ELI LILLY & Co - Quarter Report: 2024 September (Form 10-Q)

Earnings (loss) per share:Basic$ $()$ $ Diluted$ $()$ $ Other current liabilities Total current liabilities Noncurrent LiabilitiesLong-term debt Accrued retirement benefits (Note 9) Long-term income taxes payable Other noncurrent liabilities Total noncurrent liabilities Commitments and Contingencies (Note 10) Additional paid-in capital Retained earnings Employee benefit trust()()Accumulated other comprehensive loss (Note 11)()()Cost of common stock in treasury()()Total Eli Lilly and Company shareholders' equity Noncontrolling interests Total equity Total liabilities and equity$ $

See notes to consolidated condensed financial statements.

Consolidated Condensed Statements of Shareholders' Equity

(Unaudited)

ELI LILLY AND COMPANY AND SUBSIDIARIES

Equity of Eli Lilly and Company Shareholders

(Dollars in millions, except per-share data, and shares in thousands)

Common Stock

Additional
Paid-in
Capital

Retained
Earnings

Employee Benefit Trust

Accumulated Other Comprehensive Loss

Common Stock in Treasury(1)

Noncontrolling Interests

Amount

Balance at July 1, 2023

()

Net income (loss)

()

Other comprehensive income, net of tax

Issuance of stock under employee stock plans, net

)

Stock-based compensation

Other

()

Balance at September 30, 2023

()

Balance at July 1, 2024

()

Net income

Other comprehensive income, net of tax

Net increase in cash and cash equivalents

Cash and cash equivalents at January 1

Cash and Cash Equivalents at September 30

See notes to consolidated condensed financial statements.

Notes to Consolidated Condensed Financial Statements

(Tables present dollars in millions, except per-share data)

Note 1:

Note 2:

$ $ $

Collaboration and other revenue

Revenue$ $ $ $

We recognize revenue primarily from two different types of contracts, product sales to customers (net product revenue) and collaborations and other arrangements. Revenue recognized from collaborations and other arrangements includes our share of profits from the collaborations, as well as royalties, upfront and milestone payments we receive under these types of contracts. See Note 4 for additional information related to our collaborations and other arrangements. Collaboration and other revenue disclosed above includes the revenue from the Jardiance® and Trajenta® families of products resulting from our collaboration with Boehringer Ingelheim, as well as from the 2023 sales of rights for the olanzapine portfolio, including Zyprexa®, and for Baqsimi®, all of which are discussed in Note 4. Substantially all of the remainder of collaboration and other revenue is related to contracts accounted for as contracts with customers. Collaboration and other revenue associated with intellectual property licensed in prior periods was not material during the three and nine months ended September 30, 2024 and 2023.

Adjustments to Revenue

Adjustments to revenue recognized as a result of changes in estimates for our most significant United States (U.S.) sales returns, rebates, and discounts liability balances for products shipped in previous periods were percent and percent of U.S. revenue during the three months ended September 30, 2024 and 2023, respectively, and percent and less than percent of U.S. revenue during the nine months ended September 30, 2024 and 2023, respectively.

Contract Liabilities

Our contract liabilities result from arrangements where we have received payment in advance of performance under the contract and do not include sales returns, rebates, and discounts. Changes in contract liabilities are generally due to either receipt of additional advance payments or our performance under the contract.

During the three and nine months ended September 30, 2024 and 2023, revenue recognized from contract liabilities as of the beginning of the respective year was not material. Revenue expected to be recognized in the future from contract liabilities as the related performance obligations are satisfied is not expected to be material in any one year.

$ $ $ $ $

Trulicity®

Zepbound®

Jardiance(1)

Humalog® (2)

Humulin®

Basaglar® (3)

Baqsimi Other cardiometabolic health Total cardiometabolic health Oncology:

Verzenio®

Cyramza®

Erbitux®

Tyvyt®

Other oncology Total oncology Immunology:

Taltz®

Olumiant®

Other immunology Total immunology Neuroscience:

Emgality®

Zyprexa (4)

Other neuroscience Total neuroscience Other:

Forteo®

Cialis®

Other Total other Revenue$ $ $ $ $ $

Numbers may not add due to rounding.

