The second-quarter earnings season for large drug and biotech companies has concluded, with Eli Lilly reporting its results last week. The pharma/biotech industry, part of the broader Medical sector (which also includes medical device companies), saw a positive trend. According to the Zacks Earnings Trends report, 85.7% of medical companies exceeded earnings estimates, while 75.5% beat revenue expectations in the second quarter. Earnings per share rose 17.1% year-over-year, and revenues increased by 7.6%.
Despite headwinds like economic concerns, inflation, Medicare drug price negotiations, regulatory scrutiny of mergers, pipeline setbacks, and generic competition, some drugmakers stood out. Eli Lilly, Pfizer, and AbbVie all raised their earnings and sales guidance for 2024, signaling investor optimism. While a single quarter’s performance shouldn’t be the sole focus for long-term investors, these companies’ fundamentals warrant closer examination.
Eli Lilly and Company
Eli Lilly delivered strong second-quarter results, with adjusted earnings per share reaching $3.92, an 86% year-over-year increase. Revenues surged 36% to $11.3 billion, driven by robust demand for its GLP-1-based treatments, Mounjaro and Zepbound, along with other key drugs like Verzenio and Taltz. All key drugs exceeded expectations, with Mounjaro and Zepbound generating over $4 billion in sales. The company continues to face supply constraints for incretin-based products, leading to strong demand exceeding supply. To address this, Lilly is investing in new manufacturing facilities in the United States and Europe. Increased production volumes contributed to improved sales growth in the quarter, though supply issues could persist for certain doses. Lilly’s strong performance led it to raise its sales and earnings guidance for 2024, reflecting better visibility on production plans and planned international launches for Mounjaro. Lilly’s new drugs, including Mounjaro, Omvoh, Zepbound, Ebglyss, and Jaypirca, are expected to significantly contribute to top-line growth. The company recently received FDA approval for donanemab (Kisunla), a potential blockbuster drug for treating early symptomatic Alzheimer’s disease. Earnings estimates for Lilly have been revised upwards, reflecting the company’s strong prospects.
Pfizer
Pfizer’s second-quarter adjusted earnings per share declined 11% year-over-year to 60 cents, while revenues rose 3% operationally to $13.28 billion. This marked Pfizer’s first quarter of top-line growth after five consecutive quarters of decline. Higher sales of key non-COVID products like Vyndaqel and Eliquis, new product launches, and acquired products from Seagen offset an expected drop in COVID-19 vaccine (Comirnaty) revenues. Seagen drugs contributed $845 million to the top line. Pfizer’s non-COVID products saw a 14% operational revenue increase in the quarter. Driven by these factors, the company raised its earnings and revenue expectations for 2024. Pfizer’s non-COVID operational revenues have shown improvement in the first half of 2024, driven by key products and new launches. Cost-cutting measures and internal restructuring are expected to generate $4 billion in savings in 2024. Pfizer’s dividend yield of around 6% remains attractive.
AbbVie
AbbVie’s adjusted earnings per share declined 8.9% year-over-year to $2.65, primarily due to acquisition-related costs. Sales, however, increased 5.6% operationally to $14.46 billion. While Humira sales are declining due to patent loss and biosimilar competition, AbbVie’s ex-Humira drugs saw an 18% increase in sales, fueled by strong performance of Rinvoq, Skyrizi, Venclexta, and Vraylar. Sales of Rinvoq and Skyrizi rose significantly due to label expansions. AbbVie raised its earnings and sales guidance for 2024, driven by the strong performance of its ex-Humira drugs. The company expects to return to robust revenue growth in 2025, supported by its new product launches and strong ex-Humira growth platform. AbbVie’s ex-Humira growth drugs account for over 80% of its total sales and are expected to outperform initial expectations. The company has several early/mid-stage candidates that hold potential for long-term growth.
