Eli Lilly (LLY) and Merck (MRK) both reported earnings that surpassed Wall Street expectations.
Both reports signal continued strength in the pharmaceutical sector despite looming policy risks and market volatility.
Key Points
- Eli Lilly reported a 54% revenue jump, driven by strong obesity and diabetes drug sales.
- Merck beat profit estimates, supported by its blockbuster cancer drug Keytruda.
- Both companies raised full-year guidance, showing confidence despite U.S. drug pricing pressures.
LLY Reports a “Beat and Raise” Quarter
Eli Lilly’s latest earnings report showcased one of the strongest performances in the sector. The company posted adjusted earnings of $7.02 per share, topping analyst forecasts of $5.89. Revenue surged 54% year-over-year to $17.6 billion, far ahead of expectations.
The growth was powered by Lilly’s incretin-based therapies — Mounjaro, a diabetes treatment that generated $6.5 billion, and Zepbound, its obesity drug that delivered $3.6 billion in sales. Combined, these treatments have cemented Lilly’s leadership in the fast-growing weight-loss market
Management raised its full-year guidance to $23 to $23.70 per share in earnings and $63 billion in revenue, signaling optimism for continued momentum. However, ongoing negotiations with the Trump administration over drug pricing for Zepbound remain a potential headwind.
Despite these concerns, analysts called the results “arguably the strongest print across 3Q so far.” The company’s CFO also highlighted growth in other segments, including oncology, immunology, and neuroscience, underscoring a broad-based expansion beyond obesity treatments.
MRK’s Keytruda Keeps Merck Ahead — For Now
Merck’s third-quarter results also topped expectations, as demand for its flagship cancer drug Keytruda rose 10% to $8.1 billion. Overall revenue reached $17.3 billion, beating estimates of $17 billion, while adjusted earnings per share came in at $2.58, well above projections of $2.35.
Merck raised its 2025 earnings outlook to $8.93–$8.98 per share and expects full-year sales between $64.5 billion and $65 billion. The company’s strong performance was boosted by efficiency gains, pushing its operating margin to 39%, up from 23.6% a year earlier.
However, challenges lie ahead. Keytruda, which currently contributes about half of Merck’s total revenue, will begin facing competition from biosimilar drugs in 2028, potentially cutting billions in future sales. The company is responding with acquisitions, such as Verona Pharma and Acceleron, to diversify its portfolio and sustain growth.
How Are Political Pressures Affecting These Pharma Giants?
A central concern for both companies is the White House’s ongoing effort to lower drug prices. President Trump has signaled a push to reduce the cost of weight-loss medications like Zepbound to around $150 a month — a fraction of current list prices.
While competitors such as Pfizer have already reached pricing deals, Eli Lilly has not yet announced one. Investors are watching closely, as the outcome could shape future margins and investor sentiment across the sector.
Merck, meanwhile, has taken a more collaborative tone, saying it is “actively engaged” with the administration to balance affordability with innovation incentives.
What It Means for Investors
For investors analyzing stocks in the healthcare sector, both LLY and MRK continue to stand out as companies that are good to invest in due to their strong fundamentals and diversified growth pipelines.
Eli Lilly remains a leader in the obesity treatment market, with robust demand for Mounjaro and Zepbound, plus new drugs like Orforglipron on the horizon. Despite political headwinds, its raised guidance and broad product strength make it one of the best stocks to buy for exposure to long-term healthcare growth.
Merck, though facing patent expirations, has maintained profitability through innovation and strategic acquisitions. Its strong margins and continued R&D investments make it a stable option for those seeking basics of investing exposure to large-cap pharmaceuticals.
Conclusion
Eli Lilly and Merck delivered impressive quarterly results, showing that even amid political uncertainty and competitive pressures, innovation and strong demand can drive resilient performance. For retail investors following investment news, both companies remain compelling long-term plays in a rapidly evolving healthcare landscape.
FAQs
Why did Eli Lilly’s stock rise after earnings?
Because the company’s earnings and revenue far exceeded analyst expectations, driven by strong sales of Zepbound and Mounjaro.
What are the main risks for Merck investors?
Keytruda’s patents expire in 2028, which could lead to declining sales as biosimilar competitors enter the market.
How does the U.S. government’s pricing policy affect LLY and MRK?
Potential price cuts on branded drugs could reduce profit margins, though both companies are negotiating terms that protect their bottom lines.
Which company has better growth potential right now?
Eli Lilly currently shows stronger near-term growth, but Merck’s diversification and acquisitions could provide more stable returns over time.
Are these companies still considered good investments?
Yes. Both remain among the best company investments for those seeking exposure to healthcare innovation and long-term growth.
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