Eli Lilly and Company (LLY) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A indicate strong financial performance, strategic advancements, and positive market reception. Key highlights include raised revenue and EPS guidance, new trials and product launches, and a focus on market expansion. The management's responses in the Q&A were generally well-received, with analysts showing interest in the company's innovation and market strategies. Despite some vague responses, the overall sentiment is positive, supported by growth prospects and strategic initiatives.
Key Financial Performance
Revenue Growth Revenue grew 54% compared to Q3 2024. This growth was driven by key products, with significant contributions from Zepbound and Mounjaro. In Europe, revenue increased by over 100% in constant currency, reflecting strong uptake of Mounjaro. Revenue was positively impacted by a $380 million one-time benefit related to a milestone payment and business development.
Gross Margin Gross margin as a percentage of revenue was 83.6% in Q3, an increase of 1.4 percentage points versus the same quarter last year. This improvement was driven by favorable product mix, partially offset by lower realized prices.
Research and Development Expenses R&D expenses increased 27% year-over-year, driven by continued investments in the portfolio, including the initiation of 16 new Phase III programs since the start of 2024.
Marketing, Selling, and Administrative Expenses These expenses increased 31% year-over-year as the company increased investment to support ongoing and future launches across therapeutic areas and geographies.
Performance Margin Non-GAAP performance margin was 48.3%, an increase of more than 8 percentage points from Q3 2024, driven by revenue growth.
Earnings Per Share (EPS) EPS increased to $7.02, inclusive of $0.71 of acquired IPR&D charges, compared to $1.18 in Q3 2024, which included $3.08 of acquired IPR&D charges.
U.S. Revenue U.S. revenue increased 45% in Q3, driven by strong volume growth of Zepbound and Mounjaro, partially offset by a 15% decline in price. The price decline was due to a favorable one-time adjustment to estimates for rebates and discounts in Q3 2024.
International Revenue Japan, China, and Rest of the World delivered constant currency revenue growth of 24%, 22%, and 51%, respectively, driven by Mounjaro volume growth.
Dividends and Share Repurchases The company distributed $1.3 billion in dividends and executed approximately $700 million in share repurchases during the quarter.
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Operating Highlights
FDA approval for imlunestrant (Inluriyo): Approved for ER+, HER2-, ESR1-mutated advanced or metastatic breast cancer.
EU approval for Kisunla: Approved for early symptomatic Alzheimer's disease.
Positive Phase III trial results for Jaypirca: Demonstrated efficacy in treatment-naive CLL.
Positive results for Verzenio: Showed overall survival benefits in high-risk early breast cancer.
Orforglipron trials: Positive results in obesity and type 2 diabetes, enabling global submissions.
Market share in incretin analogs: Lilly gained market share in the U.S. for the fifth consecutive quarter, with nearly 6 out of 10 prescriptions.
Mounjaro global uptake: Strong performance in 55 countries, with significant share gains in major markets.
Zepbound U.S. performance: Prescriptions tripled year-over-year, with 71% share of new prescriptions in the branded anti-obesity market.
Manufacturing expansion: Plans for two new U.S. facilities and expansion in Puerto Rico to support bioconjugates, monoclonal antibodies, and small molecules.
Financial performance: Revenue grew 54% year-over-year; gross margin improved to 83.6%; EPS increased to $7.02.
Pipeline advancements: 16 new Phase III programs initiated since 2024, with significant progress in cardiometabolic health, oncology, and neuroscience.
Capital allocation: $1.3 billion in dividends and $700 million in share repurchases during the quarter.
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Risk or Challenges
Regulatory hurdles: The company faces challenges in obtaining regulatory approvals for new drugs and therapies, as evidenced by the ongoing need for FDA and EU approvals for various products.
Supply chain disruptions: Expansion of manufacturing facilities in the U.S. and Puerto Rico indicates potential risks in meeting production demands for new and existing products.
Economic uncertainties: The company is exposed to economic risks, such as price declines in the U.S. market and limited obesity reimbursement internationally, which could impact revenue.
Competitive pressures: Lilly faces intense competition in the incretin analogs market and other therapeutic areas, which could affect market share and profitability.
Strategic execution risks: The ambitious R&D agenda and multiple ongoing clinical trials pose risks related to timely execution and successful outcomes.
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Guidance & Outlook
Revenue Expectations: The company has increased its full-year revenue guidance for 2025 to a range of $63 billion to $63.5 billion, reflecting strong underlying performance and favorable foreign exchange rates.
Earnings Per Share (EPS) Projections: Non-GAAP EPS for 2025 is now expected to be between $23 and $23.70, an increase from prior guidance.
Performance Margin: The company expects a non-GAAP performance margin of 45% to 46% of revenue for 2025, driven by revenue growth and operational efficiency.
Product Launches and Regulatory Submissions: Global regulatory submissions for orforglipron for obesity treatment are beginning imminently, with a U.S. launch anticipated in 2026. Submissions for orforglipron for type 2 diabetes are expected in the first half of 2026.
Pipeline Developments: The company anticipates results from multiple Phase III trials for orforglipron, retatrutide, and other pipeline products by the end of 2026. These include trials for obesity, type 2 diabetes, and other indications such as osteoarthritis pain and stress urinary incontinence.
Market Trends and Product Performance: Strong uptake of Mounjaro and Zepbound globally, with Mounjaro gaining significant market share in the incretin analog market. The incretin analog market in the U.S. grew by 36% in Q3 2025 compared to the same period in 2024.
