Eli Lilly CEO explains why profit missed estimates in fiscal Q2

Eli Lilly & Co (NYSE: LLY) said on Tuesday its profit in the fiscal second quarter came in weaker than expected. Revenue, however, topped Wall Street estimates in Q2. Shares of the company are up more than 5.0% on Tuesday.

David Ricks’ remarks on CNBC’s “Squawk Box”

According to CEO David Ricks, it was the COVID-19 antibodies-related excess inventory charge that weighed on profit in the recent quarter. On CNBC’s “Squawk Box”, he said:

Two things happened in Q2 that were hard to predict. One was that for some time in the quarter, the U.S., in particular, stopped distributing our antibodies. Additionally, we wrote down some material we had made last year in early H1, but it appears some of that material will expire and won’t be consumed.

Guidance for the full year

Eli Lilly valued the hit to revenue from the COVID-19 crisis at roughly $200 million in the United States and $50 million elsewhere. For fiscal 2021, it forecasts up to $8.0 of adjusted per-share earnings. Analysts, on the other hand, are calling for $7.89 of adjusted EPS.

Earlier this year, Eli Lilly acquired gene therapy specialist Prevail Therapeutics for £770 million.

Second-quarter financial performance

Eli Lilly reported $1.39 billion of net income in the second quarter that translates to $1.53 per share. In the comparable quarter of last year, its net income stood at $1.41 billion or $1.55 per share. On an adjusted basis, its EPS jumped from $1.45 to $1.87.

Eli Lilly generated $6.74 billion of revenue that represents an annualised growth of 23%. According to FactSet, experts had forecast $6.60 billion of revenue and $1.89 of adjusted EPS.

Other notable figures include a 25% year over year increase in revenue from Trulicity and gross margin as a percentage of revenue that slipped from 77.8% to 71.0% in the recent quarter.