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 and six months ended June 30, 2024, the increase in volume was primarily driven by Zepbound, Mounjaro, and Verzenio, partially offset by declines in Trulicity and the sale of rights for Baqsimi during the second quarter of 2023. Strong performance by our incretin medicines continued, as production increases resulted in improved channel dynamics and stocking levels, contributing to sales growth during the three and six months ended June 30, 2024. For the three months ended June 30, 2024, Mounjaro and Zepbound sales in the U.S. were positively impacted by channel stocking that we estimate totaled high teens to mid-20s as a percent of U.S. sales. While supply and demand have come into better balance, expected increases in demand may result in periodic supply tightness for certain presentations and dose levels.

In the U.S. for the three and six months ended June 30, 2024, the higher realized prices were primarily driven by Mounjaro as realized prices were positively impacted by access and savings card dynamics compared to the same periods in 2023. In the second half of 2024, these savings card dynamics should have a minimal impact on realized price comparisons to base periods, as the $25 non-covered benefit expired June 30, 2023.

Outside the U.S. for the three and six months ended June 30, 2024, the increase in volume was primarily driven by Mounjaro and Verzenio.

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

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

(3)Basaglar revenue includes Rezvoglar®.

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

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

(3)Basaglar revenue includes Rezvoglar.

Revenue of Mounjaro in the U.S. during the three and six months ended June 30, 2024 was $2.41 billion and $3.93 billion, respectively, compared to $915.7 million and $1.45 billion during the three and six months ended June 30, 2023, respectively, reflecting continued strong demand, improved channel dynamics, and higher realized prices due to access and savings card dynamics. In the second half of 2024, these savings card dynamics should have a minimal impact on realized price comparisons to base periods, as the $25 non-covered benefit expired June 30, 2023. Revenue outside the U.S. during the three and six months ended June 30, 2024 was $677.2 million and $963.4 million, respectively, compared to $64.0 million and $96.0 million during the three and six months ended June 30, 2023, respectively, primarily driven by increased volume associated with the launch of Mounjaro Kwikpen® in various markets.

Revenue of Trulicity decreased 36 percent and 33 percent in the U.S. during the three and six months ended June 30, 2024, respectively, driven by decreased volume primarily due to supply constraints and competitive dynamics. Revenue outside the U.S. decreased 16 percent and 15 percent during the three and six months ended June 30, 2024, respectively, primarily driven by decreased volume. 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 by communicating with healthcare practitioners to not start new patients on Trulicity.

Revenue of Verzenio increased 46 percent and 43 percent in the U.S. during the three and six months ended June 30, 2024, respectively, primarily driven by increased demand. Revenue outside of the U.S. increased 39 percent and 41 percent during the three and six months ended June 30, 2024, respectively, primarily driven by increased demand, partially offset by the unfavorable impact of foreign exchange rates.

Revenue of Zepbound in the U.S. during the three and six months ended June 30, 2024 was $1.24 billion and $1.76 billion, respectively. Zepbound launched in the U.S. for the treatment of adult patients with obesity or overweight with weight-related comorbidities in November 2023. In the U.S., we plan to launch Zepbound 2.5 milligram and 5 milligram single-dose vials in the third quarter of 2024.

Revenue of Jardiance increased 11 percent in the U.S. during both the three and six months ended June 30, 2024, driven by increased demand. Revenue outside the U.S. increased 21 percent and 24 percent during the three and six months ended June 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.

Revenue of Taltz increased 14 percent and 13 percent in the U.S. during the three and six months ended June 30, 2024, respectively, primarily driven by increased demand. Revenue outside the U.S. increased 23 percent and 22 percent during the three and six months ended June 30, 2024, respectively, primarily driven by increased demand.

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 and six months ended June 30, 2024 increased 2.5 percentage points and 3.3 percentage points compared with the three and six months ended June 30, 2023, respectively, primarily driven by higher realized prices and favorable product mix.

Research and development expenses increased 15 percent and 21 percent for the three and six months ended June 30, 2024, respectively, driven by continued investment in our portfolio and our people.

Marketing, selling, and administrative expenses increased 10 percent and 11 percent for the three and six months ended June 30, 2024, respectively, primarily driven by investments in our launches and our people.

For additional information for acquired IPR&D charges, see Note 3 to the consolidated condensed financial statements.

Asset impairment, restructuring, and other special charges for the three and six months ended June 30, 2024 were related to anticipated litigation payments. See Note 10 to the consolidated condensed financial statements for additional information.

Other–net, (income) expense included net investment losses on equity securities of $157.9 million and $141.9 million for three and six months ended June 30, 2024, respectively, and $64.9 million and $78.6 million for three and six months ended June 30, 2023, respectively. See Note 12 to the consolidated condensed financial statements for additional information.

The effective tax rates were 15.6 percent and 13.9 percent for the three and six months ended June 30, 2024, respectively, compared to 15.6 percent and 14.1 percent for the three and six months ended June 30, 2023, respectively. The effective tax rates for the three and six months ended June 30, 2024 reflect a mix of earnings in higher tax jurisdictions, while effective tax rates for the three and six months ended June 30,2023 reflect the tax impact of the sale of rights for Baqsimi. Additionally, the effective tax rates for the six months ended June 30, 2024 and 2023 were both reduced by net discrete tax benefits, with a larger net discrete tax benefit reflected in the six months ended June 30, 2024 compared to the same period in 2023.