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 nine months ended September 30, 2024, the increase in volume was primarily driven by Zepbound and Mounjaro, partially offset by declines in Trulicity. Following higher wholesaler inventory levels at the end of the second quarter of 2024, Mounjaro and Zepbound sales in the U.S. for the three months ended September 30, 2024 were negatively impacted by inventory decreases in the wholesaler channel. We estimate this impacted sales of Mounjaro and Zepbound in the U.S. for the third quarter of 2024 by mid-single digits as a percent of aggregate U.S. sales of these products.

In the U.S. for the three months ended September 30, 2024, the higher realized prices were primarily driven by Humalog®, Verzenio and Trulicity. In the U.S. for the nine months ended September 30, 2024, the higher realized prices were also positively impacted by the access and savings card dynamics related to Mounjaro, as the $25 non-covered benefit expired on June 30, 2023.

Outside the U.S. for the three months ended September 30, 2024, the decrease in volume was driven by the sale of rights for the olanzapine portfolio, including Zyprexa, in the third quarter of 2023, partially offset by the increase in volume by Mounjaro and Verzenio. Outside the U.S. for the nine months ended September 30, 2024, the increase in volume was primarily driven by Mounjaro and Verzenio, partially offset by the 2023 sale of rights for the olanzapine portfolio.

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

Gross margin as a percent of revenue for the three and nine months ended September 30, 2024 increased 0.6 percentage points and 2.3 percentage points compared with the three and nine months ended September 30, 2023, respectively, primarily driven by favorable product mix and higher realized prices, partially offset by the sale of rights for the olanzapine portfolio in the third quarter of 2023 and higher manufacturing costs.

Research and development expenses increased 13 percent and 18 percent for the three and nine months ended September 30, 2024, respectively, driven by continued investments in our early and late-stage portfolio.

Marketing, selling, and administrative expenses increased 16 percent and 13 percent for the three and nine months ended September 30, 2024, respectively, primarily driven by promotional efforts supporting ongoing and future launches.

Acquired IPR&D charges for the three and nine months ended September 30, 2024 were primarily related to the acquisition of Morphic. Acquired IPR&D charges for the three and nine months ended September 30, 2023 were primarily related to the acquisitions of DICE Therapeutics, Inc., Versanis Bio, Inc., and Emergence Therapeutics AG. See Note 3 to the consolidated condensed financial statements.

Asset impairment, restructuring, and other special charges for the three months ended September 30, 2024 were primarily related to impairment of an intangible asset associated with a molecule in development. For the nine months ended September 30, 2024 asset impairment, restructuring, and other special charges also included charges related to litigation. See Note 5 to the consolidated condensed financial statements for additional information.

Other–net, (income) expense included net investment (gains) losses on equity securities of $(112.4) million and $29.5 million for three and nine months ended September 30, 2024, respectively, and $62.9 million and $141.5 million for three and nine months ended September 30, 2023, respectively. See Note 12 to the consolidated condensed financial statements for additional information.

The effective tax rates were 38.9 percent and 19.1 percent for the three and nine months ended September 30, 2024, respectively, and 113.4 percent and 24.6 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.