Morgan Stanley: Lilly raises full-year revenue guidance as two drugs sell strongly; new oral drug falls short of expectations

How did the two drugs drive the increase in full-year guidance?

In the third quarter of 2026, combined global sales of Mounjaro and Zepbound reached $16.1 billion, above Morgan Stanley’s forecast of $15.4 billion, the market consensus of $15.1 billion, and second-quarter sales of $14.9 billion. Mounjaro accounted for $10.7 billion and Zepbound for $5.4 billion.
Lilly raised its 2026 revenue guidance from $85 billion–$87 billion to $91 billion–$92 billion, lifting the midpoint by $5.5 billion. The new midpoint of $91.5 billion exceeds the market consensus of $88.8 billion cited in the report.
The company raised its full-year margin guidance from 49.0%–50.5% to 52.0%–52.5%. Morgan Stanley said expanding revenue drove the margin improvement, consistent with its view of growth in the two drugs’ scale.
New full-year earnings guidance is $35–$36 per share, including $4.57 per share in acquired in-process research and development expenses. The bank said guidance could have risen by about $4 without that expense.

The US incretin drug market grew 32% year over year in the third quarter, and Lilly’s share by total prescriptions rose from about 61% in the second quarter to 63%. Markets outside the US grew 53%, and Lilly’s share rose from 55% to 58.4%.
The Medicare GLP-1 Bridge program, launched in July, covers about 20 million eligible Americans, with patients paying $50 per month. More than 500 thousand patients use Lilly obesity drugs through the program, of whom 80% had not previously started incretin treatment. The company receives $245 per patient.
Lilly expects volume growth in 2027 to outweigh pressure from lower realized net prices. However, 2026 revenue also includes approximately $2 billion in one-time items, mainly milestone payments and adjustments to rebate and discount estimates, which the company does not expect to recur.

Foundayo generated $184 million in global third-quarter sales, nearly twice the $98 million recorded in the second quarter, but below Morgan Stanley’s $216 million forecast and the $230 million market consensus. Based on recent trends, the bank cut its 2026 and 2027 sales forecasts by about $700 million and $600 million, respectively.
Lilly said the drug’s share of new US oral-drug patients reached about 40% at the end of the third quarter, and its US application for a type 2 diabetes indication is under review. The company sees this as an important expansion opportunity because about half of US GLP-1 drug use comes from patients with type 2 diabetes.

Morgan Stanley maintained its Overweight rating on Lilly and raised its price target from $1430 to $1596. While lowering its near-term Foundayo forecasts, the bank raised its forecasts for Mounjaro outside the US, resulting in a net increase in its overall incretin portfolio forecast.
The new target is based on forecast earnings per share of about $57 from the fourth quarter of 2027 through the third quarter of 2028, multiplied by a price-to-earnings ratio of 28, up from 27 previously. The bank attributed the higher valuation multiple to stronger growth prospects.
Under the bank’s model, Foundayo’s global sales rise from about $687 million in 2026 to about $31.5 billion in 2030. Lilly’s innovation day on 7 December is expected to cover its research and development pipeline; the company will not provide financial guidance at the event.