Eli Lilly and : Q4 2022 Lilly Press Release

Feb. 2, 2023

For Release: Immediately

Refer to: Jordan Bishop; [e-mail]; [phone] (Media) Joe Fletcher; [e-mail]; [phone] (Investors)

Lilly Reports Fourth-Quarter 2022 Financial Results, Core Business Growth and Pipeline

Advancements Support Strong Long-Term Outlook

• Revenue in Q4 2022 decreased 9%. Excluding COVID-19 antibodies, revenue in Q4 2022 increased 5%, or 10% on a constant currency basis, driven by volume growth of key growth products, partially offset by lower Alimta revenue. Excluding COVID-19 antibodies, total worldwide volume in Q4 2022 increased 13%.
• Pipeline advancements included FDA approval of Jaypirca for mantle cell lymphoma under the accelerated approval pathway and FDA and EMA acceptance of regulatory submissions for Jardiance for adults with chronic kidney disease. Additionally, the company initiated a rolling submission in the U.S. for tirzepatide in obesity and the FDA granted Fast Track designation for tirzepatide in obstructive sleep apnea.
• Key growth products - consisting of Verzenio, Mounjaro, Jardiance, Taltz, Trulicity, Retevmo, Emgality, Cyramza, Tyvyt and Olumiant - grew 21% and represented 70% of revenue in Q4 2022.
• Q4 2022 EPS increased 13% to $2.14 on a reported basis and decreased 4% to $2.09 on a non-GAAP basis, both inclusive of $0.23 of acquired IPR&D and development milestone charges.
• 2023 EPS guidance updated to be in the range of $7.90 to $8.10 on a reported basis and $8.35 to $8.55 on a non-GAAP basis.

INDIANAPOLIS, Feb. 2, 2023 - Eli Lilly and Company (NYSE: LLY) today announced its financial results for the fourth quarter of 2022.

"2023 is an inflection point for Lilly - a chance to expand our impact on patients and growth potential as an R&D-driven biopharma company," said David A. Ricks, Lilly's chair and CEO. "Over the course of this critical year, we hope to launch as many as four new medicines for challenging diseases, while advancing our next generation of molecules currently in Phase 3."

Eli Lilly and Company | Lilly Corporate Center | Indianapolis, Indiana 46285 | U.S.A.

Anat Ashkenazi, Lilly's executive vice president and chief financial officer added: "As we closed out 2022, Lilly demonstrated strong growth and achieved meaningful pipeline progress that included the launch for Mounjaro in type 2 diabetes. We expect to capitalize on this momentum and deliver mid- teen revenue growth for our core business in 2023 while remaining committed to investing in innovation, late-stage opportunities, manufacturing capacity, and our people."

Lilly shared numerous updates recently on key regulatory, clinical, business development and other events, including:

• The U.S. Food and Drug Administration (FDA) approval of JaypircaTM (pirtobrutinib) for adults with relapsed or refractory mantle cell lymphoma after at least two lines of systemic therapy, including a BTK inhibitor, under the accelerated approval pathway;
• FDA issuance of a complete response letter for the accelerated approval submission of donanemab for early Alzheimer's disease;
• FDA and European Medicines Agency acceptance of regulatory submissions for Jardiance® for adults with chronic kidney disease based on results from the EMPA-KIDNEY Phase 3 trial;
• The initiation of a rolling submission in the U.S. for tirzepatide in obesity and FDA Fast Track designation for tirzepatide in obstructive sleep apnea;
• The announcement that Jardiance is the first SGLT2 inhibitor to show statistically significant reduction in blood sugar levels in children and adolescents with type 2 diabetes;
• Positive donanemab data from the first Phase 3 active comparator study in early Alzheimer's disease, TRAILBLAZER-ALZ 4;
• Plans to invest an additional $450 million and create at least 100 new jobs to expand manufacturing capacity at the company's Research Triangle Park facility;
• The acquisition of Akouos, Inc., which expands Lilly's efforts in genetic medicines to include Akouos's potential first-in-classadeno-associated viral gene therapies;
• The fifth consecutive 15% annual increase in Lilly's quarterly dividend, doubling since 2018;
• A collaboration with EVA Pharma to establish local manufacturing capabilities to supply low-cost insulin to at least 1 million people by 2030, mostly in Africa; and

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• An initiative with Direct Relief to expand cold chain capacity in Africa, Latin America, the Caribbean and Southeast Asia.

For additional information on these and other important public announcements, visit the news section of Lilly's website.