(1) Jardiance revenue includes Glyxambi®, Synjardy®, and Trijardy® XR.

(2) Humalog revenue includes insulin lispro.

(3) Basaglar revenue includes Rezvoglar®.

(4) Zyprexa revenue includes sale of rights for the olanzapine portfolio in July 2023.

)Acquisition date fair value of consideration transferred Less: Cash acquired()Cash paid, net of cash acquired$

(1) The goodwill recognized from this acquisition is primarily attributable to the radiopharmaceutical discovery, development, and manufacturing capabilities and the assembled workforce for POINT, which is not deductible for tax purposes.

billion and $ billion for the three and nine months ended September 30, 2024, respectively, and $ billion and $ billion for the three and nine months ended September 30, 2023, respectively. DICE Therapeutics, Inc.

DC-806, an oral IL-17 inhibitor for the treatment of chronic diseases in immunology(2)

August 2023Phase 2 Versanis Bio, Inc.Bimagrumab, a monoclonal antibody for the treatment of people living with obesity and obesity-related complicationsAugust 2023Phase 2 Emergence Therapeutics AGETx-22, a Nectin-4 antibody-drug conjugate for the treatment of urothelial cancerAugust 2023Pre-clinical

(1) The phase of development presented is as of the date of the arrangement and represents the phase of development of the most advanced asset acquired, where applicable.

(2) In 2024, we discontinued development of this molecule in favor of another molecule in development.

Note 4:

$ $ $ Basaglar Trajenta

Olumiant

We have a worldwide license and collaboration agreement with Incyte Corporation (Incyte), which provides us the development and commercialization rights to baricitinib, which is branded and trademarked as Olumiant, and certain follow-on compounds, for the treatment of inflammatory and autoimmune diseases and COVID-19. Incyte has the right to receive tiered, double digit royalty payments on worldwide net sales with rates ranging up to percent. Incyte has the right to receive an additional royalty ranging up to the low teens on worldwide net sales for the treatment of COVID-19 that exceed a specified aggregate worldwide net sales threshold. The agreement calls for payments by us to Incyte associated with certain development, success-based regulatory, and sales-based milestones.

In connection with the regulatory approvals of Olumiant in the U.S., Europe, and Japan, as well as achievement of a sales-based milestone, milestone payments were capitalized as intangible assets and are being amortized to cost of sales through the term of the collaboration. Net milestones capitalized are not material. As of September 30, 2024, Incyte is eligible to receive up to $ million of additional payments from us in potential sales-based milestones.

We record our sales of Olumiant to third parties as net product revenue with the royalty payments made to Incyte recorded as cost of sales.

$ $ $

Tyvyt

We have a collaboration agreement with Innovent Biologics, Inc. (Innovent) to jointly develop and commercialize sintilimab injection in China, where it is branded and trademarked as Tyvyt. We record our sales of Tyvyt to third parties as net product revenue, with payments made to Innovent for its portion of the gross margin reported as cost of sales. We report as collaboration and other revenue our portion of the gross margin for Tyvyt sales made by Innovent to third parties.

$ $ $

billion in potential sales-based milestones. During the three and nine months ended September 30, 2024 and 2023, milestone payments to Roche were not material.

We have a license agreement with Almirall, S.A. (Almirall), under which Almirall licensed the rights to develop and commercialize Ebglyss, for the treatment or prevention of dermatology indications, including, but not limited to, atopic dermatitis in Europe. We receive tiered royalty payments on net sales in Europe ranging in percentages from low double digits to low twenties, which we recognize as collaboration and other revenue. During the three and nine months ended September 30, 2024 and 2023, collaboration and other revenue recognized under this license agreement was not material. As of September 30, 2024, we are eligible to receive additional payments up to $ billion in a series of sales-based milestones.

Orforglipron

We have a license agreement with Chugai Pharmaceutical Co., Ltd (Chugai), which provides us with the worldwide development and commercialization rights to orforglipron. Chugai has the right to receive tiered royalty payments on future worldwide net sales from mid-single digits to low teens if the product is successfully commercialized. As of September 30, 2024, Chugai is eligible to receive up to $ million contingent upon the achievement of success-based regulatory milestones and up to $ million in a series of sales-based milestones, contingent upon the commercial success of orforglipron. During the three and nine months ended September 30, 2024 and 2023, milestone payments to Chugai were not material.

