Executive Summary / Key Takeaways

• Eli Lilly is experiencing unprecedented growth, primarily fueled by the explosive demand for its incretin medicines, Mounjaro and Zepbound, driving a 45% revenue increase in Q1 2025.
• The company is making massive, strategic investments exceeding $50 billion in U.S. manufacturing since 2020 to alleviate supply constraints and meet global demand, aiming for significant production increases in the coming years.
• Lilly's deep and diversified pipeline, particularly in Cardiometabolic Health (Orforglipron, Retatrutide, Muvalaplin), Oncology (Jaypirca, Imlunestrant, Olomorasib), Immunology (Ebglyss, Omvoh), and Neuroscience (Kisunla), represents significant future growth drivers with numerous key readouts and submissions expected through 2026.
• While facing intense competition and pricing pressures from payers and government initiatives like the IRA, Lilly is leveraging its differentiated technology, clinical trial success, and strategic focus on expanding access and choice to maintain market leadership.
• The company reaffirmed its 2025 revenue and performance margin guidance, absorbing potential impacts from tariffs, signaling confidence in continued strong financial performance despite increased investments in R&D and commercialization.

The Dawn of a New Era: Lilly's Strategic Ascent

Eli Lilly and Company, founded in 1876 with a mission to unite caring with discovery, stands at a pivotal moment in its nearly 150-year history. What began as a small laboratory in Indianapolis has evolved into a global pharmaceutical powerhouse, now experiencing a period of transformative growth driven by groundbreaking scientific innovation and strategic market execution. The company operates as a single, integrated segment focused on the discovery, development, manufacturing, marketing, and sale of pharmaceutical products worldwide, supported by a global R&D engine, a sophisticated supply chain, and expansive commercial organizations.

Lilly's overarching strategy is clear: to discover, develop, and make innovative new medicines that address significant unmet medical needs. This strategy is underpinned by a commitment to investing heavily in research and development, building a robust and diversified pipeline, and ensuring these life-changing medicines can reach patients globally through scaled manufacturing and broad market access. The company's recent history is a testament to the success of this approach, particularly highlighted by the launch and rapid uptake of its incretin therapies, Mounjaro and Zepbound, which have fundamentally reshaped the landscape of diabetes and obesity treatment and propelled Lilly into a period of accelerated financial performance.

Central to Lilly's competitive advantage is its differentiated technological expertise across various modalities. While historically strong in biologics and small molecules, the company is actively expanding its capabilities in areas like gene editing, RNA-targeted therapies, and leveraging artificial intelligence in drug discovery and antibody development through strategic collaborations and acquisitions. This multi-modal approach is designed to tackle complex diseases and combat treatment resistance.

A prime example of Lilly's technological edge is its work in incretin mimetics. Tirzepatide, the active ingredient in Mounjaro and Zepbound, is a dual GIP and GLP-1 receptor agonist. This dual mechanism has demonstrated superior efficacy in clinical trials compared to single GLP-1 agonists, leading to significant weight loss (e.g., ~20.2% with Zepbound vs. ~13.7% with Wegovy in SURMOUNT-5) and A1C reductions (e.g., Mounjaro showing ~15-20% better A1C reduction than some comparators). This quantifiable clinical differentiation is a key driver of market share gains and underpins the strong demand for these products.

Beyond injectables, Lilly is pioneering oral incretin therapies. Orforglipron, an oral small molecule GLP-1 receptor agonist, represents a significant technological leap. Unlike peptide-based injectables, its small molecule structure allows for easier manufacturing and potentially broader global distribution without cold-chain requirements. Phase 3 data in Type 2 diabetes showed compelling efficacy, with A1C reductions of 1.3% to 1.6% and average weight loss of 7.9% (16 lbs) at the highest dose, with a tolerability profile consistent with injectable GLP-1s and no hepatic safety issues observed in the ACHIEVE-1 trial. This positions orforglipron as a potential game-changer, offering injectable-like benefits with oral convenience, addressing the preference of approximately 50% of Type 2 diabetes patients and 25% of U.S. obesity patients who have needle fear. The goal is to deliver a medicine manufacturable at scale to impact hundreds of millions globally.

Further technological advancements are evident in Lilly's pipeline. Muvalaplin, an oral Lp(a) reducer, showed impressive Phase 2 data with up to 85% reduction in Lp(a) levels, potentially becoming the first oral small molecule for lowering this cardiovascular risk factor. In oncology, the acquisition of Scorpion Therapeutics' PI3Kα inhibitor program and the advancement of assets targeting KRAS mutations and ADCs demonstrate a focus on precision therapies and novel modalities to improve outcomes. The collaboration with Verve Therapeutics (VERV) in gene editing for cardiovascular disease and the partnership with Creyon Bio for RNA-targeted therapies highlight Lilly's push into cutting-edge genetic medicines. These technological differentiators are not merely scientific achievements; they are the engines driving Lilly's competitive moat, enabling the development of best-in-class medicines that command market attention and fuel financial performance.

