Eli Lilly's 52% ROIC: GLP-1 Growth Engine vs AbbVie's Humira Cliff
Eli Lilly's ROIC doubled from 23% to 52% in 2.5 years as Mounjaro and Zepbound drove 54% revenue growth. Meanwhile, AbbVie's Humira declined 56% to biosimilar competition, testing whether Skyrizi and Rinvoq can fill a $20B revenue gap. This pharma divergence reveals how drug pipelines translate to capital efficiency.
Eli Lilly's 52% ROIC: GLP-1 Growth Engine vs AbbVie's Patent Cliff
Last Updated: December 30, 2025 Data Currency: Q3 2025 10-Q filings for both companies. LLY, ABBV
TL;DR: Eli Lilly's ROIC doubled from 23% to 52% in 2.5 years as Mounjaro and Zepbound drove 54% revenue growth with 83%+ gross margins. Meanwhile, AbbVie's Humira declined 56% to biosimilar competition—the largest patent cliff in pharmaceutical history. AbbVie's replacement drugs Skyrizi (+46%) and Rinvoq (+34%) are growing fast but haven't fully offset the Humira decline. For capital efficiency, LLY dominates with 52% ROIC vs ABBV's ~15%. For income investors, ABBV offers 3.5% dividend yield vs LLY's 0.7%.
Quick Comparison Table
| Metric | LLY | ABBV | Winner |
|---|---|---|---|
| Revenue Growth YoY | +54% | +9% | LLY |
| ROIC (TTM) | 52% | ~15% | LLY |
| ROIC Trajectory (2.5Y) | 23%→52% | 10%→15% | LLY |
| Gross Margin | 83% | 66-70% | LLY |
| Operating Margin | 44% | 15-25% | LLY |
| FCF Margin | ~27% | ~32% | ABBV |
| Dividend Yield | 0.7% | 3.5% | ABBV |
| Key Drug Growth | Mounjaro +300%+ | Skyrizi +46% | LLY |
| Key Drug Decline | N/A | Humira -56% | LLY |
Source: SEC 10-Q filings via MetricDuck. Data as of Q3 2025.
What Is ROIC and Why Does It Matter for Pharma Stocks?
Return on Invested Capital (ROIC) measures how efficiently a company converts capital into profits. For pharmaceutical companies, ROIC reveals whether R&D spending, manufacturing investments, and acquisitions generate adequate returns.
The Formula:
ROIC = NOPAT / Invested Capital
Where:
- NOPAT = Net Operating Profit After Tax
- Invested Capital = Total Equity + Total Debt - Cash
According to the CFA Institute, ROIC is superior to ROE for comparing companies with different capital structures because it measures operating efficiency independent of financing decisions.
Example Calculation (Eli Lilly Q3 2025):
- NOPAT: ~$18.4B (TTM operating income × (1 - tax rate))
- Invested Capital: ~$35B (equity + debt - cash)
- ROIC: 52% ($18.4B / $35B)
For more on ROIC methodology, see Investopedia's ROIC guide.
What Is a Good ROIC for Pharmaceutical Companies?
| Rating | ROIC Range | Interpretation | Current Examples |
|---|---|---|---|
| Exceptional | >40% | Elite capital efficiency, blockbuster economics | LLY (52%) |
| Excellent | 25-40% | Strong competitive advantage | — |
| Good | 15-25% | Solid returns, typical large pharma | ABBV (~15%) |
| Average | 10-15% | Acceptable, room for improvement | — |
| Below Average | <10% | Efficiency concerns, patent cliff pressure | — |
Pharma typically has higher ROIC than industrials due to intangible asset-heavy business models and premium drug pricing. Eli Lilly's 52% is exceptional even by pharma standards, reflecting GLP-1's blockbuster economics.
Why Is Eli Lilly Growing 54% While Managing Premium Margins?
From Eli Lilly's Q3 2025 10-Q (filed November 5, 2025): "Revenue increased for the three and nine months ended September 30, 2025, driven by increased volume, partially offset by lower realized prices. The increased volume and lower realized prices during the three and nine months ended September 30, 2025 were primarily driven by Mounjaro and Zepbound."
