Mounjaro To Lead Eli Lilly’s Q3 Growth

Eli Lilly stock (NYSE: LLY) will report its Q3 results on Wednesday, October 30. The pharmaceutical giant is expected to garner $12.1 billion in sales and $1.45 in adjusted earnings per share, per the consensus estimates. All eyes will be on Eli Lilly’s diabetes drug – Mounjaro – and its weight-loss drug – Zepbound. In this note, we discuss the trends that will drive Eli Lilly’s Q3 results and the impact on its stock price. Also, look at How Will Pfizer Fare In Q3

What Trends Will Drive Eli Lilly’s Q3?

Eli Lilly’s relatively new products should continue to drive the sales growth. The company is expected to post over 2.5x y-o-y rise in Mounjaro sales to around $3.5 billion. Verzenio sales should also see strong growth to levels of over $1.3 billion. The company’s much-talked-about obesity drug – Zepbound – will likely bring in $1.5 billion. Among other drugs, Jardiance, Taltz, and Humalog, should continue to see double-digit gains, while Trulicity will see a sharp decline, amid increased competition.

We think Eli Lilly may see higher gross margin on better pricing trends and product mix. Higher revenue and margin expansion will likely result in its bottom-line surging 14.5x to $1.45 on an adjusted basis. This high change figure can be attributed to favorable comparison with the prior-year quarter, which was impacted by $3 billion IPR&D charges recorded by the company, related to the acquisitions of DICE Therapeutics, Versanis Bio, and Emergence Therapeutics,

How Did Eli Lilly Fare In Q2?

Looking at Q2, Eli Lilly’s revenue of $11.3 billion reflected a solid 36% y-o-y growth. This can be attributed to market share gains for some of its drugs, including Mounjaro, Verzenio, and Zepbound. Mounjaro saw a massive 3x surge in sales to $3.1 billion. Verzenio sales were also up a solid 44% y-o-y to $1.3 billion. Zepbound sales stood at $1.2 billion. Eli Lilly also saw its adjusted gross margin expand by 220 bps to 82.0% in Q2. Higher revenues and margin expansion resulted in a 86% growth in adjusted earnings to $3.92 per share.

The overall growth was driven by Mounjaro’s launch outside of the U.S. and an increase in overall production. This trend is expected to continue in the near term. Eli Lilly raised its full-year outlook and now expects its sales to be between $45.4 billion and $46.6 billion, reflecting an increase of $3 billion from its prior outlook. It expects its adjusted earnings to be in the range of $16.10 and $16.60, compared to its previous outlook of $13.50 to $14 per share.

What About LLY Stock?

A better-than-anticipated Q3 will likely bode well for LLY stock. More importantly, investors will be closely watching for trends in pickup of sales for its obesity and diabetes drugs, along with margin profile. Since the beginning of the year, Eli Lilly has raised its sales outlook by $5 billion, and any further upward  revision will bode well for its stock. Despite a large move in recent years, LLY stock looks like it has more room for growth. The $1,017 average of analysts price estimate reflects nearly 15% upside from its current levels of under $900. Separately, within the healthcare sector, Intuitive Surgical Is No Dud Either — Here’s Path To 10x.

LLY stock has outperformed the broader markets, with a nearly 60% rise this year, versus around 20% growth for the S&P500 index. Admirably, LLY stock has generated better returns than the broader market in each of the last three years. Returns for the stock were 66% in 2021, 34% in 2022, and 61% in 2023. Similarly, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is less volatile, and it has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

While LLY stock may see higher levels, it is helpful to see how Eli Lilly peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 10/28/2024
[2] Cumulative total returns since the end of 2016

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