Lilly shares hit record high on drug sales

Eli Lilly shares closed at a record high of approximately $1,370 on Thursday, marking a gain of more than 6% for the session. The stock surpassed its previous peak of $1,306.69 set on Oct. 22. The rally followed the company's release of third-quarter financial results, which showed revenue of $24.4 billion, a 39% increase from the same period last year. This figure exceeded the LSEG consensus estimate of $22.6 billion.

Adjusted earnings per share rose to $7.48, outpacing the $6.26 expected by analysts. The company also reported an adjusted gross margin of 84.4%, beating the 82.7% consensus and expanding from 83.6% in the prior year. Executives attributed the modest growth in adjusted profit to a one-time accounting charge related to a recent acquisition.

The primary driver of the results was strong performance in the company's obesity and diabetes portfolio. Mounjaro revenue grew 65% year over year to $10.7 billion. Sales in international markets increased by 93% to $5.7 billion, driven by volume growth that offset lower realized prices. Mounjaro's inclusion on China's reimbursed prescription medicine list contributed to overseas demand despite price pressures.

Zepbound, the injectable treatment for obesity, generated $5.35 billion in revenue, a 49% increase from the previous year. This result surpassed the consensus estimate of $5.05 billion. The growth in patient volume compensated for the price reductions implemented through the company's agreement with the Trump administration. This deal included a Medicare pilot program that allows eligible seniors to access drugs for $50 a month.

The new oral pill Foundayo presented the only notable weakness in the report. Revenue of $184 million fell short of the $229 million consensus estimate. The drug launched in the U.S. in April, four months after rival Novo Nordisk's Wegovy pill. Lilly said the launch is proceeding according to plan, with the company holding nearly 40% of new obesity pill prescriptions in the U.S. market. Foundayo has since expanded to the United Arab Emirates, Saudi Arabia, Mexico, and the U.K.

CEO David Ricks stated on CNBC's Squawk on the Street that the global market for obesity care remains largely untapped. He estimated that only 3% of eligible patients worldwide have access to these treatments, compared to 10% in the U.S. Ricks indicated that the Medicare Bridge program has helped more than 500,000 patients access Lilly medicines. He noted that seven out of every 10 new Bridge patients start on a Lilly drug.

Lilly revised its full-year 2026 guidance upward. The company now expects revenue between $91 billion and $92 billion, previously projected at $85 billion to $87 billion. Performance margin is expected to fall in the 52% to 52.5% range. Earnings per share guidance was adjusted to a range of $35 to $36, down from the prior estimate of $35.50 to $36.50.

Investors are next expected to receive full 2027 guidance during the company's fourth-quarter earnings call, scheduled for early 2027. The company will also host an investor day on Dec. 7 focused on its research and development pipeline. That event will feature updates on next-generation treatments, including retatrutide and eloralintide.