Financial Results

$ in millions, except	Fourth Quarter	%
per share data
	2022	2021	Change
Revenue	$7,301.8	$7,999.9	(9)%
Net Income - Reported	1,937.7	1,726.1	12%
EPS - Reported	2.14	1.90	13%
Net Income - Non-GAAP	1,893.1	1,970.5	(4)%
EPS - Non-GAAP	2.09	2.17	(4)%

A discussion of the non-GAAP financial measures is included under "Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information (Unaudited)."

Fourth-Quarter Reported Results

In Q4 2022, worldwide revenue was $7.30 billion, a decrease of 9% compared with Q4 2021, driven by a 4% decrease from the unfavorable impact of foreign exchange rates, a 3% decrease due to lower realized prices, and a 2% decrease in volume. Excluding COVID-19 antibodies, revenue in Q4 2022 increased 5% and total worldwide volume increased 13%. Key growth products, consisting of Verzenio®, Mounjaro®, Jardiance, Taltz®, Trulicity®, Retevmo®, Emgality®, Cyramza®, Tyvyt® and Olumiant®, grew 21% and represented 70% of revenue for Q4 2022.

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Revenue in the U.S. decreased 10% to $4.66 billion, driven by a 10% decrease in volume with prices remaining relatively flat. Excluding revenue from COVID-19 antibodies, revenue in the U.S. increased by 11%, primarily driven by volume from key growth products.

Revenue outside the U.S. decreased 6% to $2.64 billion, driven by a 12% decrease from the unfavorable impact of foreign exchange rates and a 7% decrease due to lower realized prices, partially offset by a 12% increase in volume. The lower realized prices were primarily driven by the impact of government pricing in China from the volume-based procurement (VBP) for Humalog® and the National Reimbursement Drug List (NRDL) formulary for certain products, particularly Verzenio and Tyvyt. The increase in volume outside the U.S. was largely driven by key growth products and approximately $130 million of one-time revenue associated with the sale of the company's rights to Alimta in Korea and Taiwan.

Gross margin decreased 3% to $5.75 billion in Q4 2022 compared with Q4 2021. Gross margin as a percent of revenue was 78.8%, an increase of 4.4 percentage points compared with Q4 2021. The increase in gross margin percent was primarily driven by lower sales of COVID-19 antibodies, partially offset by lower realized prices and increased expenses due to inflation and logistics costs.

In Q4 2022, research and development expenses increased 5% to $2.00 billion, or 27% of revenue, driven by higher development expenses for late-stage assets, partially offset by the favorable impact of foreign exchange rates and lower development expenses for COVID-19 antibodies.

Marketing, selling and administrative expenses increased 3% to $1.64 billion in Q4 2022, primarily driven by costs associated with launches of new products and indications, partially offset by the favorable impact of foreign exchange rates.

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In Q4 2022, the company recognized acquired in-process research and development (IPR&D) and development milestone charges of $240.1 million. In Q4 2021, the company recognized acquired IPR&D and development milestone charges of $437.7 million, primarily related to a business development transaction with Foghorn Therapeutics Inc.

In Q4 2022, the company recognized asset impairment, restructuring and other special charges of $38.1 million, primarily related to acquisition and integration costs associated with the closing of our acquisition of Akouos, Inc. In Q4 2021, the company recognized asset impairment, restructuring and other special charges of $104.5 million, primarily related to impairment of an intangible asset from our acquisition of Loxo Oncology.

Operating income in Q4 2022 was $1.84 billion compared with $1.92 billion in Q4 2021. Operating margin percent, defined as operating income as a percent of revenue, was 25.1%, which includes a negative impact of approximately 330 basis points attributed to acquired IPR&D and development milestone charges.

Other income (expense) was income of $260.0 million in Q4 2022 compared with expense of $77.3 million in Q4 2021. The increase in other income (expense) was primarily driven by net gains on investments in equity securities in Q4 2022 compared with net losses on investments in equity securities in Q4 2021.

The effective tax rate was 7.6% in Q4 2022 compared with 6.2% in Q4 2021. The effective tax rate in Q4 2022 reflects the favorable tax impact of the implementation of the provision in the Tax Cuts and Jobs Act (the 2017 Tax Act) that requires capitalization and amortization of research and development expenses for tax purposes starting in 2022 and a net discrete tax benefit, partially offset by the tax impact of the mix of earnings in higher tax jurisdictions. The effective tax rate in Q4 2021 reflected a net discrete tax benefit and the tax impact of acquired IPR&D and development milestone charges.

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