Eli Lilly and Company — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing, not a standalone fourth-quarter report. Comparisons below are primarily with fiscal 2022. Lilly operates as one human-pharmaceutical-products segment.
Financial performance
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $34.12 billion | $28.54 billion | +20% |
| Gross margin | $27.04 billion; 79.2% of revenue | $21.91 billion; 76.8% | +2.4 percentage points |
| Net income | $5.24 billion | $6.24 billion | -16% |
| Diluted EPS | $5.80 | $6.90 | -16% |
| Operating cash flow | $4.24 billion | $7.59 billion | Down; principally higher cash income-tax payments |
| Capital expenditures | $3.45 billion | $1.85 billion | Higher investment in manufacturing capacity |
| Total debt at year-end | $25.23 billion | $16.24 billion | +$8.99 billion |
Revenue rose in both the U.S. (+20%, to $21.79 billion) and outside the U.S. (+19%, to $12.33 billion). Management attributed consolidated growth mainly to higher volume, with higher realized prices also contributing. Net income and EPS fell as acquired in-process research and development (IPR&D), R&D, marketing and administrative expenses, and income taxes increased.
Year-end cash and cash equivalents were $2.82 billion, versus $2.07 billion in 2022. Current assets were $25.73 billion and current liabilities $27.29 billion. Lilly also reported $3.16 billion of total investments and $7.42 billion of unused committed bank credit facilities. The company said cash, operating cash generation, and access to borrowing were sufficient for existing and planned capital requirements.
Key business and period changes
- Mounjaro revenue reached $5.16 billion, compared with $482.5 million in 2022, reflecting increased demand and higher realized prices. Zepbound launched in the U.S. in 2023 and recorded $175.8 million in revenue.
- Verzenio revenue rose 56% to $3.86 billion, and Jardiance-family revenue rose 33% to $2.74 billion. Trulicity revenue declined 4% to $7.13 billion; Humalog fell 19% to $1.66 billion.
- There was no COVID-19 antibody revenue in 2023, compared with $2.02 billion in 2022. Alimta revenue fell 77% to $217.5 million following generic competition.
- Sales of rights for the olanzapine portfolio, including Zyprexa, and Baqsimi generated $1.45 billion and $579 million of 2023 revenue, respectively. Lilly received $1.60 billion in cash proceeds from product-rights sales during the year.
- Gross margin improved despite higher manufacturing labor costs and capacity-expansion investment. R&D expense increased 30% to $9.31 billion; marketing, selling, and administrative expense increased 15% to $7.40 billion.
- Acquired IPR&D charges increased to $3.80 billion from $908.5 million, primarily reflecting acquisitions and business-development transactions. The effective tax rate increased to 20.1% from 8.3%, with non-deductible acquired IPR&D and other tax effects contributing.
Outlook, commentary, risks, and unusual items
- Demand and supply: Lilly reported intermittent delays meeting demand for incretin products, including Mounjaro and Trulicity, and expected tight supply to persist while additional capacity is brought online. It is investing in manufacturing sites and contracted capacity. Some supply agreements could require payments of up to approximately $10 billion if specified purchase commitments are not met.
- Pipeline and approvals: The filing describes approximately 50 candidates in clinical development or under regulatory review. Donanemab was submitted for review in the U.S., EU, and Japan for early Alzheimer’s disease. The FDA issued a complete response letter for lebrikizumab in 2023 based on inspection findings at a third-party manufacturing facility; Lilly anticipated regulatory action by the end of 2024. Several pipeline approvals are subject to confirmatory trials.
- Pricing and reimbursement: Lilly identifies government and private-payer cost controls as a significant risk. Jardiance was selected for Medicare government-set pricing effective in 2026 under the Inflation Reduction Act; Lilly expects other significant products could be selected in future years.
- Legal and regulatory matters: Ongoing matters include incretin-product injury lawsuits, insulin-pricing litigation and investigations, 340B program disputes, and other product, pricing, and commercial claims. Lilly states it is predominantly self-insured for litigation losses. It says the ultimate outcomes cannot be determined and that some matters could materially affect results in an individual period, while not expecting their resolution to materially affect consolidated financial position or liquidity.
- Other financial considerations: Income-tax cash payments rose to $5.56 billion from $2.67 billion. A $1.43 billion Toll Tax balance remained payable, including $634.2 million in 2024 and $792.8 million in 2025. February 2024 debt issuance of $6.45 billion occurred after year-end; proceeds were intended for general corporate purposes, including repayment of borrowings.
- Guidance: The supplied filing text does not provide a clear numeric 2024 revenue or EPS forecast. Management indicated capital expenditures would remain higher over the next several years as manufacturing capacity expands and expected tight incretin supply to continue during capacity ramp-up.
- Controls and audit: Management and Ernst & Young reported effective internal control over financial reporting as of December 31, 2023, and the auditor issued unqualified opinions on the financial statements and controls. Lilly completed implementation of a new global ERP system in February 2024 and noted post-implementation activities and related control evaluation.
Important facts for investors to verify
- Whether incretin manufacturing expansion reduces supply constraints and supports continued growth in Mounjaro and Zepbound.
- How much reported growth depends on product-rights transactions, collaboration revenue, and other items that may not recur at similar levels.
- Whether higher R&D, launch, and capacity costs—and the elevated acquired-IPR&D and tax charges—translate into improved future earnings and cash flow.
- The effect of Medicare price setting, payer rebates, and other pricing actions on Jardiance and the broader portfolio.
- Developments in the lebrikizumab review, donanemab regulatory applications, and confirmatory trials for accelerated approvals.
- Debt repayment and liquidity following the increase in debt, the February 2024 issuance, and substantial planned manufacturing investment.
- Material developments in product-liability, insulin-pricing, 340B, and other litigation or investigations, including potential effects not yet reasonably estimable.