Eli Lilly and Company — Third Quarter 2026 Earnings Summary

Financial Performance:

• Q3 2026 worldwide revenue increased 39% year-over-year to $24.4 billion ($24,397 million), driven by a 53% volume increase partially offset by a 15% decrease in realized prices.
• U.S. revenue grew 34% to $15.1 billion, while revenue outside the U.S. increased 47% to $9.3 billion.
• Reported net income rose 16% to $6.5 billion ($6,451 million), and reported EPS increased 16% to $7.22.
• Non-GAAP net income increased 6% to $6.7 billion ($6,679 million), and non-GAAP EPS rose 7% to $7.48.
• Q3 2026 reported and non-GAAP EPS included $4.57 per share in acquired in-process research and development (IPR&D) charges, compared to $0.71 in Q3 2025.
• Gross margin increased 40% to $20.5 billion (reported) and $20.6 billion (non-GAAP), with gross margin as a percent of revenue reaching 83.9% (reported) and 84.4% (non-GAAP).
• Research and development expenses increased 23% to $4.2 billion, representing 17% of revenue.
• Marketing, selling, and administrative expenses increased 14% to $3.1 billion.
• The effective tax rate was 23.3% (reported) and 24.0% (non-GAAP), unfavorably impacted by nondeductible acquired IPR&D charges.

Guidance and Future Outlook:

• Full-year 2026 revenue guidance was raised by $5.5 billion to a range of $91.0 to $92.0 billion.
• Underlying non-GAAP EPS guidance for 2026 was raised by $4.07 at the midpoint, resulting in an updated range of $35.00 to $36.00 after accounting for $4.57 in Q3 acquired IPR&D charges.
• Full-year 2026 performance margin guidance was raised to 52.0% to 52.5% (from 49.0% to 50.5%).
• Full-year 2026 non-GAAP tax rate guidance was raised to 19% to 20% (from 18% to 19%).
• Guidance assumes approximately 894 million shares outstanding and foreign currency exchange rates of 1.13 (Euro), 157 (Yen), and 6.7 (Yuan).

Business Segments and Product Lines:

• Key Products revenue grew to $17.1 billion, with Immunology, Oncology, and Neuroscience therapeutic areas growing 100% year-over-year.
• Mounjaro revenue increased 65% to $10.7 billion ($10,723 million); U.S. revenue was $5.0 billion and international revenue was $5.7 billion.
• Zepbound revenue increased 49% to $5.4 billion ($5,352 million), with U.S. revenue up 48% to $5.3 billion.
• Jaypirca revenue increased 59% to $228 million.
• Ebglyss revenue increased 59% to $202 million.
• Kisunla revenue increased 175% to $193 million.
• Omvoh revenue increased 76% to $114 million.
• Foundayo revenue was $184 million (first-time reporting).
• Inluriyo revenue was $73 million (first-time reporting).
• Jardiance revenue outside the U.S. included $410 million in sales-based milestones, with no further milestones remaining.

Market and Competitive Landscape:

• Mounjaro received U.S. FDA approval to reduce cardiovascular risk in adults with type 2 diabetes.
• Jaypirca received an expanded U.S. FDA indication for adults with untreated chronic lymphocytic leukemia or small lymphocytic lymphoma.
• Onswik, a once-weekly basal insulin, received U.S. FDA approval for adults with type 2 diabetes.
• Inluriyo received U.S. FDA approval in combination with Verzenio for adults with ER+, HER2-, ESR1-mutated advanced or metastatic breast cancer.
• Retatrutide delivered greater A1C reduction and more than double the weight loss of Ozempic 2 mg in a head-to-head Phase 3 trial.
• Phase 3 results for Ebglyss in moderate-to-severe hand and foot atopic dermatitis were positive.
• Phase 2 results for EloraTZP in adults with obesity and type 2 diabetes were positive, with Phase 3 trials starting in Q4 2026.
• Olumiant received U.S. FDA approval for pediatric patients 12 years and older with severe alopecia areata.
• Omvoh met the primary endpoint of clinical remission and reported one-year Phase 3 results in pediatric ulcerative colitis.

Risks and Challenges:

• Realized prices decreased globally (15% overall, 7% in U.S., 29% outside U.S.) due to pricing pressures, including the inclusion of Mounjaro on China's National Reimbursement Drug List (NRDL).
• Significant acquired IPR&D charges of $4.2 billion ($4.181 billion) were recognized in Q3 2026, primarily related to the acquisitions of AtaiBeckley Inc. and Curevo Inc.
• The company faces risks related to the illegal black market for retatrutide and calls for regulators to shut down online platforms selling counterfeit products.
• Future results may be impacted by uncertainties in R&D, regulatory approvals, competition, pricing pressures, and supply chain dependencies.

Management Commentary and Tone:

• David A. Ricks, Chair and CEO, stated the company had "another strong quarter, exceeding our prior expectations and allowing us to raise our full-year outlook."
• Management highlighted "broad global consumer demand" for Mounjaro and Zepbound, global launches of Foundayo, expanded U.S. coverage for obesity care, and a doubling of newest products in oncology, immunology, and neuroscience.
• The CEO emphasized executing well across the value chain, investing in drug-making and technology capabilities, and expanding manufacturing in Texas and Virginia.
• Patrik Jonsson is retiring after 36 years, and Ilya Yuffa has been named president, Lilly Global Markets.

Other Key Points:

• Completed the acquisition of AtaiBeckley to advance therapies for treatment-resistant depression and other mental health conditions.
• Completed the acquisition of Merida Biosciences subsequent to the quarter end to advance treatments for serious autoimmune and allergic diseases.
• Broke ground on manufacturing expansions in Richmond, Texas, and Houston, advancing a build-out of 10 new U.S. sites since 2020.
• Launched the "Lilly Change the Course Commitment" to address treatment gaps in diabetes and obesity in low- and middle-income countries (LMICs).
• Real-world study data linked Zepbound to lower healthcare costs in adults over age 55 with obesity.
• Dividends paid per share increased 15% to $1.73 in Q3 2026 compared to $1.50 in Q3 2025.