Olanzapine Portfolio (including Zyprexa)

In July 2023, we sold the rights for the olanzapine portfolio, including Zyprexa, to Cheplapharm Arzneimittel GmbH (Cheplapharm), a European company. Under the terms of the agreement, we received $ billion in cash upon closing and an additional $ million in cash upon the one-year anniversary of closing. We included both in the transaction price as of September 30, 2023.

We entered into a supply agreement with Cheplapharm that obligates Cheplapharm to purchase Zyprexa product we are manufacturing at an amount which represents a standalone selling price. As the product we are manufacturing under this supply agreement has no alternative use to us and we have right to payment, we recognize net product revenue over time as we manufacture the product.

During the three and nine months ended September 30, 2023, we recognized $ billion in revenue primarily related to the net gain on the sale of rights for the olanzapine portfolio.

Baqsimi

In June 2023, we sold the rights for Baqsimi to Amphastar Pharmaceuticals, Inc. (Amphastar). Under the terms of the agreement, we received $ million in cash upon closing and an additional $ million in cash upon the one-year anniversary of closing. We included both in the transaction price as of September 30, 2023. We are eligible to receive payments of up to $ million in a series of sales-based milestones that have not been included in the transaction price as of September 30, 2024.

We entered into a supply agreement with Amphastar that obligates Amphastar to purchase Baqsimi product we are manufacturing at an amount which represents a standalone selling price. As the product we are manufacturing under this supply agreement has no alternative use to us and we have right to payment, we recognize net product revenue over time as we manufacture the product.

million in revenue primarily related to the net gain on the sale of rights for Baqsimi.

Note 5:

million, which primarily related to impairment of an intangible asset in development driven by expected commercial projections. Asset impairment, restructuring, and other special charges recognized during the nine months ended September 30, 2024 were $ million, which primarily related to litigation charges and the previously mentioned impairment. See Note 10 for additional information related to the litigation charges.

There were asset impairment, restructuring, and other special charges recognized during the three and nine months ended September 30, 2023.

Note 6:

$ Work in process Raw materials and supplies Total (approximates replacement cost)

Increase to last-in, first-out (LIFO) cost

Inventories$ $

Note 7:

Adjustments recorded for the three and nine months ended September 30, 2024 and 2023 were not material.

The net gains (losses) recognized in our consolidated condensed statements of operations for equity securities were $ million and $() million for the three and nine months ended September 30, 2024, respectively, and $() million and $() million for the three and nine months ended September 30, 2023, respectively. The net gains (losses) recognized for the three and nine months ended September 30, 2024 and 2023 on equity securities sold during the respective periods were not material.

As of September 30, 2024, we had approximately $ million of unfunded commitments to invest in venture capital funds, which we anticipate will be paid over a period of up to years.

Impairment and credit losses related to available-for-sale securities were not material for the three and nine months ended September 30, 2024 and 2023. $ $ $ $ $ Unrealized gross losses Fair value of securities in an unrealized gain position Fair value of securities in an unrealized loss position

As of September 30, 2024, the available-for-sale securities in an unrealized loss position include primarily fixed-rate debt securities of varying maturities, which are sensitive to changes in the yield curve and other market conditions. Substantially all of the fixed-rate debt securities in a loss position are investment-grade debt securities. As of September 30, 2024, we do not intend to sell, and it is not more likely than not that we will be required to sell, the securities in a loss position before the market values recover or the underlying cash flows have been received, and there is no indication of a material default on interest or principal payments for our debt securities.

Realized gains and losses on sales of available-for-sale investments are computed based upon specific identification of the initial cost adjusted for any other-than-temporary declines in fair value that were recorded in earnings and were not material for the three and nine months ended September 30, 2024 and 2023. Proceeds from sales of available-for-sale investments were $ million and $ million for the three and nine months ended September 30, 2024, respectively, and $ million and $ million for the three and nine months ended September 30, 2023, respectively.

