Eli Lilly Sells 53% More at Lower Prices: Rapid Earnings Reaction
Key Points
Eli Lilly’s third-quarter revenue rose 39% to about $24.4 billion, as a 53% jump in volume more than offset a 15% drop in realized prices.
Part of the quarter won’t repeat, and deal charges are weighing on earnings.
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Eli Lilly's (NYSE:LLY) third-quarter revenue rose 39% to about $24.4 billion, as a 53% jump in volume swamped a 15% drop in realized prices. Shares were up about 6% in regular trading at midday. Lilly is accepting lower prices to reach far more patients, and so far the extra volume more than pays for it. Management raised full-year revenue guidance by $5.5 billion at the midpoint.
Key Numbers
- Revenue: $24.4 billion, up 39% year over year.
- Gross margin: 83.9% of revenue, up 1.0 percentage point.
- GAAP EPS: $7.22, up 16%.
- 2026 revenue guidance: $91 billion to $92 billion, up from $85 billion to $87 billion.
What It Means
Price cuts usually squeeze a drugmaker's margins. Lilly's widened instead, because its cost to make each dose fell and sales shifted toward higher-margin products. Mounjaro and Zepbound brought in about two-thirds of revenue. Research and marketing spending grew much slower than sales, so most of the added volume reached profit.
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Earnings lagged sales because of deals, not the business. Lilly keeps acquired research charges in both GAAP and adjusted results, and the AtaiBeckley and Curevo purchases cost $4.57 per share. Those charges aren't tax-deductible, which also raised the tax rate. That's why full-year EPS guidance slipped even as the underlying outlook improved.
Some of this quarter won't repeat. About $900 million of revenue came from Jardiance milestone payments, which are now finished, and favorable rebate adjustments.
What to Watch Next
Watch U.S. Zepbound pricing, which drove the domestic price decline. If volume growth cools while prices keep falling, the math stops working. Also expect another acquired-research charge from the Merida deal, which current EPS guidance excludes.
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David Kretzmann has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly. The Motley Fool has a disclosure policy.
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