Eli Lilly’s net income declined by $1 billion or 16% year-over-year to $5.2 billion in 2023, primarily due to higher acquired in-process research and development expenses. Despite this, the company’s stock performance has been strong, with LLY stock experiencing gains of 345% over the last three years, outperforming the S&P 500 each year. Eli Lilly’s margin profile has also seen improvement, with gross and operating margins expanding in recent years.
The company’s gross profit rose from $19 billion in 2020 to $27 billion in 2023, with gross profit margin increasing from 77.7% to 79.2% over the same period. Operating margins also expanded from 28.9% in 2020 to 31.6% in 2023. Despite increasing investments in research and development, total R&D expenses rose 53% between 2020 and 2023, while SG&A costs only increased by 18%. The rise in combined SG&A and R&D expenses was lower than the 39% revenue growth over this period.
However, despite the expansion of gross and operating margins, the company saw its net income decline from $6.2 billion in 2020 to $5.2 billion in 2023. This was primarily due to non-operating expenses, particularly IPR&D expenses, which rose from $660 million or 2.7% of revenue in 2020 to $3.8 billion or 11.1% of revenue in 2023. On an adjusted basis, net income margin contracted from 25.2% in 2020 to 16.7% in 2023, resulting in a decline in earnings per share over the same period.
Looking ahead to 2024, Eli Lilly’s outlook is solid, with expected revenue growth driven by its diabetes drug Mounjaro and weight-loss drug Zepbound. The company expects adjusted earnings per share to be in the range of $13.50 and $14.00, implying a significant year-over-year rise. Eli Lilly has not included any IPR&D charges in its current guidance, and with the bottom-line expected to double in 2024, a sharp jump in net income margin is anticipated.
Overall, the company’s improved margin profile and strong outlook for 2024 bode well for its stock performance. While LLY stock may see higher levels, it is important to consider how Eli Lilly’s peers fare on key metrics. Investors can find valuable comparisons for companies across industries at Peer Comparisons. With the potential for continued growth and improved financial performance, Eli Lilly remains a company to watch in the pharmaceutical industry.
