Eli Lilly and Company (LLY) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary indicates strong financial performance, with revenue growth and solid earnings projections. Product development is robust, with new launches and pipeline expansion. Market strategy is well-defined, focusing on Medicare activation and employer programs. Expenses are increasing due to R&D, but financial health appears strong with good margins. Shareholder return plans are not explicitly mentioned, but the overall sentiment from the Q&A supports a positive outlook. The combination of optimistic guidance, strategic market expansion, and innovative product launches suggests a likely positive stock price movement.
Key Financial Performance
Revenue Revenue grew 56% compared to Q1 2025. This growth was driven by Zepbound and Mounjaro and solid momentum across all therapeutic areas and geographies.
Gross Margin Gross margin as a percentage of revenue was 82.6% in Q1, a decrease of approximately 1 percentage point versus the same quarter last year. The change was driven primarily by low prices.
Marketing, Selling, and Administrative Expenses Increased 19% as the company continued to invest in promotional activities to support ongoing and planned new product launches.
R&D Expenses Increased 28%, driven by continued investments in the pipeline, including 42 active Phase III programs.
Non-GAAP Performance Margin 50%, an increase of approximately 7 percentage points from Q1 2025, driven by revenue growth.
Non-GAAP Earnings Per Share $8.55, including acquired R&D charges of $0.52. This compares to non-GAAP earnings per share of $3.34 in Q1 2025, inclusive of $1.72 of acquired IPR&D charges.
U.S. Revenue Increased 43% in Q1, primarily driven by volume growth from Zepbound and Mounjaro as well as contributions from the Immunology, Oncology, and Neuroscience portfolio. U.S. price declined by 7%, including the impact of previously announced direct-to-patient prices for Zepbound.
Europe Revenue Grew 37% in constant currency, driven by sustained strong volume growth of Mounjaro.
Japan Revenue Grew 42% in constant currency, driven by Mounjaro for type 2 diabetes.
China Revenue Growth accelerated with the inclusion of Mounjaro on the national reimbursement drug list for type 2 diabetes.
Rest of the World Revenue More than doubled in constant currency as Mounjaro achieved rapid share gains in Latin America and Asia.
Immunology Medicines U.S. new patient starts for Ebglyss increased by 90% compared to Q1 2025, with steady gains in the specialty dermatology market.
Oncology Medicines Jaypirca posted a strong quarter of growth, with worldwide sales growing 79% compared to Q1 2025. This was driven by expanded post-BTK indication in CLL.
Neuroscience Medicines Kisunla continues to be the U.S. leader in amyloid targeting therapies, with steady market growth as diagnostic capabilities for Alzheimer's disease expand.
Cardiometabolic Health Mounjaro and Zepbound global revenue was $12.8 billion combined, contributing $6.7 billion of growth compared to Q1 2025.
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Operating Highlights
Foundayo approval and launch: Foundayo, a GLP-1 therapy in pill form for weight management, was approved by the U.S. FDA. It is the first incretin medicine launched with obesity as its primary indication. Regulatory reviews are ongoing in over 40 countries for obesity and type 2 diabetes.
Pipeline advancements: Positive Phase III data for multiple products, including Jaypirca for CLL, Ebglyss for pediatric atopic dermatitis, and retatrutide for type 2 diabetes. Initiation of new Phase III programs for eloralintide and other molecules.
Revenue growth: Revenue grew 56% compared to Q1 2025, driven by key products like Zepbound and Mounjaro. Strong growth was observed across all therapeutic areas and geographies.
International market expansion: Mounjaro achieved rapid share gains in Latin America and Asia, with strong growth in Brazil, U.K., Korea, and China. Lilly became the market leader outside the U.S. in the incretin analog market.
Business development: Acquisitions of Orna Therapeutics, Centessa Pharmaceuticals, Kelonia Therapeutics, and Ajax Therapeutics to expand capabilities in autoimmune diseases, sleep disorders, cancers, and blood cancers.
Cost management: Marketing, selling, and administrative expenses increased by 19%, and R&D expenses rose by 28% to support pipeline development and product launches.
Obesity medication access: Launch of Lilly Employer Connect platform and CMS extension of the Medicare GLP-1 Bridge program to improve access to obesity medications.
Capital allocation: Distributed $1.5 billion in dividends and executed $2.4 billion in share repurchases. Increased revenue guidance for 2026 to $82-$85 billion.