$ $ $ $ $ Short-term investments:U.S. government and agency securities$ $ $ $ $ $ Corporate debt securities Asset-backed securities Other securities Short-term investments$ Noncurrent investments:U.S. government and agency securities$ $ $ $ $ $ Corporate debt securities Mortgage-backed securities Asset-backed securities Other securities Marketable equity securities

Equity investments without readily determinable fair values(3)

Equity method investments(3)

Noncurrent investments$ December 31, 2023

Cash equivalents(2)

$ $ $ $ $ $ Short-term investments:U.S. government and agency securities$ $ $ $ $ $ Corporate debt securities Other securities U.S. dollarsJapanese yenBritish poundsU.S. dollars

billion and $ billion as of September 30, 2024 and December 31, 2023, respectively, of which $ billion and $ billion have been designated as, and are effective as, economic hedges of net investments in certain of our foreign operations as of September 30, 2024 and December 31, 2023, respectively. At September 30, 2024, we had outstanding cross-currency swaps with notional amounts of $ million swapping U.S. dollars to euro and $ million swapping Swiss francs to U.S. dollars which have settlement dates ranging through 2028. Our cross-currency interest rate swaps, for which a significant amount convert a portion of our U.S. dollar-denominated fixed-rate debt to foreign-denominated fixed-rate debt, have also been designated as, and are effective as, economic hedges of net investments. At September 30, 2024, we had outstanding foreign currency forward contracts to sell billion euro and to sell billion Chinese yuan with settlement dates ranging through 2025, which have been designated as, and are effective as, economic hedges of net investments.

At September 30, 2024, all of our total long-term debt is at a fixed rate. We have converted approximately percent of our long-term fixed-rate notes to floating rates through the use of interest rate swaps.

The Effect of Risk-Management Instruments on the Consolidated Condensed Statements of Operations

$()$ $()Effect from interest rate contracts() () Cash flow hedges:Effective portion of losses on interest rate contracts reclassified from accumulated other comprehensive loss Cross-currency interest rate swaps() ()Net (gains) losses on foreign currency exchange contracts not designated as hedging instruments() Total$()$ $ $

During the three and nine months ended September 30, 2024 and 2023, the amortization of losses related to the portion of our risk management hedging instruments, fair value hedges, and cash flow hedges that was excluded from the assessment of effectiveness was not material.

)$ $()$ Cross-currency interest rate swaps() () Foreign currency forward contracts() () Cash flow hedges:Forward-starting interest rate swaps() Cross-currency interest rate swaps()

Risk-management instruments above are disclosed on a gross basis. There are various rights of setoff associated with certain of the risk-management instruments above that are subject to enforceable master netting arrangements or similar agreements. Although various rights of setoff and master netting arrangements or similar agreements may exist with the individual counterparties to the risk-management instruments above, individually, these financial rights are not material.

Contingent consideration liabilities relate to our liabilities arising in connection with the contingent value rights (CVRs) issued as a result of acquisitions of businesses. The fair values of the CVR liabilities were estimated using a discounted cash flow analysis and Level 3 inputs, including projections representative of a market participant's view of the expected cash payments associated with the agreed upon regulatory milestones based on probabilities of technical success, timing of the potential milestone events for the compounds, and estimated discount rates.

Note 8:

percent and percent for the three and nine months ended September 30, 2024, respectively, and percent and percent for the three and nine months ended September 30, 2023, respectively, primarily driven by unfavorable tax impacts of non-deductible acquired IPR&D charges, with a larger impact occurring in 2023.

The U.S. examination of tax years 2016-2018 began in 2019 and remains ongoing. The Internal Revenue Service commenced its examination of tax years 2019-2021 during the third quarter of 2023. The resolution of both audit periods will likely extend beyond the next 12 months.

