Eli Lilly and Company: Earnings, Tirzepatide Power, and the Cash-Flow Puzzle

FY2024 Surge and a Clinical Win Define the Moment#

Eli Lilly reported $45.04B in revenue and $10.59B in net income for fiscal 2024 — a +32.00% and +102.08% year‑over‑year increase, respectively — driven by blockbuster performance of the tirzepatide franchise and reinforced by the SURMOUNT‑5 head‑to‑head trial showing Zepbound’s superiority versus Wegovy. Those figures mark a material inflection in Lilly’s top line and profitability profile and underpin the company’s elevated market capitalization near $695B. According to Eli Lilly’s FY2024 financial statements (filed 2025‑02‑19), the operating income expansion to $17.50B (operating margin 38.86%) is the clearest evidence that product mix and scale are translating into margin leverage even as the company continues a large capital program (see below) Eli Lilly FY2024 financials.

The headline is simple: clinical leadership with tirzepatide delivered a step change in revenue and profits in 2024, but underlying cash flow dynamics and heavy capex temper the near‑term free cash generation story.

Financial performance: a granular look (2021–2024)#

Lilly’s four‑year income statement shows accelerating revenue and operating leverage concentrated in 2024. The table below summarizes the core income‑statement metrics and derived margins we calculated from the company’s FY filings (filed dates shown in the financials):

All line items above are taken from Eli Lilly’s FY financial statements and our margin calculations are independent arithmetic based on those figures (filed 2025‑02‑19) Eli Lilly FY2024 financials.

The arithmetic highlights two dynamics: revenue acceleration (++32.00% YoY from 2023 → 2024) and outsized margin expansion (+525 bps in operating margin). The jump in operating income (from $10.79B to $17.50B) drove most of the net‑income acceleration, but cash generation tells a different story, as discussed below.

Balance sheet and cash flow: capex and working capital reshape FCF#

The balance sheet shows increased asset scale and materially higher leverage on a FY2024 snapshot. We calculated the following ratios directly from the year‑end numbers reported in the filings (accepted 2025‑02‑19):

Two points stand out from these calculations: first, Lilly’s net debt of $30.38B and FY net‑debt/EBITDA near 1.99x (using FY2024 EBITDA) are manageable for a large pharmaceuticals company but higher than pre‑2024 levels. Second, despite strong reported net income, free cash flow is essentially flat at $414.3MM in 2024 — a tiny 0.92% of revenue — driven by heavy capex and a large working capital outflow (change in working capital ‑$5.38B) that absorbed near‑term operating cash.

This heavy investment spend (capital expenditure of $8.4B in 2024) aligns with Lilly’s stated manufacturing scale‑up for tirzepatide and other biologics; the company has publicly described multi‑billion dollar projects designed to boost sellable doses and global distribution capability Lilly investor releases on capacity expansion.

Reconciling ratio discrepancies: TTM vs fiscal-year bases#

The dataset includes TTM metrics (e.g., reported netDebt/EBITDA TTM 1.57x, ROE TTM 88.36%, currentRatioTTM 1.28x) that differ from the FY2024 snapshots we calculated above. These differences stem from different denominators and time windows: TTM metrics use trailing twelve‑month EBITDA and equity measures that smooth quarterly volatility, whereas our FY2024 calculations use year‑end balance‑sheet and FY EBITDA values reported for 2024. We prioritize the FY2024 end‑of‑period balance‑sheet figures for leverage and ROE calculations when discussing the company’s financial position at that reporting date, while acknowledging that TTM metrics provide a smoothing effect useful for trend analysis.

Driver analysis: tirzepatide (Mounjaro/Zepbound) and the SURMOUNT‑5 signal#

The revenue acceleration and margin expansion in 2024 are tightly correlated with the commercial success of tirzepatide products (Mounjaro and Zepbound) and with realized pricing and mix in diabetes and obesity indications. Company disclosures and industry reporting indicate the tirzepatide franchise accounted for a large share of 2024 growth and that SURMOUNT‑5’s head‑to‑head result materially strengthened the clinical value proposition for Zepbound versus semaglutide‑only therapies Lilly SURMOUNT‑5 release.

The SURMOUNT‑5 trial reported 20.2% mean body‑weight loss for Zepbound versus 13.7% for Wegovy at 72 weeks — an absolute advantage of 6.5 percentage points and a relative efficacy edge of roughly +47.45% (calculated as 6.5 / 13.7). Those clinical data materially increase the addressable patient population willing to pursue pharmacologic obesity therapy and strengthen Lilly’s commercial positioning versus Novo Nordisk in higher‑efficacy segments Eli Lilly SURMOUNT‑5 results.

Strategic implications: capacity, pricing, and payer access#

Lilly’s fiscal choices in 2024 show a clear strategic posture: translate clinical superiority into scale by investing aggressively in manufacturing and distribution. The nearly $8.4B capex in a single year is consistent with the company’s public statements about expanding capacity for biologics and tirzepatide supply chains. That investment is a necessary precondition to sustain product shipments and to reduce earlier shortages; it also explains the weak free cash flow in an otherwise high‑margin year.

The next phase of the strategy centers on payer negotiations, pricing, and adherence. SURMOUNT‑5 improves Lilly’s bargaining position with payers because higher clinical efficacy can justify different formulary placements and potentially higher per‑patient pricing. But payer acceptance, co‑pay designs, and prior‑authorization processes will determine whether trial‑level efficacy scales into real‑world revenue per patient and retention rates.

Quality of earnings: income vs cash flow#

A central tension in Lilly’s 2024 results is the divergence between strong reported earnings and weak free cash flow. Net income rose to $10.59B, yet free cash flow was only $0.414B. The main drivers are aggressive capex and a substantial working‑capital build (change in working capital ‑$5.38B). From an accounting perspective the earnings are real — operating margin expanded and EBITDA grew — but the cash conversion profile is constrained this year by deliberate investment choices.