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Risk or Challenges
Loss of Medicaid Access: The loss of Medicaid access in certain states negatively impacted Zepbound prescription growth in the high single digits during Q1 2026.
Price Decline in the U.S.: U.S. prices declined by 7%, including the impact of previously announced direct-to-patient prices for Zepbound. Excluding a one-time adjustment, U.S. prices would have declined by 10%.
Regulatory Approvals and Scalability: Regulatory reviews for Foundayo are ongoing in over 40 countries, and scalability challenges may arise as oral GLP-1s for obesity have not yet been introduced outside the U.S.
Increased Marketing and R&D Expenses: Marketing, selling, and administrative expenses increased by 19%, and R&D expenses rose by 28%, driven by investments in promotional activities and 42 active Phase III programs, which could pressure margins.
Supply Chain and Distribution Challenges: Broad digital and traditional distribution availability for Foundayo is a priority, but challenges in ensuring scalability and access globally could impact performance.
Competitive Pressures in Key Markets: The incretin analog market is highly competitive, with rapid growth and new entrants, which could pressure market share and pricing.
Medicare GLP-1 Bridge Program: The Medicare GLP-1 Bridge program, starting no later than July 1, 2026, could improve access but may also introduce pricing and reimbursement complexities.
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Guidance & Outlook
Revenue Guidance: The company has increased its full-year revenue guidance for 2026 to a range of $82 billion to $85 billion, reflecting strong performance of key products like Mounjaro and Zepbound. This represents a 28% growth compared to 2025.
Earnings Per Share (EPS) Guidance: Non-GAAP earnings per share guidance has been raised to a range of $35.50 to $37, an increase of $2 to both the top and bottom ends of the previous guidance.
Product Launch and Market Expansion: The company has launched Foundayo, an oral GLP-1 therapy for obesity, and plans to submit it for type 2 diabetes in the U.S. later this quarter. Regulatory reviews for Foundayo are ongoing in over 40 countries.
Pipeline Development: The company is actively studying Foundayo in six Phase III programs for other diseases and plans to generate new data in the coming quarters and years. Additionally, retatrutide, a GIP, GLP-1, and glucagon triple agonist, has shown promising Phase III results for type 2 diabetes and obesity.
Market Trends and Growth: The incretin analog market continues to grow robustly, with Mounjaro and Zepbound driving significant revenue growth. The company expects continued strong performance outside the U.S., with increased patient activations being key to sustainable growth.
Capital Allocation: The company plans to remain active in business development to complement its internal portfolio while maintaining financial discipline. It has also distributed $1.5 billion in dividends and executed $2.4 billion in share repurchases in Q1 2026.
Medicare GLP-1 Bridge Program: The Medicare GLP-1 Bridge program will begin no later than July 1, 2026, and run through December 2027, providing access to obesity medicines for Medicare patients with capped out-of-pocket costs at $50 per month.
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Shareholder Return Plan
Dividends distributed: $1.5 billion in dividends were distributed in the first quarter of 2026.
Share repurchases executed: $2.4 billion in share repurchases were executed in the first quarter of 2026.
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Key Q&A
Q:Can you discuss the margins under a wide range of price scenarios for Lilly, particularly in the context of investments in manufacturing and competitive dynamics?
A:David Ricks explained that the obesity and weight loss category is different from other pharmaceuticals due to price sensitivity. He noted that price reductions often lead to significant volume expansion, though there is a floor due to cost structures. He emphasized the importance of investing in future medicines and highlighted the company's latitude in managing margins.
Q:What are the learnings from the international Mounjaro launch, and how might generic semaglutide impact the ramp and long-term opportunity?
A:Patrik Jonsson highlighted strong growth and market share gains for Mounjaro in over 55 countries, with some markets like Brazil and Korea achieving a 60% market share. He noted that generic semaglutide in India has stimulated overall market growth, with Mounjaro maintaining its market share and prescriptions increasing by 10%. He expects continued strong growth driven by patient activation and market penetration.
Q:How do you see the market segmenting with the introduction of retatrutide, Foundayo, and eloralintide?
A:Kenneth Custer explained that the obesity market is large and diverse, with opportunities to tailor medicines to individual needs. He discussed retatrutide for greater weight loss, eloralintide for non-GLP-1-based mechanisms or as an add-on therapy, and other innovations like ultra-long-acting medicines. He emphasized Lilly's leading position in these areas and investments in manufacturing platforms to support these innovations.
