With the commercial business performing so well, Eli Lilly is eyeing earlier business development bets to build out a longer-term pipeline.
Eli Lilly’s revenue is growing so fast that analysts are continually being caught off guard on earnings day. It’s a good surprise, with billions of dollars earned over expectations, but a surprise nonetheless, and analysts don’t like surprises.
As analysts try to read the crystal ball and provide investors with as clear a view as possible on potential investment risks, anything that throws off their calculations could be seen as a bad thing. So CEO David Ricks and his executive team were asked on a Thursday morning earnings call why guidance has been so unreliable, consistently underestimating the revenue that Lilly will actually bring in.
“A key for investors, I think, is to determine when the surprise factor runs its course,” Steve Scala, a long-time analyst with TD Cowen, said on the call.
Providing accurate guidance is always the goal for Lilly, Ricks said, but the rapid expansion of the incretin market has simply been too unprecedented to predict.
“We’re in the middle of the largest new category expansion in the history of the pharmaceutical industry, and Lilly’s leading that,” Ricks said. “There’s a number of things that have never actually happened before that we’re trying to project, and we prefer to give a posture that investors can rely on versus one that is more speculative.”
He admitted that Lilly’s guidance has missed on the low side, with actual earnings arriving much above consensus. But Ricks said the alternative—underperforming expectations—is worse. “We’re beating on the up; that’s better than missing on the down.”
Following third quarter earnings, where revenue rose 39% to $24.4 billion, Lilly again raised full-year guidance after the third quarter to a range of $91–92 billion. At the end of 2025, Lilly had expected a range of $80–83 billion for 2026.
Major factors behind that $10 billion guidance increase include the Medicare GLP-1 Bridge program, an access program launched by the Centers for Medicare and Medicaid Services in July that has spurred more uptake than expected. Lilly reported that 500,000 patients are now using the program to access Lilly’s obesity medications, with 80% being those new to incretins.
Growth in all regions defied expectations, explained CFO Lucas Montarce.
Ricks recalled back to the J.P. Morgan Healthcare Conference in January when he pointed to the Bridge program and consumer uptake as major variables. “If I knew the answer [then] we would have had a tighter range,” he said on Thursday.
Lilly also wasn’t sure how many patients it would reach as GLP-1s went to a more consumer market. Were they going to reach beyond high-net-worth individuals into the middle class?
“As time goes on, I suspect we’ll have fewer and fewer of those never-before-done things, and the guidance can become more predictable,” Ricks assured analysts on the call.
How to spend it
The staggering revenue growth has left Lilly with plenty of cash to play with for deals. Already, the company has executed 11 new pacts this year with chief dealmaker Jacob Van Naarden promising more during the earnings call.
“Risk is really our friend here. Risk allows us to actually create value,” said Van Naarden, who serves as executive VP and president, Lilly Oncology and head of Corporate Business Development.
But Lilly’s strategy is evolving. After completing the acquisitions of psychedelics biotech AtaiBeckley and Merida Biosciences, the pharma has now shifted its dealmaking to preparing for the next decade and beyond with early bets, Van Naarden said, as the incretin portfolio carries the rest of the business. He even cryptically hinted at some deals that have been done without much fanfare beyond known acquisitions.
“Some of that is very early-stage deal making, which oftentimes are not really even press released by us, so some of them maybe you don’t know as much about,” he said.
Van Naarden promised deals across all of Lilly’s therapeutic categories, including cardiometabolic, immunology, oncology and neuroscience.
“We’re just solving for great products, great science and great people that we can bring into the company and fuel growth into the decades to come,” he said on the call. “I think that gives us a competitive advantage, frankly, in how we look for what we want to take inside relative to our peers.”
