Eli Lilly (NYSE:LLY) reports third-quarter results in about a week, and the split between volume and price matters more than the headline total. In the second quarter, revenue rose 48% to $23.0 billion on a 60% jump in the amount of medicine sold, while the price Lilly collected per unit fell 13%. The company is one of the 10 No-Brainer Stocks to Buy Now.
That is an unusual mix for a drugmaker, and it sets up the central question. Lilly is growing by selling far more at lower prices, so the story holds only as long as volume keeps outrunning price cuts. The business looks strong enough to keep doing that. The stock, though, already assumes it will.
Lilly makes Mounjaro and Zepbound, the weekly injections for diabetes and weight loss, along with a newer weight-loss pill called Foundayo and a range of cancer and immune-disease drugs. Mounjaro brought in $9.9 billion last quarter, up 91%, with Zepbound the second-biggest seller. Nothing else Lilly sells comes close.
Pixabay/Public Domain
Volume Is Still Beating Price Cuts
Price pressure varies by region. Outside the U.S., realized prices fell 36% after Mounjaro joined China’s national reimbursement list, yet volume there rose 113%. At home the pattern is the same but milder, with U.S. volume up 37% while realized prices slipped 3%.
Lower prices have not cost Lilly its profits. Gross margin reached 85.8% last quarter, higher than a year earlier, as production got cheaper and the product mix improved. If you’re interested in highly profitable companies, we recently compiled a report on 12 Most Profitable S&P 500 Stocks to Invest In.
Growth has also sped up, with revenue rising about 31.7% a year over the past three years against about 21.6% a year over five.
New Drugs Have to Fill the Gap
Today’s injections are not the only bet. Foundayo sold $98 million in its first reported quarter, though a Reuters roundup of the field noted that Novo Nordisk’s rival pill reached Europe and the UK first.
Rivals are the main worry. Reuters named Pfizer, Amgen, Roche, AstraZeneca and Boehringer Ingelheim among the companies chasing the same market, and lower prices are already part of Lilly’s results. So far they have not slowed Lilly’s volume, which is the figure that decides how much the price cuts matter.
Lilly is also spending to widen its lineup. Charges for acquired research reached $2.8 billion last quarter. That is why Lilly trimmed the top of its adjusted profit forecast even as it raised its 2026 revenue forecast to $85 billion to $87 billion. Its next weight-loss drug, retatrutide, has completed the late-stage data it needs for approval requests, with a U.S. filing planned for the first quarter of 2027. To keep supply growing, Lilly also committed another $4.5 billion to its Indiana manufacturing sites. Investors who want more healthcare ideas can see our ranking of 10 Best Healthcare Stocks to Buy According to Hedge Funds.
What the Price Already Assumes
On forward adjusted earnings, the stock trades at 36.79 times. That is about 88% above the sector median, but about 19% below Lilly’s own five-year average. Earnings per share have grown about 27.6% a year over the past five years. That helps explain why buyers pay so much more than they do for the typical healthcare stock. For investors looking for cheaper growth stocks, our list of 10 Undervalued Growth Stocks to Buy Now is worth a look.
A shareholder today owns a business whose margins widened while prices fell, at a price that already counts on that continuing. The stock is cheaper than it was in the past, yet still far above its sector.
Volume has beaten price so far, and a 48% jump says buyers are still lining up. The first sign of whether that lasts comes in next week’s report, where the thing to watch is how far realized prices fall next to volume growth.
While we acknowledge the risk and potential of LLY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LLY and that has 10,000% upside potential, check out our report about this cheapest AI stock.
READ NEXT: Pfizer vs. AbbVie: Is the Cheaper Pharma Stock Really the Better Investment? and Merck’s Rally Reflects Renewed Confidence, but Has the Market Priced in Too Much?
This article is originally published at Insider Monkey.