Performance Reflecting Innovation and Scale

Lilly's recent financial performance vividly illustrates the impact of its innovative pipeline and strategic execution. For the three months ended March 31, 2025, the company reported robust revenue of $12,728.5 million, a significant 45% increase compared to $8,768.0 million in the same period of 2024. This growth was overwhelmingly driven by volume increases, particularly from Mounjaro and Zepbound, partially offset by lower realized prices and unfavorable foreign exchange rates.

Cardiometabolic Health revenue surged by 67.6% year-over-year in Q1 2025, reaching $9,208.1 million. Mounjaro contributed $3,841.8 million, more than doubling its Q1 2024 sales, while Zepbound, launched in late 2023, generated $2,311.9 million, demonstrating exceptional early uptake. This segment now accounts for the vast majority of Lilly's revenue.

Beyond incretins, other therapeutic areas also contributed positively. Oncology revenue grew 7.6% to $1,947.5 million, driven by continued strong performance from Verzenio ($1,158.9 million). Immunology saw a 30.5% increase to $1,088.0 million, with Taltz contributing $761.9 million and new launches like Omvoh and Ebglyss gaining traction. Neuroscience revenue, however, decreased by 30.1% to $272.1 million. Overall, the business excluding incretins demonstrated solid growth, highlighting the breadth of Lilly's portfolio.

Profitability metrics underscore the financial leverage gained from increased sales volume. Gross margin as a percent of revenue improved to 82.5% in Q1 2025, up from 80.9% in Q1 2024, primarily due to improved cost of production and favorable product mix, despite lower realized prices. Operating expenses increased, with R&D rising 8% to $2,733.7 million due to continued pipeline investment and Marketing, Selling, and Administrative expenses increasing 26% to $2,468.8 million to support launches. Notably, acquired IPR&D charges were substantial at $1,571.7 million in Q1 2025, primarily related to the Scorpion Therapeutics acquisition, significantly impacting net income.

Despite the IPR&D charge, net income increased to $2,759.3 million in Q1 2025 from $2,242.9 million in Q1 2024, resulting in diluted earnings per share of $3.06, up from $2.48. The effective tax rate was 20.2% in Q1 2025, higher than 11.6% in Q1 2024, primarily due to the non-deductible acquired IPR&D charge.

Lilly's financial condition remains robust, supporting its ambitious investment plans. As of March 31, 2025, total assets were $89,388.8 million, up from $78,714.9 million at December 31, 2024. Total liabilities increased to $73,542.0 million from $64,443.3 million, reflecting increased long-term debt used to fund acquisitions and investments. Total equity stood at $15,846.8 million. The company maintains strong liquidity, with $3,093.3 million in cash and cash equivalents and access to significant committed bank credit facilities, providing confidence in its ability to fund planned capital requirements, which are expected to be meaningfully higher over the next several years.

Outlook and the Road Ahead

Lilly's outlook for 2025 remains highly positive, underpinned by the continued momentum of its key products, expanding manufacturing capacity, and a rich pipeline. The company reaffirmed its full-year 2025 revenue guidance, expecting continued strong growth driven by volume increases from Mounjaro and Zepbound in the U.S. and increasing contributions from international launches. Performance margin guidance was also reaffirmed, reflecting the balance between robust revenue growth and planned increases in R&D and commercial investments. Non-GAAP earnings per share guidance remains unchanged, excluding the impact of Q1 acquired IPR&D charges.

Management anticipates significant progress in expanding access for its incretin medicines. Zepbound is rapidly building commercial formulary coverage, and the company is seeing increasing employer opt-in for anti-obesity coverage. Potential Medicare access for the obstructive sleep apnea indication in the second half of 2025 is also expected to drive further uptake. Internationally, Mounjaro is launching in new markets throughout 2025, contributing increasingly to revenue.

The pipeline is poised to deliver numerous key catalysts. Over the next 12 months, results are expected from seven Phase 3 trials for orforglipron across Type 2 diabetes and obesity, with potential regulatory submissions for obesity starting worldwide by the end of 2025, followed by Type 2 diabetes in the first half of 2026. A Phase 3 trial for orforglipron in hypertension is also planned to start in Q2 2025. In Cardiometabolic Health, a Phase 3 program for muvalaplin in atherosclerotic cardiovascular disease is planned for later this year. In Oncology, Jaypirca is expected to launch in Europe in Q2 2025, with additional Phase 3 readouts later this year, and a Phase 3 program for Olomorasib in resected adjuvant non-small cell lung cancer has been initiated. In Neuroscience, U.S. regulatory action for the modified dose enrichment for Kisunla is expected in the coming months, and the event-based TRAILBLAZER-ALZ 3 study in preclinical Alzheimer's could read out earlier than 2027.