Note 9:

$ $ $ Interest cost Expected return on plan assets()()()()Amortization of prior service cost Recognized actuarial loss Net periodic cost$ $ $ $

)


	Retiree Health Benefit Plans
	Three Months Ended September 30,		Nine Months Ended September 30,
	2024	2023	2024	2023
Components of net periodic benefit:
Service cost	$	$	$	$
Interest cost
Expected return on plan assets	()	()	()	()
Amortization of prior service benefit	()	()	()	()
Recognized actuarial gain	()	()	()	()

()




()



()

)$()$()$ $()Other comprehensive income (loss) before reclassifications() () ()Net amount reclassified from accumulated other comprehensive loss Net other comprehensive income (loss)()

Balance at September 30, 2024

$()$()$()$ $()


(Amounts presented net of taxes)	Foreign Currency Translation Gains (Losses)			Net Unrealized Gains (Losses) on Available-For-Sale Securities			Defined Benefit Pension and Retiree Health Benefit Plans			Net Unrealized Gains (Losses) on Cash Flow Hedges			Accumulated Other Comprehensive Loss
Balance at January 1, 2023	$	()		$	()		$	()		$			$	()

Other comprehensive income (loss) before reclassifications	()			()			()
Net amount reclassified from accumulated other comprehensive loss	()
Net other comprehensive income (loss)	()			()

2024			2023			2024			2023
Amortization of retirement benefit items:
Prior service benefits, net	$	()		$	()		$	()		$	()	Other–net, (income) expense
Actuarial losses, net												Other–net, (income) expense
Total before tax
Tax benefit	()			()			()			()		Income taxes
Net of tax

Other, net of tax										()		Other–net, (income) expense

Total reclassifications, net of tax	$			$			$			$

Note 12:

$ $ $ Interest income()()()()Net investment (gains) losses on equity securities (Note 7)() Retirement benefit plans()()()()

Numbers may not add due to rounding.

NM - not meaningful

(1) Jardiance revenue includes Glyxambi®, Synjardy®, and Trijardy® XR.

(2) Humalog revenue includes insulin lispro.

(3) Basaglar revenue includes Rezvoglar®.

(4) Zyprexa revenue includes sale of rights for the olanzapine portfolio in July 2023.

The following table summarizes our revenue, including net product revenue and collaboration and other revenue, by product for the nine months ended September 30, 2024 and 2023:


	Nine Months Ended September 30,
	2024						2023
	U.S.		Outside U.S.		Total		Total		Percent Change
Mounjaro	$	6,318.7	$	1,691.3	$	8,010.0	$	2,957.5	NM
Trulicity	2,894.0		1,109.3		4,003.3		5,463.2		(27)
Verzenio	2,378.4		1,373.1		3,751.5		2,717.9		38
Zepbound	3,018.4		—		3,018.4		—		NM
Taltz	1,486.7		821.7		2,308.4		1,975.0		17
Jardiance(1)	1,133.1		1,009.4		2,142.5		1,946.6		10
Humalog(2)	1,096.8		608.1		1,704.9		1,296.8		31
Cyramza	329.9		384.8		714.7		721.1		(1)
Olumiant	159.8		536.0		695.9		679.2		2
Humulin	472.3		164.5		636.8		664.0		(4)
Emgality	404.0		216.7		620.6		492.2		26
Basaglar(3)	273.9		226.1		500.0		543.1		(8)
Erbitux	408.2		44.2		452.4		446.3		1
Tyvyt	—		389.9		389.9		279.7		39
Cialis	17.6		301.0		318.6		302.7		5
Forteo	124.9		124.4		249.3		416.8		(40)
Zyprexa (4)	0.5		107.0		107.5		1,651.0		(93)
Baqsimi	1.4		23.4		24.8		658.4		(96)
Other products	824.6		1,035.8		1,860.4		1,559.2		19
Revenue	$	21,343.2	$	10,166.7	$	31,509.9	$	24,770.7	27

Numbers may not add due to rounding.

NM - not meaningful

(1) Jardiance revenue includes Glyxambi, Synjardy, and Trijardy XR.

(2) Humalog revenue includes insulin lispro.

(3) Basaglar revenue includes Rezvoglar.

(4) Zyprexa revenue includes sale of rights for the olanzapine portfolio in July 2023.

