearly 90% over the past year, vastly outperforming the S&P 500.
Most Wall Street analysts remain highly upbeat on Lilly heading into 2024 thanks to the early success of Mounjaro and Zepbound. Cowen analyst Steve Scala recently called Lilly his “top pick” citing the company’s “superior pipeline” and “unstoppable” growth drivers.
Jefferies analyst Chris Schott also has Lilly as his “top large-cap pick” expecting accelerating revenue and earnings growth this year fueled by strong volume-based demand for new obesity and diabetes offerings. Schott boosted his price target on Lilly stock to $435 indicating further 14% upside potential.
While Lilly stock has seen a huge run-up recently, analysts contend shares still have more room for gains if execution remains solid. Mounjaro is seen hitting $11 billion in peak annual sales down the line while Zepbound could reach up to $6 billion annually at its summit. With these two products just starting their launch trajectories, Lilly seems poised to continue its outstanding performance.
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