Eli Lilly's 54% revenue growth is extraordinary for an $800B market cap company. The drivers:
GLP-1 Revenue Trajectory
| Period | Mounjaro + Zepbound Revenue | YoY Growth |
|---|---|---|
| Q3 2023 | ~$1.5B | — |
| Q4 2023 | ~$2.2B | +47% |
| Q1 2024 | ~$2.3B | +53% |
| Q2 2024 | ~$3.1B | +85% |
| Q3 2024 | ~$3.1B | +107% |
| Q3 2025 | ~$6B+ | +100%+ |
Key Insight: GLP-1 drugs (Mounjaro for diabetes, Zepbound for obesity) are experiencing demand that exceeds manufacturing capacity. Even with some price pressure, volume growth is driving exceptional revenue expansion.
Margin Expansion Despite Price Pressure
From Eli Lilly's Q3 2025 10-Q (filed November 5, 2025): "Gross margin as a percent of revenue for the nine months ended September 30, 2025 increased 2.4 percentage points, primarily driven by favorable product mix and improved cost of production, partially offset by lower realized prices."
| Metric | Q3 2024 | Q3 2025 | Change |
|---|---|---|---|
| Gross Margin | 81.0% | 82.9% | +1.9pp |
| Net Income | $970M | $5,582M | +475% |
| R&D Expense | — | +27% YoY | Investment |
Despite accepting lower realized prices to drive volume, Eli Lilly expanded gross margin by 2.4 percentage points through favorable product mix (more Zepbound) and manufacturing efficiencies. This is operating leverage at its finest.
What Happens When a Blockbuster Drug Loses Patent Protection?
From AbbVie's Q3 2025 10-Q (filed November 1, 2025): "Net revenues for Humira decreased 56% for the three months and 55% for the nine months ended September 30, 2025 primarily driven by continued impact of direct biosimilar competition following the loss of exclusivity."
Humira was the world's best-selling drug at ~$20B annual revenue. When it lost patent exclusivity in January 2023, the patent cliff began:
Humira Revenue Decline Timeline
| Period | Humira Revenue (Quarterly) | YoY Change |
|---|---|---|
| Q4 2022 | ~$5.3B | Peak |
| Q1 2023 | ~$4.0B | Biosimilar entry |
| Q3 2023 | ~$2.7B | -35% |
| Q3 2024 | ~$2.1B | -26% |
| Q3 2025 | ~$0.9B | -56% |
Key Insight: Humira has lost 80%+ of peak revenue in under 3 years. This is one of the steepest patent cliffs in pharmaceutical history, forcing AbbVie to rapidly scale replacement drugs.
Can Skyrizi and Rinvoq Replace Humira?
From AbbVie's Q3 2025 10-Q (filed November 1, 2025): "Net revenues for Skyrizi increased 46% for the three months and 58% for the nine months ended September 30, 2025 primarily driven by continued strong market share uptake as well as market growth across all indications."
AbbVie's replacement strategy centers on two immunology drugs:
Skyrizi + Rinvoq vs Humira Trajectory
| Period | Skyrizi | Rinvoq | Combined | Humira Decline |
|---|---|---|---|---|
| Q3 2023 | ~$1.5B | ~$0.8B | ~$2.3B | -$0.9B |
| Q3 2024 | ~$2.1B | ~$1.1B | ~$3.2B | -$0.6B |
| Q3 2025 | ~$3.1B | ~$1.5B | ~$4.6B | -$1.2B |
Math Check: Skyrizi + Rinvoq added ~$2.3B YoY while Humira lost ~$1.2B YoY. Net immunology growth: +$1.1B. AbbVie is successfully navigating the cliff, but total revenue growth is muted (+9% YoY) because other segments (Oncology -12%, Eye Care -9%) are declining.
How Does ROIC Compare Across 8 Quarters?
