Eli Lilly's obesity and diabetes drug franchise is genuinely growing fast and is patent-protected until 2036.
But the stock is priced for that growth to continue almost uninterrupted for five-plus years, and Novo Nordisk, the only company to run this exact playbook before, just showed how quickly a GLP-1 growth story can crack.
Our fair-value estimate sits roughly 25–30% below today's price; only our most optimistic scenario supports the current level.
Overvalued.
Eli Lilly earns most of its money from diabetes and weight-loss drugs (Mounjaro and Zepbound), which together make up roughly 80% of revenue and are still growing fast; other areas such as immunology are much smaller and roughly flat.
We'd revisit this call if the price falls below $350.00 or rises above $1.6K.
These are review triggers for us to take another look, not price targets or a promise the stock will reach them.
| Metric | LLY (subject) | Peer median |
|---|---|---|
| EV/Sales | 17.54x | 5.84x |
| EV/EBIT | 44.43x | 20.27x |
| EV/EBITDA | 41.23x | 16.99x |
| P/B | 41.75x | 7.17x |
| Gross Margin | 83.0% | 73.1% |
| ROIC | 33.4% | 20.0% |
| ROE | 77.8% | 33.8% |
| Rule of 40 | N.M. | 27.9% |
Eli Lilly is now effectively a GLP-1/incretin company: Mounjaro+Zepbound (tirzepatide) were 64.8% of Q1 2026 revenue ($12.82B of $19.80B), up from 48.4% a year earlier. FY2025 revenue $65.18B (+44.8% YoY); Q1 2026 revenue $19.80B (+55.5% YoY). Net income TTM $25.28B (~35% margin). Balance sheet: $116.6B assets, $43.4B total debt, $5.3B cash, net debt ~$38.1B, equity $31.2B (10-Q, 31-Mar-2026).
Gross margin expanding: 81.3% (FY24) → 83.0% (FY25) → 81.9% (Q1'26, mix noise). R&D $13.3B FY25 (20.5% of revenue, down from 24.4% as revenue outgrew spend). Operating margin ex-IPR&D charges: 41.4% (Q1'25) → 48.0% (Q1'26), real leverage, not just lower one-off IPR&D. Diluted EPS $8.26 (Q1'26) vs $3.06 (Q1'25), +170%. TTM diluted EPS ≈$28 (895.9M wtd-avg diluted shares, Q1'26 10-Q); trailing P/E ≈44x; consensus forward P/E ≈29-31x (multiple public estimates).
OCF TTM $20.48B; capex TTM $8.66B (12.0% of revenue, elevated for manufacturing capacity buildout, not a distortion, it's core growth capex); FCF TTM ≈$11.82B (16.4% FCF margin, depressed vs. mature-pharma norms of 25-30% because of the capex surge). SBC TTM ~$633M (immaterial, <1% of revenue). Dividends paid FY25 $5.38B (payout ratio 26.1% of NI, fails the >0.40 DIVIDEND-class gate, confirms GROWTH classification). $15B buyback authorized Dec-2024; $4.1B executed by FY25-end.
Total debt $43.4B (Q1'26) vs $42.5B (FY25-end), raised to fund capacity capex; cash only $5.3B. Net debt/TTM-FCF ≈3.2x, not high-risk for an investment-grade issuer with 83% gross margins, but leverage has risen materially (FY24 debt $28.5B → FY25 $42.5B, +49%) as the company borrows to build manufacturing scale ahead of demand. Current ratio 1.50x. No liquidity or covenant concern identified.
Novo Nordisk is the key read-through: after years of GLP-1 hypergrowth, NVO guided its first-ever revenue DECLINE for 2026 (-5% to -13%), CagriSema Phase 3 failed to beat tirzepatide (Feb-2026, stock -16% that day, -56% off highs), Barclays cut CagriSema peak-sales est. 83% ($12B→$2B). JNJ/MRK/ABBV/PFE trade at high-single/low-double-digit forward multiples on low-single-digit growth. LLY is priced as sole survivor of a two-horse race whose rival just stumbled, real edge, but already in the multiple.
Nov-2025 White House/MFN deal cut Medicare/Medicaid tirzepatide price to ~$245/mo and TrumpRx cash price to ~$346/mo (from $1,086 list) starting 2026; Medicare obesity coverage begins, $50/mo copay from 1-Apr-2026, a volume-for-price trade, net effect not yet observable. Formal IRA negotiation eligibility for tirzepatide deferred to ~2031-2035 (statutory exemption), so the bigger structural pricing risk is further out.
97 Form 4s filed 22-Oct-2025 to 16-Jun-2026 (SEC feed); no transaction-level buy/sell codes in feed. Externally: CEO Ricks' 2026 filings show routine RSU-vest tax sales (14,297 sh @ $1,037.15, 1-Feb-2026) plus new grants (38,914 sh, 9-Feb-2026), standard comp mechanics. One notable open-market buy (1,632 sh @ $644.77, Aug-2025) predates the run to $1,235. No net buy/sell conclusion possible; UNAVAILABLE at transaction-code level.
Catalysts (12-18mo): orforglipron US launch trajectory, T2D NDA filing (2026), retatrutide NDA (~Q4'26-Q1'27), TrumpRx volume data, capex-driven FCF-margin inflection. Risks: competitive response, CMS/IRA pricing creep, capacity execution, multiple compression if growth is merely "very good" not "exceptional."
q6: (1) Novo's CagriSema failure shows even the #2 incretin player can miss, orforglipron (12.4% wt loss) already trails oral semaglutide 25mg (~13.6-16.6%) cross-trial; (2) MFN/TrumpRx cuts ~68% off list price are a real, current net-price headwind; (3) Trulicity's -16% YoY previews how fast an incretin franchise erodes once supplanted; (4) debt up 49% YoY funding capex that assumes demand shows up. q7 falsification: Mounjaro+Zepbound YoY growth decelerating below +20% in FY2026 (vs guided +23-27% co-wide), or orforglipron failing to reach a >$2B annualized run-rate within two quarters of launch, falsifies the sustained-hypergrowth thesis priced in.
Two-stage DCF-equivalent (5yr fade + exit multiple, ~8.5% discount rate, ~915M shares): Bear. CAGR ~10%/yr, margin pressure, 14x exit (peer-average, Novo-style derating) → ~$350/sh. Base. CAGR ~18%/yr fading to teens, margin ~34%, 20x exit → ~$880/sh. Bull. CAGR ~24%/yr, margin ~37%, 26x exit (pipeline fully realized) → ~$1,650/sh. Current price $1,236 sits between base and bull, priced for the bull/near-flawless path.
Mechanical model output, a screen, not a fair value.conservative screen, understates growth/AI-capex names
Two-stage growth-fade + exit-multiple DCF (5yr fade, ~8.5% discount rate, ~915M shares) puts base-case fair value near $880/sh vs. $1,235.56 current price; the price sits between the base and bull scenarios, i.e. it already discounts sustained ~20%+ revenue CAGR, margin expansion, and no Novo-style derating for 5 years.
Research flagged that one or more mechanical-screen inputs look invalid or distorted (e.g. a data-extraction issue or a capex/FCF definition mismatch); the research verdict was independently re-derived from primary filings, not just a check on the same numbers.
Confidence = 0.7 × research sub-score + 0.3 × mechanical sub-score. Mechanical sub-score rewards the Layer 1 screen for agreeing with Layer 2's direction (corroboration), not just for being conviction=NORMAL in isolation.