Lilly(US:LLY)2024-08-08 15:28PART I. Financial Information Item 1. Financial Statements This section presents the unaudited consolidated condensed financial statements for the three and six months ended June 30, 2024, including statements of operations, comprehensive income, balance sheets, shareholders' equity, and cash flows, with detailed notes on accounting policies and events Consolidated Condensed Statements of Operations The company reported significant growth in revenue and net income for the three and six months ended June 30, 2024, compared to the same periods in 2023, with Q2 revenue increasing 36% to $11.3 billion and net income rising 68% to $3.0 billion, resulting in a diluted EPS of $3.28 Q2 & H1 2024 Financial Performance (YoY) | Financial Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | YoY Change | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $11,302.8 M | $8,312.1 M | +36.0% | $20,070.8 M | $15,272.1 M | +31.4% | | Net Income | $2,967.0 M | $1,763.2 M | +68.3% | $5,209.9 M | $3,108.1 M | +67.6% | | Diluted EPS | $3.28 | $1.95 | +68.2% | $5.76 | $3.44 | +67.4% | Consolidated Condensed Balance Sheets As of June 30, 2024, total assets increased to $71.9 billion from $64.0 billion at year-end 2023, driven by growth in accounts receivable and property and equipment, while total liabilities grew to $58.2 billion and total equity rose to $13.6 billion Balance Sheet Summary | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $30,204.3 M | $25,727.0 M | | Total Assets | $71,874.8 M | $64,006.3 M | | Total Current Liabilities | $27,121.2 M | $27,293.2 M | | Long-term Debt | $23,730.4 M | $18,320.8 M | | Total Liabilities | $58,239.3 M | $53,142.6 M | | Total Equity | $13,635.5 M | $10,863.7 M | Consolidated Condensed Statements of Cash Flows For the first six months of 2024, net cash provided by operating activities was $2.6 billion, net cash used for investing activities was $3.4 billion, and net cash provided by financing activities was $1.2 billion Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $2,632.2 M | $2,362.5 M | | Net Cash Used for Investing Activities | ($3,376.3 M) | ($1,147.9 M) | | Net Cash Provided by (Used for) Financing Activities | $1,244.2 M | ($621.1 M) | | Net increase in cash and cash equivalents | $405.0 M | $627.5 M | Notes to Consolidated Condensed Financial Statements The notes provide detailed disclosures on key financial items, including revenue growth driven by Mounjaro, Zepbound, and Verzenio, a $924.7 million manufacturing facility acquisition, an agreement to acquire Morphic Holding for approximately $3.2 billion, and a $435.0 million charge for anticipated litigation payments - Total revenue for Q2 2024 was $11.3 billion, with net product revenue comprising $10.4 billion and collaboration/other revenue at $0.9 billion32 - In May 2024, the company acquired a manufacturing facility in Wisconsin for $924.7 million to expand its injectable product manufacturing network44 - In July 2024, the company announced an agreement to acquire Morphic Holding, Inc. for approximately $3.2 billion51 - A charge of $435.0 million was recognized in Q2 2024 related to anticipated litigation payments63 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition Management discusses the key drivers of financial performance, highlighting a 36% revenue increase in Q2 2024 led by Mounjaro, Zepbound, and Verzenio, along with late-stage pipeline developments, external factors like the Inflation Reduction Act, and significant investments in manufacturing capacity Executive Overview The company's revenue grew 36% in Q2 2024, driven by volume and price increases, primarily from Mounjaro, Zepbound, and Verzenio, with key pipeline developments including the U.S. approval of Donanemab for Alzheimer's, ongoing management of supply constraints for incretin medicines, and anticipated impacts from the Inflation Reduction Act - Q2 2024 revenue growth was driven by increased sales of Mounjaro, Zepbound, and Verzenio, partially offset by declines in Trulicity and the 2023 sale of Baqsimi rights126 - Donanemab (Kisunla™) was approved in the U.S. in 2024 for early Alzheimer's disease130 - Demand for incretin medicines has exceeded production, leading to periodic supply tightness, with the company expanding manufacturing capacity, and increases continuing in 2024 and beyond136 - The Inflation Reduction Act (IRA) is expected to create pricing pressure, with Jardiance, part of