Manufacturing Expansion: Plans to build two new U.S. facilities and expand an existing facility in Puerto Rico to support the production of small molecules and bioconjugates. Updates on two additional U.S. facilities are expected in the coming months.
New Indications and Trials: Phase III trials for new indications such as osteoarthritis pain, stress urinary incontinence, and alcohol use disorder are underway or planned. Results from these trials are expected in late 2025 or early 2026.
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Shareholder Return Plan
Dividends distributed: During the quarter, we distributed $1.3 billion in dividends.
Share repurchases executed: Executed approximately $700 million in share repurchases during the quarter.
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Key Q&A
Q:Why wasn't orforglipron included in the Commissioner's National Priority Review Voucher program?
A:David Ricks stated that the company is pursuing all strategies to get orforglipron to patients quickly, including in the U.S. He mentioned that orforglipron meets several criteria for the voucher program, but the decision lies with the government. The company is focused on speed and is ready to launch once approval is granted.
Q:How are the new country launches for Mounjaro performing, and what are the growth expectations?
A:Patrik Jonsson highlighted strong performance in new markets like China, Brazil, Mexico, and India, with initial stocking followed by continued growth. He noted that 75% of the business is out-of-pocket and 25% is type 2 diabetes. The company is focusing on reimbursement in 8 markets and sees significant opportunities in type 2 diabetes and obesity globally.
Q:What is Lilly's perspective on market dynamics and competition in the obesity space?
A:Daniel Skovronsky emphasized Lilly's strong R&D engine and competitive portfolio, including best-in-class or first-in-class molecules. David Ricks added that Lilly is focused on innovation and execution, including manufacturing and market performance, to maintain its leadership position despite competition.
Q:What is Lilly's view on the recent changes in PBM business models, such as Cigna's move to replace drug rebates with GPO fees?
A:David Ricks supported the move, stating it promotes transparency and lowers out-of-pocket costs for patients. He believes it benefits innovators and makes clinical differentiation more relevant for formulary positioning. He applauded Cigna's leadership and hopes others follow suit.
Q:What is the commercial strategy for orforglipron in the U.S.?
A:Ilya Yuffa explained that the strategy includes broad coverage and expanding direct-to-consumer platforms to ensure accessibility. The approach is similar to Zepbound, focusing on reducing healthcare system frictions and meeting consumer demand.
Q:Has the TRAILBLAZER-ALZ 3 interim analysis been conducted, and what is the status of Alzheimer's prevention trials?
A:Anne White stated that enrollment for TRAILBLAZER-3 is complete, and the trial is event-based with a listed completion date of 2027. She emphasized the need for readiness work, including awareness and accessible blood tests, to treat early-stage Alzheimer's.
Q:What are Lilly's thoughts on GLP-1/GIP therapies for Alzheimer's disease?
A:Daniel Skovronsky acknowledged the potential of brenipatide for CNS indications, including Alzheimer's, but stated no plans have been laid out yet. He is awaiting data from the evoke trial to inform next steps.
Q:What is the potential market expansion for orforglipron, and will it impact new starts during its launch?
A:Kenneth Custer highlighted orforglipron's efficacy and scalability, aiming to reach a much larger patient population globally. He stated that the drug could serve as both a starter incretin and a maintenance option, with no expected slowdown in new starts during the launch.
Q:What are the pricing and volume dynamics for orforglipron, especially in the U.S. and international markets?
A:Ilya Yuffa and Patrik Jonsson discussed the importance of consumer channels like LillyDirect and the learnings from price elasticity in markets like the U.K. They emphasized orforglipron's potential to meet diverse needs and expand accessibility globally.
Q:How does Lilly view the IRA-negotiated price for semaglutide and its impact on GLP-1 pricing?
A:Ilya Yuffa noted that the IRA-negotiated price applies only to semaglutide in Medicare Part D starting in 2027, which is a small portion of Lilly's volume. He emphasized tirzepatide's superior efficacy as a strong foundation for value-based discussions.
Q:What is the importance of the ATTAIN-MAINTAIN trial for orforglipron's commercial opportunity?
A:Kenneth Custer described the trial as a first-of-its-kind study to evaluate orforglipron's ability to maintain weight loss achieved with other drugs. He sees it as an opportunity to expand the market and provide data to guide physicians and patients.
Q:Can Lilly balance innovation in obesity treatment with making orforglipron accessible to a global population?
A:David Ricks stated that Lilly aims to bridge both goals by offering compelling consumer pricing and proving long-term health benefits. He emphasized the unique consumer self-pay channel and the potential to reach hundreds of millions globally.
Q:What drives Lilly's excitement about presymptomatic Alzheimer's programs?
A:Daniel Skovronsky cited data from TRAILBLAZER-1 and TRAILBLAZER-2 showing the largest treatment effects in early-stage patients. He remains confident in the potential of preclinical Alzheimer's treatments.
Q:Review of Unclear Management Responses
A:Management avoided directly answering whether the TRAILBLAZER-ALZ 3 interim analysis had been conducted, citing their policy not to comment on interims. Additionally, while discussing GLP-1 pricing and competition, they provided general statements without specific details on pricing strategies or competitor actions.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ACHIEVE
CLL
III study
III trial
Lpa
Phase III
President Lilly
RD
Slide
TRIUMPH
breast cancer
disease
efficacy
margin
market
medicine
milligram
month
obesity
orforglipron
patient
people
percentage
period
pirtobrutinib
portfolio
prescription
program
progress
result Phase
retatrutide
share
therapy
tirzepatide
treatment
type diabetes
update
weight loss
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