The expansion of the obesity treatment market remains robust this year. As competition intensifies among global pharmaceutical companies over GLP-1 class drugs, Eli Lilly has posted earnings that exceed market expectations, fueled by the explosive sales growth of Mounjaro and Zepbound. Accordingly, investor interest in the broader obesity treatment sector is being reignited.

On August 5 (local time), Eli Lilly announced its second-quarter earnings, reporting revenue of $23 billion, a 48% increase year-over-year.

Sales Volume Up 60% · Average Price Down 13%... "Driven by Prescription Expansion"

The core driver of the revenue surge was "volume expansion." Overall sales volume increased by 60%, while average selling prices declined by 13%. The fact that revenue surged despite the price drop is evidence that the pace of prescription expansion is steep.

Looking at product-specific performance, the power of the so-called "twin engines" stands out. Mounjaro recorded $9.9 billion, up 91% year-over-year, while Zepbound reached $4.9 billion, a 46% increase.

Overseas Revenue Surges 80% Amid China NRDL Inclusion Effect

By region, revenue outside the United States surged by 80%, reaching approximately 8.6 trillion won. This was driven by a significant increase in local sales after China included Mounjaro in its National Reimbursement Drug List (NRDL). However, due to the price reduction associated with the NRDL inclusion, the average overseas selling price dropped by 36%. Domestic securities firms are analyzing that changes in drug pricing policies by country are a key variable determining earnings volatility.

Profitability Remains Solid... Acquisition Costs Limit Net Income Growth Rate

Profitability indicators showed an improving trend. The gross profit margin rose to 85.8%, up 1.5 percentage points year-over-year.

Meanwhile, second-quarter net income was limited to a 25% increase, reaching $7.1 billion. This was because $2.8 billion in amortization of intangible assets related to acquisitions—such as Morphic Therapeutic and Akastra Therapeutic—and acquired in-process research and development (IPR&D) costs were recorded as one-time expenses. Excluding this, non-GAAP earnings per share (EPS) increased by 33% to $8.38.

Phase 3 Results Positive for Triple Agonist 'Retatrutide'... FDA Submission Planned for Q1 Next Year

Visible progress has also been made on the pipeline front. Eli Lilly announced that retatrutide, a triple agonist candidate, secured additional positive results in three Phase 3 clinical trials related to obesity. This completes a registration data package encompassing obesity, sleep apnea, and knee osteoarthritis pain.

The company plans to submit a marketing authorization application to the U.S. FDA within the first quarter of next year. However, this is only at the company's planning stage, and the actual timing and outcome of approval remain uncertain.

M&A activity was also brisk during the quarter. In the second quarter, the company completed four acquisitions, including Morphic Therapeutic, Akastra Therapeutic, Centessa Pharmaceuticals, and Kelonia Therapeutic. After the quarter's end, it additionally signed three acquisition agreements to strengthen its infectious disease portfolio, along with an agreement to acquire Ataibecle. An additional $4.5 billion will be invested in expanding its manufacturing facilities in Indiana.

Annual Revenue Guidance Raised... EPS Upper End Lowered

Accordingly, Eli Lilly raised its 2026 annual revenue guidance from the previous range of $82 billion to $85 billion, to a new range of $85 billion to $87 billion. On the other hand, the upper end of the annual EPS guidance was lowered from the previous $37.00 to $36.50, reflecting acquisition-related costs (the lower end of $35.50 remains unchanged).

Future Checkpoints: Drug Pricing Trends, Retatrutide Review Schedule, M&A Costs

The key variables that investors should monitor going forward are as follows. First, whether the decline in net drug prices in the United States will continue to widen. The company estimates that excluding adjustments to rebate and discount estimates, U.S. drug prices fell by approximately 9%, meaning the impact of future pricing pressure on margins should be closely watched.

Second is the FDA submission and review schedule for retatrutide. Third is changes in drug pricing policies in overseas countries such as China. Fourth is the trajectory of one-time cost reflections from successive mergers and acquisitions.

[※ This article is for informational purposes only to assist with investment decisions and does not recommend the purchase or sale of any specific stock or financial product. The final investment decision and responsibility lie with the investor. This publication bears no legal or financial liability. This article was written with AI assistance.]