Stock Analysis
Eli Lilly and Company (LLY)
NYSE: LLY · Pharmaceuticals - Cardiometabolic, Oncology, Immunology, Neuroscience
Updated
Rated Watchlist, with a fair value of $1,233.02 against a last close of $1,251.61 (-1.5% implied upside). Europe's medicines committee backed the Foundayo pill, but the shares already price a smooth 2027; interesting near $1,058.
- Verdict
- Watchlist
- Fair Value
- $1,233.02
- Investment Score
- 73.8/100prev 75.8
Technical read (chart only): Conflicts as of Uptrend above a rising 50-day average, so the chart is turning up before the valuation case has; watch closely without changing the rating, and note that a pullback toward the 200-day average near $1,079 would bring the price into the area of interest.The Watchlist verdict comes from the fundamentals alone. The technical read looks only at the price chart. It does not change the verdict or the score and only guides entry timing.
Investment Scorecard
Composite score 73.8/100 (previous 75.8). Every factor is scored out of 10, ten always being the best outcome, including for risk.
| Factor | Score | Weight | Change | Basis |
|---|---|---|---|---|
| Business Quality | 9/10 | 16% | unch. | Unchanged. Tirzepatide franchise with an 86.3% non-GAAP gross margin in Q2; no new results since the last report. |
| Financial Strength | 8/10 | 16% | unch. | Unchanged. Trailing free cash flow about $18.2bn and net debt about $45bn at end-June; no new balance sheet until 29 Oct. |
| Competitive Advantage | 9/10 | 16% | unch. | Unchanged. The EU recommendation puts Foundayo on track to be the second oral GLP-1 for weight in Europe; Novo's pill still leads in orals. |
| Management | 8/10 | 10% | -1 | Down 1. Deal flow continues (Merida closing this quarter, more licensing) while this year's acquisition spend already exceeds trailing free cash flow. |
| Growth Potential | 8/10 | 16% | unch. | Unchanged. 2027 revenue consensus $102.1bn, about 15% growth; EU Foundayo adds little before 2028. |
| Valuation | 4/10 | 16% | unch. | Unchanged. 26.6x our 2027 EPS of $47.00; the weighted value sits 1.5% below the price. |
| Risk (10 = lowest risk) (10 = lowest risk) | 5/10 | 10% | -1 | Down 1. Q3 results on 29 Oct are the first full quarter of the $50 Medicare bridge, with tirzepatide near two-thirds of revenue and a Fed that is still raising rates. |
Recent Developments
| Date | Development | Impact |
|---|---|---|
| Foundayo (orforglipron) EU positive opinion The EMA's CHMP, at its 12-15 October meeting, recommended EU authorisation for weight management (adults with obesity, or overweight with a weight-related condition) and type 2 diabetes in adults. European Commission decision pending, date not announced. Novo's Wegovy pill has held EU approval since July. Reading: Not yet an approval, and small in 2027: our estimate of about $0.4bn of European sales is worth about $0.23 of EPS; strong or weak uptake moves the share price by about $7 or $4. It de-risks the oral franchise rather than changing the case. | High | |
| Foundayo data and US uptake ACHIEVE-4 met cardiovascular non-inferiority against insulin glargine (MACE-4 hazard ratio 0.84). An indirect comparison showed 1.5% more weight loss than oral semaglutide 25 mg. The CEO said about one-third of new oral GLP-1 patients start on Foundayo (reported, 21 Sep). Q2 sales $98m. Reading: Q3 sales on 29 October are the first hard read. Our sizing: success adds about $1.13 of 2027 EPS and failure costs about $0.73; the larger effect of a failure would be on the multiple. | High | |
| Retatrutide Phase 3 programme 80-week Phase 3 data presented at EASD; management plans submission in early 2027. Reading: No 2027 revenue either way; filing timing drives the multiple. | High | |
| US obesity pricing Medicare GLP-1 bridge at $50 a month live since 1 July; underlying US price down about 9% in Q2. No new pricing action between 22 September and 16 October. Reading: Tirzepatide is about two-thirds of revenue, so US net price remains the largest input to 2027 earnings; Q3 is the first full quarter of the bridge. | High | |
| Acquisitions and licensing Merida Biosciences (up to $2.875bn) expected to close in Q4; AtaiBeckley closed 11 September; licences with InnoCare and Noah Health and a trial collaboration with Adlai Nortye. Reading: Commitments this year exceed trailing free cash flow, and management has signalled more deals. | Medium | |
| Onswik (insulin efsitora alfa) FDA approval First once-weekly basal insulin approved in the US for type 2 diabetes; launch in coming months. Reading: Supports the diabetes franchise; small against total revenue. | Medium | |
| Jaypirca first-line CLL approval FDA approved Jaypirca for adults with previously untreated CLL or SLL without 17p deletion. Reading: Widens an oncology product; immaterial to group earnings. | Low |
Key Risks
| Risk | Probability | Severity | Comment |
|---|---|---|---|
| US drug pricing policy | Medium | High | Government pricing reaching commercial channels would hit the core franchise. |
| Multiple compression | Medium | High | At 26.6x 2027 EPS, a move to 21x costs about $265 a share before any earnings change. |
| Retatrutide setback | Low-Medium | High | Delay or safety signal removes the next growth leg. |
| Revenue concentration | Structural | High | Tirzepatide is about two-thirds of revenue. |
| US net price erosion | High | Medium | Underlying -9% in Q2; Q3 is the first full quarter of the $50 Medicare bridge. |
| Oral competition | Medium | Medium | Wegovy pill launched first in the US and EU. |
| Acquisition size | Medium | Medium | Commitments exceed trailing free cash flow; more signalled. |
| Compounded and grey-market supply | Medium | Medium | Caps self-pay pricing. |
Scenario Analysis
| Case | Probability | Fair Value | Outlook |
|---|---|---|---|
| Bull | 25% | $1,530 | 2027 revenue about $110bn. US price erosion narrows, Foundayo succeeds (about $4.5bn including about $0.9bn in Europe), retatrutide files on time. EPS $51.00, 30x. |
| Base | 52% | $1,245.50 | 2027 revenue about $102bn. Erosion near the current pace, Foundayo about $2.5bn ($0.4bn Europe), retatrutide files early 2027. EPS $47.00, 26.5x. |
| Bear | 23% | $882 | 2027 revenue about $95bn. Five more points of US price erosion, Foundayo about $1.2bn, retatrutide delayed. EPS $42.00, 21x. |
The Case
Eli Lilly leads the obesity drug market, and on 16 October Europe's medicines committee recommended its Foundayo pill for weight management and type 2 diabetes, pending a Commission decision. Europe adds little to 2027 earnings, and the shares, up 5.6% since late September, trade at about 26.6 times our 2027 EPS of $47.00. A weighted fair value of $1,233.02 sits below the price; the name becomes interesting near $1,058, ideally after Q3 results test US pricing on 29 October.
Archived Reports
Beating The Bull keeps every past version of this report on file. Verdicts and numbers reflect what was known when each one was published.
Informational use only. Not financial advice.