ELI LILLY & Co

RESULTS OF OPERATIONS

Revenue

The following table summarizes our revenue activity by region:

The following are components of the change in revenue compared with the prior year:

In the U.S. for the three months ended March 31, 2024, the increase in volume was primarily driven by Zepbound, Mounjaro, and Verzenio, partially offset by a decrease in Trulicity. Exceptionally strong demand for our incretin medicines led to wholesaler backorders for these products at March 31, 2024. We expect tight supply to continue as growing production volume is outpaced by demand. In the short to mid-term, we expect sales growth for incretin medicines to primarily be a function of the quantity we can produce and ship. In the U.S. for the three months ended March 31, 2024, the higher realized prices were primarily driven by Mounjaro as realized prices were positively impacted by savings card dynamics compared to the same period in 2023. In the second half of 2024, these savings card dynamics should cease to have a notable effect on realized price comparisons to base periods, as the $25 non-covered benefit expired June 30, 2023.

Outside the U.S. for the three months ended March 31, 2024, the increase in volume was primarily driven by Mounjaro, Verzenio, Jardiance, and Tyvyt®.

The following table summarizes our revenue, including net product revenue and collaboration and other revenue, by product for the three months ended March 31, 2024 and 2023:

NM - not meaningful

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

(2)Humalog revenue includes insulin lispro.

(3)Basaglar revenue includes Rezvoglar®.

Revenue of Mounjaro in the U.S. during the three months ended March 31, 2024 was $1.52 billion compared to $536.4 million during the three months ended March 31, 2023, reflecting higher realized prices, as well as increased demand. The higher realized prices were positively impacted by savings card dynamics compared to the same period in 2023. In the second half of 2024, these savings card dynamics should cease to have a notable effect on realized price comparisons to base periods, as the $25 non-covered benefit expired June 30, 2023. Revenue outside the U.S. was $286.2 million compared to $32.0 million during the three months ended March 31, 2023, driven by increased volume. Worldwide volume growth was linked to available supply.

Revenue of Trulicity decreased 30 percent in the U.S. during the three months ended March 31, 2024, driven by decreased volume primarily due to supply constraints and competitive dynamics. Revenue outside the U.S. decreased 13 percent during the three months ended March 31, 2024, driven by decreased volume and, to a lesser extent, lower realized prices. In addition to the factors affecting U.S. volume, international markets continue to be impacted by actions we have taken to manage demand amid tight supply, including measures to minimize impact to existing patients.

Revenue of Verzenio increased 38 percent in the U.S. and 42 percent outside the U.S. during the three months ended March 31, 2024, primarily driven by increased demand.

Revenue of Jardiance increased 12 percent in the U.S. during the three months ended March 31, 2024, driven by increased demand. Revenue outside the U.S. increased 28 percent during the three months ended March 31, 2024, driven by increased volume. See Note 4 to the consolidated condensed financial statements for information regarding our collaboration with Boehringer Ingelheim involving Jardiance.

Revenue of Taltz increased 11 percent in the U.S. during the three months ended March 31, 2024, driven by increased demand and higher realized prices. Revenue outside the U.S. increased 20 percent during the three months ended March 31, 2024, driven by increased demand.

Revenue of Zepbound in the U.S. during the three months ended March 31, 2024 was $517.4 million. Similar to our other incretin medicines, volume growth was linked to available supply. Zepbound launched in the U.S. for the treatment of adult patients with obesity or overweight with weight-related comorbidities in November 2023.

Gross Margin, Costs, and Expenses

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

Gross margin as a percent of revenue for the three months ended March 31, 2024 increased 4.3 percentage points compared with the three months ended March 31, 2023, primarily driven by higher realized prices, favorable product mix, and, to a lesser extent, improvements in the cost of production.

Research and development expenses increased 27 percent for the three months ended March 31, 2024, driven by higher development expenses for late-stage assets and additional investments in early-stage research, as well as a charge of approximately $75 million during the three months ended March 31, 2024 associated with the termination of the Verzenio prostate cancer program due to futility.

Marketing, selling, and administrative expenses increased 12 percent for the three months ended March 31, 2024, primarily driven by promotional efforts associated with ongoing and future launches, as well as increased compensation and benefit costs.

The effective tax rate was 11.6 percent for the three months ended March 31, 2024 compared to 12.1 percent for the three months ended March 31, 2023, driven by a larger net discrete tax benefit reflected in the three months ended March 31, 2024 compared to the same period in 2023.

For additional information for acquired IPR&D charges and other–net, (income) expense, see Note 3 and Note 11 to the consolidated condensed financial statements, respectively.