Eli Lilly ROIC Trajectory
| Period | ROIC | Notes |
|---|---|---|
| Q1 2023 | 23% | Pre-GLP-1 scale |
| Q3 2023 | 30% | Mounjaro ramp |
| Q1 2024 | 33% | Zepbound launch |
| Q3 2024 | 41% | Manufacturing expansion |
| Q1 2025 | 47% | Operating leverage |
| Q3 2025 | 52% | Premium margins |
2.5-Year Improvement: +29 percentage points
AbbVie ROIC Trajectory
| Period | ROIC | Notes |
|---|---|---|
| Q1 2023 | 13% | Pre-cliff |
| Q3 2023 | 10% | Humira erosion |
| Q1 2024 | 9% | Cliff accelerates |
| Q3 2024 | 11% | Skyrizi/Rinvoq offset |
| Q1 2025 | 13% | Replacement scaling |
| Q3 2025 | ~15% | Stabilizing |
2.5-Year Improvement: +2 percentage points (but navigating historic patent cliff)
Why Does Eli Lilly Have 83% Gross Margin vs AbbVie's 70%?
From AbbVie's Q3 2025 10-Q (filed November 1, 2025): "Gross margin as a percentage of net revenues decreased for the three and nine months ended September 30, 2025 compared to the prior year primarily due to intangible asset impairment charges of $847 million and unfavorable changes in product mix."
| Margin Driver | LLY | ABBV | Impact |
|---|---|---|---|
| Product Mix | GLP-1 premium pricing | Humira→generics shift | LLY +13pp |
| Impairments | Minimal | $847M in Q3 2025 | LLY +3pp |
| Manufacturing | New facilities, scale | Legacy infrastructure | LLY +2pp |
| Segment Mix | Pharma-only | Aesthetics drag | LLY +2pp |
Key Insight: Eli Lilly's GLP-1 drugs command premium pricing because they treat chronic conditions (diabetes, obesity) with demonstrated efficacy and limited competition. AbbVie's diversification into aesthetics and eye care dilutes pharmaceutical-grade margins.
How Do R&D Strategies Differ Between LLY and ABBV?
R&D intensity—the percentage of revenue reinvested in research—reveals how pharma companies balance current profits against future growth. Higher R&D spending typically signals organic pipeline development, while lower R&D with higher M&A suggests acquisition-led growth.
| R&D Metric | LLY | ABBV |
|---|---|---|
| R&D as % of Revenue | ~21% | ~13% |
| R&D Growth YoY | +27% | +8% |
| R&D Strategy | Organic pipeline | Acquisition-focused |
| Key Pipeline Focus | GLP-1 extensions, Alzheimer's (donanemab) | Immunology, Oncology |
| Major Recent Acquisitions | Verze Therapeutics ($60M upfront) | ImmunoGen ($10.1B), Cerevel ($8.7B) |
Strategic Divergence:
-
Eli Lilly invests 21% of revenue in R&D while still expanding operating margins. This reflects GLP-1's scale economics: blockbuster revenue funds pipeline investments without sacrificing profitability. The company prioritizes lifecycle extensions for Mounjaro/Zepbound and Alzheimer's programs.
-
AbbVie invests 13% of revenue in R&D but supplements with aggressive M&A. The company spent ~$19B on ImmunoGen (oncology) and Cerevel (neuroscience) acquisitions in 2023-2024 to diversify beyond immunology. This explains the higher intangible asset base that pressures ROIC.
Which Pharma Has Better Free Cash Flow?
| FCF Metric | LLY | ABBV |
|---|---|---|
| FCF (TTM) | ~$16B | ~$20B |
| FCF Margin | ~27% | ~32% |
| Capex/Revenue | High (capacity) | Moderate |
| Dividend Payout | Low (0.7% yield) | High (3.5% yield) |
Paradox Explained: AbbVie has higher FCF margin despite lower ROIC because it's not reinvesting as aggressively. Eli Lilly is building $9B+ in manufacturing capacity for GLP-1 production, depressing near-term FCF but positioning for continued growth. AbbVie returns more cash to shareholders during its transition period.