Revenue of Mounjaro in the U.S. during the three months ended September 30, 2024 was $2.38 billion compared to $1.28 billion for the three months ended September 30, 2023, reflecting continued strong demand, increased supply and, to a lesser extent, favorable changes to estimates for rebates and discounts. Following higher wholesaler inventory levels at the end of the second quarter of 2024, sales in the U.S. for the three months ended September 30, 2024 were negatively impacted by inventory decreases in the wholesaler channel. Revenue of Mounjaro in the U.S. during the nine months ended September 30, 2024 was $6.32 billion compared to $2.73 billion for the nine months ended September 30, 2023, reflecting continued strong demand, increased supply and higher realized prices due to access and savings card dynamics, as the $25 non-covered benefit expired on June 30, 2023. Revenue outside the U.S. during the three and nine months ended September 30, 2024 was $728.0 million and $1.69 billion, respectively, compared to $132.4 million and $228.4 million during the three and nine months ended September 30, 2023, respectively, primarily driven by increased volume associated with the launch of Mounjaro Kwikpen® in various markets.

Revenue of Trulicity decreased 26 percent and 31 percent in the U.S. during the three and nine months ended September 30, 2024, respectively, driven by decreased volume primarily due to competitive dynamics, partially offset by higher realized prices primarily due to changes to estimates for rebates and discounts. The decrease in volume in the U.S. during the nine months ended September 30, 2024 was also driven by supply constrains during the first half of 2024. Revenue outside the U.S. decreased 12 percent and 14 percent during the three and nine months ended September 30, 2024, respectively, primarily driven by decreased volume due to competitive dynamics. The decrease in volume outside the U.S. during the nine months ended September 30, 2024 was also driven by actions we have taken to manage demand.

Revenue of Verzenio increased 28 percent and 37 percent in the U.S. during the three and nine months ended September 30, 2024, respectively, primarily driven by increased demand and higher realized prices, partially offset by wholesaler buying patterns. Revenue outside of the U.S. increased 38 percent and 40 percent during the three and nine months ended September 30, 2024, respectively, primarily driven by increased demand.

Revenue of Zepbound in the U.S. during the three and nine months ended September 30, 2024 was $1.26 billion and $3.02 billion, respectively. Following higher wholesaler inventory levels at the end of the second quarter, sales in the U.S. for the three months ended September 30, 2024 were negatively impacted by inventory decreases in the wholesaler channel.

Revenue of Taltz increased 18 percent and 15 percent in the U.S. during the three and nine months ended September 30, 2024, respectively, driven by increased demand and higher realized prices, partially offset by wholesaler buying patterns. Revenue outside the U.S. increased 19 percent and 21 percent during the three and nine months ended September 30, 2024, respectively, driven by increased demand.

Revenue of Jardiance decreased 19 percent and was flat in the U.S. during the three and nine months ended September 30, 2024, respectively. The decrease in revenue in the U.S. for the three months ended September 30, 2024 was driven by lower realized prices, partially offset by increased demand. Revenue outside the U.S. increased 23 percent and 24 percent during the three and nine months ended September 30, 2024, respectively, driven by increased volume. See Note 4 to the consolidated condensed financial statements for information regarding our collaboration with Boehringer Ingelheim involving Jardiance.

Gross Margin, Costs, and Expenses

The following table summarizes our gross margin, costs, and expenses:


	Three Months Ended September 30,						Percent Change	Nine Months Ended September 30,						Percent Change
	2024			2023				2024			2023

Gross margin	$	9,268.3		$	7,638.5		21	$	25,495.4		$	19,476.5		31
Gross margin as a percent of revenue	81.0		%	80.4		%		80.9		%	78.6		%

* Filed herewith.

Long-term debt instruments under which the total amount of securities authorized does not exceed 10 percent of our consolidated assets are not filed as exhibits to this Quarterly Report. We will furnish a copy of these agreements to the Securities and Exchange Commission upon request.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


		ELI LILLY AND COMPANY
		(Registrant)

Date:	October 30, 2024	/s/ Lucas Montarce
		Lucas Montarce
		Executive Vice President and Chief Financial Officer
Date:	October 30, 2024	/s/ Donald Zakrowski
		Donald Zakrowski
		Senior Vice President, Finance, and Chief Accounting Officer

ELI LILLY & Co - Quarter Report: 2024 September (Form 10-Q)

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