Lilly has added $10 billion to this year's revenue guidance, and not all of it will repeat

Eli Lilly raised its revenue guidance for this year again, to $91 billion to $92 billion. The midpoint now sits $10 billion above the midpoint of the range the company set in February. For someone holding the shares, the size of the raise matters less than its make-up, because this year's revenue is the figure next year's growth will be measured against. Most of the gain comes from many more patients paying less per prescription, which management expects to continue. Some of it will not come back, and a meaningful part rests on a Medicare program that is still being run as a trial.

Last year followed a similar path, though not at every step: Lilly kept its opening range in May, raised it in August and again in October, and full-year revenue of $65.2 billion still finished above the top of the October range, $63.5 billion. Asked on this call whether guidance had been a poor predictor, chief executive David Ricks said two things were unknown at the start of this year: how fast patients would take up Medicare's new GLP-1 Bridge coverage, and how far cash-paying demand for the drugs reached beyond wealthy buyers abroad. Both turned out well, he said, "thus the roughly $10 billion improvement over first time guide."

The September 2026 quarter shows how that money is being earned. Volume rose 53% while realised prices, what Lilly collects after rebates and discounts, fell 15%. In the US the fall was smaller, helped by a favourable revision to rebate estimates; without that revision, the company said, US prices fell 10%. Outside the US prices fell 29%, mostly because Mounjaro was added to China's national reimbursement list. None of this was a surprise to management, which in April guided to a price decline in the low to mid teens for the year. Better product mix and cheaper production more than covered it, and gross margin as a share of revenue still rose.

Not all of the extra revenue will recur. Last quarter included about $900 million of benefits, including $410 million of milestone payments on Jardiance, which Lilly sells in a collaboration with Boehringer Ingelheim, and favourable changes to rebate and discount estimates; no further Jardiance milestones remain. The release says the first three quarters all gained from such items, and chief financial officer Lucas Montarce put the total for the year at about $2 billion, which the company does not expect to record next year. That is small against the whole, but it lowers the starting point for next year's comparison. Montarce also said price would again cost Lilly growth next year, more than offset by volume.

The Medicare program is the part with the least history behind it. The Bridge, which began in July, extended coverage of obesity medicines to older Americans, and Lilly's results credit expanded US coverage for obesity care as one source of growth. Management said uptake was rapid and that about 80% of the people treated under it had not taken this class of drug before, which points to new patients rather than switching. Ricks described the program as a pilot that the government will assess for itself, and said the signs point to cost effectiveness that could lead to permanent coverage by law or regulation. Management also expects more of its sales to come through channels that pay a lower net price per prescription, including self-pay.

Earnings guidance moved the other way. The non-GAAP earnings per share range is now $35 to $36, lower than the range given in August. The company said the business itself added $4.07 a share at the midpoint, more than offset by $4.57 of charges for acquired in-process research and development, mostly from buying AtaiBeckley and Curevo. The August guide had absorbed the previous quarter's deal charges in the same way, and this one excludes any acquired IPR&D charges incurred after September, such as any from the Merida Biosciences acquisition completed after the quarter ended.

So the business is growing on the number of people taking Lilly's drugs, the part management says will carry into next year. The revenue figure that best describes it is a little lower than the one the company reports, and a share of the volume depends on how the government judges its Medicare trial.