# How Eli Lilly makes money

CXProWealth Business Lens · Eli Lilly (LLY) · Q3 FY2026

Read from the 10-Q for the period 2026-07-01 to 2026-09-30, filed 2026-10-29 with the SEC (accession 0000059478-26-000108): https://www.sec.gov/Archives/edgar/data/59478/000005947826000108/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $24.4B (+38.6% on the year)
- Operating income: — (operating margin —)
- Net income: $6.5B (net margin 26.4%)
- Gross margin: 83.9%
- Free cash flow: —
- Cash conversion (operating cash flow / net income): 1.77x
- Capital expenditure: — of revenue

## Where the money goes (Q3 FY2026)

- Mounjaro → Revenue: $10.7B
- Zepbound → Revenue: $5.4B
- Jardiance → Revenue: $1.6B
- Trulicity → Revenue: $904.0M
- Other cardiometabolic health → Revenue: $1.2B
- Verzenio → Revenue: $1.5B
- Other oncology → Revenue: $1.1B
- Taltz → Revenue: $856.0M
- Other immunology → Revenue: $579.0M
- Neuroscience → Revenue: $444.0M
- Other → Revenue: $154.0M
- Revenue → Costs, expenses, and other: $16.0B
- Costs, expenses, and other → Acquired in-process research and development: $4.2B
- Costs, expenses, and other → Cost of sales: $3.9B
- Costs, expenses, and other → Research and development: $4.2B
- Costs, expenses, and other → Other–net, (income) expense: $202.0M
- Costs, expenses, and other → Marketing, selling, and administrative: $3.1B
- Costs, expenses, and other → Asset impairment, restructuring, and other special charges: $303.0M
- Revenue → Income before income taxes: $8.4B
- Income before income taxes → Income taxes: $2.0B
- Income before income taxes → Net income: $6.5B

## Where the revenue comes from

### Products and services (Revenue - Schedule of Disaggregation of Revenue by Product (Details))

| Member | Value | Share |
|---|---:|---:|
| Mounjaro | $10.7B | 44.0% |
| Zepbound | $5.4B | 21.9% |
| Jardiance | $1.6B | 6.5% |
| Verzenio | $1.5B | 6.2% |
| Other cardiometabolic health | $1.2B | 4.9% |
| Other oncology | $1.1B | 4.5% |
| Trulicity | $904.0M | 3.7% |
| Taltz | $856.0M | 3.5% |
| Other immunology | $579.0M | 2.4% |
| Neuroscience | $444.0M | 1.8% |
| Other | $154.0M | 0.6% |

The members sum to total revenue.

### Regions (Revenue - Schedule of Disaggregation of Revenue by Geographical Area (Details))

| Member | Value | Share |
|---|---:|---:|
| Europe | $4.5B | 18.3% |
| Rest of world | $3.2B | 13.1% |

The members do not sum to total revenue.

## Key insights

### Profit trails sales because Lilly is buying its pipeline

Expensed deal costs, not weaker operations, explain why net income rose 15.6% while revenue rose 38.6%.

Acquired in-process research and development, the expensed cost of buying drug programs that others discovered, was $4.2B this quarter against $656M a year earlier. It took 17.2% of revenue, up 13.5 points, and almost matched the $4.25B Lilly spent on its own research and development, a ratio of 98.9%. The filing names the acquisitions of AtaiBeckley and Curevo as the main source. _(from the filing)_
Pretax income fell 6.6 points to 34.5% of revenue, about half the 13.5 points the acquired R&D line alone added. Net income rose 15.6% to $6.45B and the net margin fell 5.3 points to 26.4%. Income taxes took 23.3% of pretax income, which the filing ties to acquired R&D charges that are not tax deductible. _(from the filing)_
Analysis: the charge lands in the quarter a deal closes, so reported profit now moves with the calendar of acquisitions as much as with sales, and comparing quarters means separating the two. The test comes later: whether the bought programs, from a depression compound to a shingles vaccine, reach approval and earn back what was paid. _(analysis)_

### Lilly is trading price per patient for reach

Lower realized prices absorbed part of the volume gain, yet cost of sales still fell to 16.1% of revenue.

Volume rose 53% against a year earlier while revenue rose 38.6% to $24.4B. The filing attributes the gap to lower realized prices, with both effects driven mainly by Mounjaro and Zepbound. Volume grew 41% in the U.S. and 76% outside it; over nine months the outside-U.S. figure was 93%. _(from the filing)_
Outside the U.S., the filing ties lower prices to Mounjaro's inclusion on China's National Reimbursement Drug List. In the U.S., lower prices came mainly from Zepbound, partly offset by revisions to rebate and discount estimates for products shipped earlier, mainly Mounjaro. _(from the filing)_
Cost of sales fell 0.97 points to 16.1% of revenue and gross margin reached 83.9%. The filing credits improved cost of production and favorable product mix, partially offset by lower realized prices. _(from the filing)_
Analysis: when one more dose costs little next to its price, a lower price that opens a large new payer can still raise total profit. Medicare's bridge program for Lilly's obesity medicines, which began this quarter, works the same way, and the filing calls continued uptake from it unknown. Rebate estimate revisions are not a recurring source of revenue, so the underlying U.S. price trend is somewhat weaker than this quarter shows. _(analysis)_

### Cash from operations far outruns reported profit

Expensed deal costs reduce net income without touching operating cash, one reason operating cash flow reached $11.4B against $6.45B profit.

Operating cash flow was $11.4B this quarter against net income of $6.45B, 1.77 times. A year earlier it was $8.84B against $5.58B. In the cash flow statement, acquired in-process R&D is added back to net income and the purchases appear under investing activities instead. The relationship swings: in the last full fiscal year operating cash flow was $16.8B against net income of $20.6B. _(from the filing)_
The cash is being spent heavily. Over nine months the filing shows higher spending on property and equipment, larger cash payments for acquisitions, a bond issue and less cash on hand. Management says investments in manufacturing facilities will result in higher capital expenditures in the near term. _(from the filing)_
Analysis: the operating figure shows how much the medicines themselves throw off, which is large. How much is truly spare depends on how long the pace of deals and plant building continues, and this record cannot isolate the quarter's capital spending because the filing reports cash flows for nine months at a time. _(analysis)_

## For members

Signed-in members read, on the page: the investor's and the founder's views of Eli Lilly (its fundamentals against its peers, where the profit is made, how the model works, where every $100 of revenue goes against the industry, the path to scale), its performance over time with every line as filed, and the edge and the risks. Membership is free.

## Member research

Signed-in members read, on the page: what Eli Lilly's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- Eli Lilly 10-Q for the period to 2026-09-30: https://www.sec.gov/Archives/edgar/data/59478/000005947826000108/ (2026-10-29)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-03 · as of 2026-11-03