Q:What is your strategy for activating Medicare patients, and how do you see this playing out over time?
A:Ilya Yuffa outlined the strategy to activate Medicare patients starting in July, emphasizing education for physicians, pharmacies, and consumers. He noted the importance of the $50 monthly co-pay for affordability and expects gradual growth through 2026 and 2027. He highlighted strong persistence rates for Zepbound and Mounjaro, which are expected to continue.
Q:What do you need to see from the I&I, neuroscience, or oncology franchises to match the scale of the obesity and metabolic businesses?
A:Daniel Skovronsky emphasized the strong growth rates in these franchises and their significant unmet medical needs. He mentioned business development opportunities like the Centessa and Orna acquisitions, which expand Lilly's capabilities in sleep-wake medicines and immune reset, respectively.
Q:What is your confidence level in the Foundayo launch trajectory, and what contribution was factored into the guidance range?
A:Ilya Yuffa expressed confidence in the Foundayo launch trajectory, citing positive early indicators like over 8,000 prescribers and 20,000 patients treated. He noted that 80% of prescriptions are new to class. Lucas Montarce added that the guidance increase reflects strong performance across the portfolio, with Foundayo tracking expectations.
Q:What are the next steps for Balance and securing longer-term Medicare access?
A:David Ricks explained that the Bridge program will extend into 2027 due to low Part D plan participation. He expects the government to push for broader Medicare access in 2028, supported by population-level health improvements and evidence of the benefits of obesity care.
Q:What is the strategy for the Employer Connect program, and how do you plan to convince employers to opt in?
A:Ilya Yuffa described the Employer Connect program as offering transparent pricing and flexible design for employer-employee contributions. He noted positive feedback from employers and expects gradual impact starting in late 2026, with more data on health and productivity benefits reinforcing the case for coverage.
Q:How do you plan to leverage Lilly's scale in the DTC channel for the incretin portfolio?
A:David Ricks and Ilya Yuffa emphasized the importance of consumer activation via digital platforms and LillyDirect. They highlighted the role of reduced friction in patient access and the potential for expansion into preventative medicines. They also noted the success of LillyDirect in driving new patient starts.
Q:What explains the pricing dynamics for Zepbound in the U.S., and how does it compare to cash pay prices?
A:Lucas Montarce explained that Zepbound's pricing dynamics include stable prices and contributions from medical exceptions and OSA usage, which are close to undiscounted prices. David Ricks added that these factors contribute to the observed pricing levels.
Q:How does the Foundayo launch compare to a traditional primary care launch?
A:Ilya Yuffa noted that the Foundayo launch includes accelerated access and early DTC efforts. He emphasized the importance of building prescriber familiarity and consumer awareness. He compared it to successful primary care launches like Trulicity and Mounjaro, highlighting the disciplined approach to DTC activation.
Q:What is your vision for employer coverage in the U.S., and how do you see it evolving?
A:David Ricks expressed optimism about broader employer coverage for obesity medications, driven by Medicare's July 1 activation and data on health benefits. He acknowledged the challenges due to the broad disease prevalence but expects incremental progress and new indications to support coverage expansion.
Q:Review of Unclear Management Responses
A:No questions were identified where management avoided giving a direct answer or provided insufficient detail.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Ac
Bridge program
CLL efficacy
GLP Bridge
HCP
Immunology Oncology
JAK inhibitor
Kelonia Therapeutics
Oncology Neuroscience
Pharmaceuticals
Phase IIIb
Therapeutics CAR
adult psoriasis
adult type
agreement
analog market
awareness
blood cancer
brenipatide
capability
cause death
child
clearance
control
diabetes obesity
diabetes type
disorder
gain
incretin therapy
ixekizumab
line result
pirtobrutinib
platform
program Phase
receptor
regimen
regulator
retatrutide
setting
skin
venetoclax
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The earnings call summary indicates strong financial performance, with revenue growth and solid earnings projections. Product development is robust, with new launches and pipeline expansion. Market strategy is well-defined, focusing on Medicare activation and employer programs. Expenses are increasing due to R&D, but financial health appears strong with good margins. Shareholder return plans are not explicitly mentioned, but the overall sentiment from the Q&A supports a positive outlook. The combination of optimistic guidance, strategic market expansion, and innovative product launches suggests a likely positive stock price movement.
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