a collaboration, selected for government-set prices effective in 2026134 Results of Operations Revenue for Q2 2024 increased 36% to $11.3 billion, with U.S. revenue up 42% and international revenue up 25%, driven by a 27% increase in volume and a 10% increase in price, primarily from Mounjaro and Zepbound, while gross margin improved to 80.8% and operating expenses rose due to continued investment Q2 2024 Revenue Growth Drivers (vs. Q2 2023) | Region | Volume | Price | Foreign Exchange | Total Change | | :--- | :--- | :--- | :--- | :--- | | U.S. | +27% | +15% | 0% | +42% | | Outside U.S. | +27% | 0% | -3% | +25% | | Consolidated | +27% | +10% | -1% | +36% | Top Product Revenue (Q2 2024) | Product | Q2 2024 Revenue | Q2 2023 Revenue | YoY Change | | :--- | :--- | :--- | :--- | | Mounjaro | $3,090.8 M | $979.7 M | +215% | | Verzenio | $1,331.9 M | $926.8 M | +44% | | Trulicity | $1,245.6 M | $1,812.5 M | -31% | | Zepbound | $1,243.2 M | $0 M | N/A | - Gross margin as a percent of revenue increased by 2.5 percentage points to 80.8% in Q2 2024, driven by higher realized prices and favorable product mix150151 Financial Condition and Liquidity The company's cash and cash equivalents increased to $3.22 billion at June 30, 2024, total debt rose to $28.89 billion following a $6.50 billion note issuance, significant capital expenditures are planned for manufacturing expansion, and a $3.2 billion acquisition of Morphic Holding, Inc. is pending, with $2.50 billion remaining under the share repurchase program - Total debt increased by $3.67 billion to $28.89 billion as of June 30, 2024, following a $6.50 billion debt issuance154 - The company is making significant investments to expand manufacturing capacity and has entered into supply agreements that could require payments up to approximately $10 billion over several years154 - Announced an agreement to acquire Morphic Holding, Inc. for approximately $3.2 billion in cash154 - As of June 30, 2024, $2.50 billion remained under the authorized share repurchase program, with no shares repurchased during the first half of 2024154 Item 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to the company's Annual Report on Form 10-K for the year ended December 31, 2023, for a detailed discussion of market risk - The company's disclosures about market risk are consistent with those in its 2023 Annual Report on Form 10-K161 Item 4. Controls and Procedures Management, including the CEO and interim CFO, evaluated the company's disclosure controls and procedures as of June 30, 2024, and concluded that they were effective, with no material changes made to the internal control over financial reporting during the second quarter of 2024 - The company's management concluded that disclosure controls and procedures were effective as of June 30, 2024162 - There were no material changes in internal control over financial reporting during the second quarter of 2024162 PART II. Other Information Item 1. Legal Proceedings This section refers to Note 10 of the consolidated condensed financial statements for detailed information on various legal actions, government investigations, and environmental proceedings involving the company - For information on legal proceedings, the report directs readers to Note 10 of the financial statements and the 2023 Annual Report on Form 10-K164 Item 1A. Risk Factors The company states that there have been no material changes from the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes to the risk factors disclosed in the 2023 Annual Report on Form 10-K have occurred165 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any of its equity securities during the three months ended June 30, 2024, with approximately $2.5 billion remaining available under the share repurchase program authorized in May 2021 Share Repurchase Activity (Q2 2024) | Period | Total Shares Purchased | Average Price Paid | Value Remaining in Program | | :--- | :--- | :--- | :--- | | April 2024 | 0 | $0 | $2,500.0 M | | May 2024 | 0 | $0 | $2,500.0 M | | June 2024 | 0 | $0 | $2,500.0 M | Item 5. Other Information The company reports that none of its directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the second quarter of 2024 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements in Q2 2024168 Item 6. Exhibits This section lists the documents filed as exhibits with the Quarterly Report, including certifications by the CEO and interim CFO, and interactive data files