To support this accelerating growth and future launches, Lilly is executing an ambitious manufacturing expansion plan. Since 2020, the company has committed over $50 billion to U.S. manufacturing investments, including building four new facilities (three for API manufacturing). This is expected to result in meaningfully higher capital expenditures over the next several years and aims to ensure sufficient supply to meet global demand and increase export volume.

Navigating a Complex Competitive Landscape

Lilly operates within a highly competitive global pharmaceutical market, facing rivals across its therapeutic areas. In Cardiometabolic Health, its primary competitor is Novo Nordisk (NVO), particularly with Ozempic and Wegovy challenging Mounjaro and Zepbound. While Zepbound has demonstrated superior weight loss efficacy in head-to-head trials and Lilly's incretin franchise is gaining significant market share, the competitive dynamic is intense. NVO also has its own oral GLP-1 (Rybelsus) and a pipeline of next-generation obesity assets. Lilly's strategy here is to leverage the clinical differentiation of its dual agonist (tirzepatide), expand access through various channels (including the LillyDirect self-pay option), and bring forward its next-generation assets like orforglipron and retatrutide to offer a portfolio of differentiated options. The recent CVS Caremark (CVS) decision to prioritize Wegovy over Zepbound on its standard formularies highlights the ongoing pressure from private payers and PBMs, although Lilly emphasizes its preference for expanding choice rather than engaging in exclusive "one-on-one" deals that restrict access.

In Oncology, Lilly competes with major players like Merck (MRK) with Keytruda, Pfizer (PFE) with Ibrance, and others. Verzenio competes in the breast cancer market, facing competition from Novartis (NVS)'s Kisqali. Lilly's focus on targeted therapies and ADCs, supported by acquisitions and internal R&D, aims to carve out differentiated positions. In Immunology, rivals include Johnson & Johnson (JNJ) with Stelara and AbbVie (ABBV) with Humira, among others. Lilly's Taltz, Omvoh, and Ebglyss compete in inflammatory and autoimmune diseases, leveraging clinical data and market access efforts. In Neuroscience, the Alzheimer's market is emerging, with competition from other amyloid-targeting therapies. Lilly's Kisunla (donanemab) differentiates with its fixed-duration treatment approach based on amyloid plaque clearance.

Beyond direct product competition, Lilly faces broader challenges from generic and biosimilar competition upon patent expiry, ongoing pricing pressures from governments and payers globally (exacerbated by initiatives like the IRA selecting Jardiance for price negotiation), and the proliferation of compounded products, which Lilly is actively addressing through legal action and by ensuring sufficient supply of approved medicines. The consolidation of PBMs in the U.S. increases payer leverage, impacting pricing and market access negotiations.

Lilly's strategic response to this complex environment involves continuous innovation to deliver clinically differentiated products, significant investment in manufacturing to ensure supply reliability, proactive engagement with payers to expand access while advocating for more transparent pricing models, and vigorous defense of its intellectual property and regulatory framework against unauthorized products. The company's diversified pipeline across multiple therapeutic areas also provides resilience against competitive pressures in any single market.

Conclusion

Eli Lilly is currently riding a wave of unprecedented success, propelled by the remarkable performance of its incretin franchise and a strategically diversified pipeline. The company's commitment to innovation, particularly its leadership in next-generation incretin therapies and expansion into cutting-edge modalities like gene editing and RNA-targeted treatments, positions it for sustained long-term growth. While facing significant challenges from intense competition, pricing pressures, and the complexities of scaling manufacturing to meet global demand, Lilly is addressing these head-on with massive capital investments and a clear strategic focus on expanding access and choice for patients.

The reaffirmed 2025 guidance signals management's confidence in the continued strong trajectory, underpinned by expected volume growth, international expansion, and numerous anticipated pipeline catalysts. For investors, the core thesis remains compelling: Lilly's ability to consistently deliver differentiated, high-impact medicines, supported by a rapidly expanding operational footprint and a deep well of future innovation, provides a strong foundation for value creation, even amidst the dynamic and challenging pharmaceutical landscape. The successful execution of its manufacturing build-out and the clinical and commercial success of its late-stage pipeline assets, particularly orforglipron, will be critical indicators to watch as Lilly seeks to solidify its position as a leader in multiple key therapeutic areas.