This is not necessarily a red flag in isolation: the investments are explicit capacity builds intended to remove supply constraints and support multi‑year revenue growth. However, investors and stakeholders should monitor quarterly cash flow trends over the next 12–24 months to see that (a) working capital normalizes as inventory turns and receivables settle, and (b) capital spending shifts from heavy build mode to steady‑state maintenance, thereby allowing FCF to recover.

Capital allocation and balance‑sheet flexibility#

Lilly returned meaningful cash to shareholders in 2024 — $4.68B in dividends and $2.5B in share repurchases — while increasing net debt to $30.38B to finance capex and acquisitions. That mix implies a corporate preference for maintaining shareholder returns even during a heavy investment cycle. Using FY2024 figures, we calculate Debt / Equity ~ 2.37x, a leverage level that is elevated but not unusual for large integrated pharmaceutical companies investing to capture an expanding addressable market.

The tradeoff is clear: Lilly prioritized long‑term revenue capacity and share retention over short‑term free cash accumulation. The relevant metric for capital‑allocation assessment will be ROIC on the manufacturing investments as capacity comes online; early evidence of sustained top‑line growth linked to the new capacity would validate the choice.

Competitive dynamics and moat analysis#

SURMOUNT‑5’s results materially alter the competitive landscape by demonstrating a clinically meaningful advantage for tirzepatide over semaglutide in weight loss outcomes. Clinically differentiated efficacy increases pricing power, but the moat will ultimately be a composite of efficacy, manufacturing scale, payer coverage, and patient adherence.

Novo Nordisk still retains scale advantages and entrenched prescriber relationships, yet Lilly’s rapid capacity expansion and a diversified metabolic pipeline (oral GLP‑1 candidates and triple‑agonists in development) create a credible duopolistic competition in obesity and diabetes therapeutics. The critical questions for moat durability are whether Lilly can: (1) sustain supply reliability, (2) secure favorable formulary position and reimbursement, and (3) translate trial adherence into long‑term real‑world retention — each of which has direct financial consequences.

Historical context: execution track record#

Lilly has a recent track record of aggressive reinvestment into manufacturing and capacity expansion for high‑growth franchises. The increase from ~$28–34B revenue in 2021–2023 to $45.04B in 2024 is among the fastest revenue accelerations in the company’s modern history, driven primarily by a single product family. Historically, companies that reinvest to eliminate supply constraints and that pair clinical differentiation with payor wins have captured durable share; the counter‑example is when scale investments lag or when payer resistance compresses realized pricing. Lilly’s FY2024 accounts indicate the company chose to front‑load investment to secure mid‑term growth — a strategic posture consistent with a high‑conviction commercial thesis.

What this means for investors (no advice)#

• The earnings profile shows durable operating leverage when product mix favors high‑margin biologics: operating margin expanded to 38.86% in FY2024 and EBITDA rose to $15.23B, both strong indicators of scalable profitability assuming demand holds. These figures are from the FY2024 filings and our independent calculations Eli Lilly FY2024 financials.

• Cash conversion is the immediate operational watchpoint: free cash flow in 2024 was only $414.3MM (FCF margin 0.92%), suppressed by $8.4B of capex and a ‑$5.38B working‑capital outflow. Investors should track quarterly cash flow and capex cadence to confirm that FCF recovers as capacity ramp completes.

• Leverage rose: net debt of $30.38B and FY net‑debt/EBITDA near 1.99x (FY basis) reflect financing of large projects. These are manageable at scale but represent higher leverage versus historical norms and should be judged against the expected incremental cash generation from the tirzepatide franchise.

• Competitive upside from SURMOUNT‑5 is real and quantifiable: a 6.5 percentage‑point absolute efficacy advantage at 72 weeks (20.2% vs 13.7%) strengthens pricing and formulary negotiating leverage, but real‑world uptake will depend on payer access and adherence dynamics Lilly SURMOUNT‑5 release.

• Capital allocation choices signal management’s preference for growth and share protection over short‑term cash accumulation: dividends and sizable buybacks continued even as capex rose, implying confidence in multi‑year returns from the manufacturing investments.

Risks and monitoring checklist#

There are four measurable risks to watch: (1) sustained FCF recovery — quarters with improving operating cash flow and shrinking capex would be positive signs; (2) payer access and formulary positioning — monitor CMS and major private payer decisions and PBM placements; (3) real‑world adherence versus trial retention — meaningful deviations would change lifetime revenue per patient; and (4) supply‑chain execution and product quality that could reintroduce shortages.

Each risk has direct financial corollaries (revenue, FCF, and leverage) that can be tracked in regular filings and company disclosures.

Conclusion: clinical leadership meets an investment execution test#

Eli Lilly’s FY2024 results are a high‑conviction outcome of clinical advantage plus heavy investment. The company delivered $45.04B in revenue and $10.59B in net income while placing large bets on manufacturing and capacity that compressed free cash flow in the near term. SURMOUNT‑5 materially strengthens the clinical case for tirzepatide and improves Lilly’s commercial runway, but the ultimate financial payoff will be determined by how quickly working capital normalizes, capex moves from build to maintenance, and payer coverage converts trial efficacy into broad, long‑term patient retention.

The investment story is therefore twofold: an operational and clinical win that has already produced outsized revenue and earnings improvement, and an execution test in cash‑flow conversion and capacity ramp that will determine whether those accounting gains become durable cash generation. For stakeholders, the next 4–8 quarters of cash‑flow and commercial‑access data will be decisive.