Is Eli Lilly Stock a Buy?

Comprehensive Analysis: Is Eli Lilly Stock Worth Buying?

 1. The company’s fundamentals and core advantages

Eli Lilly (NYSE:LLY) is a leading global pharmaceutical company focused on diabetes/obesity, oncology, neuroscience and immunology. Its core benefits include:

• Innovative drug portfolio: Growth is driven by flagship products such as Mounjaro (diabetes), Zepbound (obesity), and Verzenio (breast cancer). In Q4 2024, Mounjaro sales reached $3.5 billion, and Zepbound grew 52% quarter-on-quarter to $1.91 billion.
• R&D investment and pipeline depth: R&D expenses accounted for 27.3% of revenue in 2023, significantly higher than Pfizer (18.3%) and Amgen (17.0%), and nearly 70 drug candidates in the pipeline are in the clinical stage, including the oral GLP-1 drug Orforglipron and the Alzheimer’s disease drug Remternetug.
• Market Leadership: With a 44% share of the GLP-1 drug market (expected in 2031), Mounjaro is on track to surpass Novo Nordisk’s Ozempic as the world’s best-selling diabetes drug by 2029.

 2. Financial performance and growth expectations

• Revenue and profit growth: Revenue of $45 billion in 2024 (up 32% year-over-year) and net profit of $10.59 billion (net profit margin of 23.5%). The 2025 revenue guidance was raised to $58 billion to $61 billion, and net profit is expected to grow at a compound growth rate of 42% from 2025 to 2027.
  
• Profitability improvement: Gross profit margin is stable at more than 80%, and net profit margin is expected to rise to 35.3% in 2027, thanks to the increase in the proportion of high-margin products (such as GLP-1 drugs).
• Cash Flow & Expansion: Q4 2024 net profit of US$4.81 billion (up 114% year-on-year), supporting a US$3 billion capacity expansion plan and enhancing supply chain stability.

 3. Industry trends and competitive landscape

• GLP-1 market explosion: The global obesity drug market is expected to reach $100 billion by 2030, with Eli Lilly and Novo Nordisk duopoly. Zepbound quickly captured 56% of new prescriptions in the U.S. after its launch, with demand far outstripping supply.
• Policy and patent risks: The main challenges are the cost control of health insurance and the patent cliff. The Trulicity ($12.5 billion in 2023 sales) patent expires in 2027, but Mounjaro and Zepbound’s patents are protected until 2036 to cushion risk.
• Competitor dynamics: Roche, Pfizer and others have accelerated their entry into the GLP-1 field through mergers and acquisitions, but Eli Lilly still has barriers due to its first-mover advantage and pipeline depth.
  
  

 4. Valuations and market sentiment

• High valuation controversy: The current price-to-earnings (TTM) ratio of 113x is well above the industry average of 21.4x, reflecting the market’s optimistic expectations for its future growth. The DCF model shows a reasonable valuation of about $1,010 (a 12%-16% premium to the current one).
• Analyst ratings are divided: Most institutions have given a “buy” rating and a target price range of $970-1100 (e.g. Bernstein, JP Morgan), but be wary of the risk of a correction at high valuations.

 5. Risk factors

• R&D uncertainty: Alzheimer’s disease drug donanemab has been delayed due to safety concerns, and some projects in the pipeline (such as IL-23 antibody mirikizumab) have been terminated due to unsatisfactory efficacy.
• Policy and cost pressures: Global health insurance fee control and rising API prices (such as the shortage of GLP-1 drug raw materials) may squeeze profit margins.
• Macroeconomic volatility: Rising interest rates and exchange rate fluctuations have impacted financing costs and overseas revenues, with a stronger U.S. dollar leading to slower revenue growth in non-U.S. markets in 2024.

 Conclusion: To buy or not?

 Short-term (1-2 years):

• Recommended buy: If investors can tolerate high volatility, the short-term catalyst is clear. Zepbound’s ramp-up and Phase III data for oral GLP-1 drug Orforglipron, which is expected to be released in 2025, could push the stock above the $1,100 price target.
• Pay attention to risks: GLP-1 drug sales growth rate and gross profit margin changes in the 2024 Q1 financial report (released on May 1).

 Long-term (3-5 years):

• Cautiously optimistic: The core pipeline (e.g., Retatrutide, Remternetug) has great potential for commercialization, but it needs to be verified whether it can resist competition during the patent protection period. If the compound revenue growth rate of more than 15% is maintained by 2030, the current valuation can be digested.
• Recommended Diversification: Under high valuations, it is recommended to use LLY as part of the growth stock portfolio, accounting for no more than 10%.

 Key Decision Metrics:

1. Whether quarterly sales of GLP-1 drugs continue to exceed expectations (e.g., Zepbound surpasses $3 billion in a single quarter).
2. Clinical trial progress of oral GLP-1 drug and FDA approval timeline.
3.  The impact of interest rate policy and health care negotiations on pricing.

In summary, Eli Lilly’s leadership and growth momentum in the field of innovative drugs make it a high-quality target for long-term investment, but it needs to closely track the valuation and fundamental fit.