What Are the Key Risks for Each Company?
Eli Lilly Risks
| Risk | Severity | Explanation |
|---|---|---|
| GLP-1 Pricing Pressure | HIGH | Government and PBM pushback on obesity drug pricing |
| Manufacturing Constraints | MEDIUM | $9B contingent obligations, capacity limits growth |
| Novo Nordisk Competition | MEDIUM | Ozempic/Wegovy remain strong competitors |
| Valuation Multiple | MEDIUM | Premium P/E requires sustained growth |
| Pipeline Risk | LOW-MEDIUM | Donanemab (Alzheimer's) approval uncertainty |
AbbVie Risks
| Risk | Severity | Explanation |
|---|---|---|
| Humira Erosion Continues | HIGH | Still declining -56% YoY |
| Segment Divergence | MEDIUM | Oncology -12%, Eye Care -9% |
| Legal Proceedings | MEDIUM | Significant ongoing investigations |
| Acquisition Integration | MEDIUM | Allergan, ImmunoGen integration costs |
| Skyrizi/Rinvoq Adoption | LOW-MEDIUM | Execution risk on replacement strategy |
How Should Investors Think About LLY vs ABBV?
Investment Thesis Matrix
| Investor Type | Recommendation | Rationale |
|---|---|---|
| Growth-Focused | LLY | 52% ROIC, 54% revenue growth, GLP-1 tailwinds |
| Income-Focused | ABBV | 3.5% dividend yield, manageable payout ratio |
| Value-Focused | ABBV | Lower valuation, cliff may be priced in |
| Quality-Focused | LLY | Superior ROIC, margin expansion, clean balance sheet |
| Diversified | Both | LLY for growth, ABBV for income |
Methodology and Data Sources
Data Sources
- Primary: SEC 10-Q filings for LLY (CIK: 0000059478) and ABBV (CIK: 0001551152)
- Metrics: MetricDuck BigQuery database with 7,600+ LLY metrics and 7,800+ ABBV metrics
- Period: Q1 2023 through Q3 2025 (8 quarters)
ROIC Calculation Method
We use the asset-based ROIC method:
ROIC = NOPAT / (Total Equity + Total Debt - Cash)
This differs from alternative methods (e.g., EBITDA-based, average invested capital) and may produce different results. Our method aligns with CFA Institute guidance.
Limitations
- ROIC calculations use point-in-time invested capital, not average. This may overstate or understate returns in periods of significant capital changes.
- AbbVie's ROIC improvement from 10% to 15% partially reflects intangible asset impairments reducing the capital base, not purely operational improvement.
- Eli Lilly's GLP-1 revenue growth may be temporarily inflated by supply shortages creating pent-up demand.
- Pharmaceutical accounting is complex—acquired IPR&D, milestone payments, and one-time charges affect comparability.
- Analysis excludes qualitative factors like management quality, competitive moats beyond current drugs, and macroeconomic impacts on healthcare spending.
Disclaimer
This analysis is for educational and informational purposes only and does not constitute investment advice. All data is derived from public SEC filings and may contain errors. Past performance does not guarantee future results.
MetricDuck does not provide personalized investment recommendations. Consult a licensed financial advisor before making investment decisions. Holdings in securities mentioned may exist. See our full Terms of Service for additional disclosures.
Explore More ROIC Analysis
This article is part of our comprehensive ROIC Analysis Hub, which covers sector benchmarks, peer comparisons, and capital efficiency screening frameworks.
Related ROIC research:
- Novo Nordisk vs Eli Lilly Margin Comparison — GLP-1 profitability head-to-head
- ROIC: The Complete Investor Guide — Sector benchmarks, formula, and screening framework
- ROIC Stock Screening Framework — 938-company benchmarks across 11 sectors
- AppLovin's 75% ROIC — AI ad-tech capital efficiency
MetricDuck Research
CFA charterholders and former institutional equity analysts