Since the approval of its first GLP-1 drug, Eli Lilly and Co.'s stock has risen nearly 300% cumulatively, pushing its market capitalization above $1 trillion. Yet Wall Street remains optimistic about its future growth. Berenberg has upgraded Eli Lilly's rating to "Buy," citing the continued volume expansion of Mounjaro and Zepbound, with oral GLP-1 drugs expected to further unlock demand. In addition, Eli Lilly continues to ramp up investments in areas such as oncology and sleep disorders, and the potential of its non-obesity pipeline remains undervalued by the market.
Since Eli Lilly and Co. received approval for its first GLP-1 drug four years ago, its stock price has risen nearly 300% cumulatively, pushing its market capitalization above $1 trillion and placing it among the world's most valuable pharmaceutical companies. Even now, despite the substantial gains, some Wall Street analysts still believe there is further upside potential.
Berenberg analyst Kerry Holford this week upgraded Eli Lilly and Co. from "Hold" to "Buy," setting a price target of $1,400. She believes that, driven by strong growth in its marketed products and an extensive pipeline, Eli Lilly's sales growth will continue to outpace peers through 2030. Holford noted that while the market has already recognized Eli Lilly's leadership in the obesity space, it still underestimates the company's R&D efficiency, the breadth of its pipeline, and the potential of its non-obesity businesses.
Eli Lilly and Co's core growth engines are the GLP-1 drugs Mounjaro and Zepbound. Mounjaro was approved in 2022 for the treatment of type 2 diabetes and subsequently received approval under the Zepbound brand for obesity treatment; its prescription volume has now surpassed Novo-Nordisk A/S's Wegovy, making it the highest-prescribed weight-management drug in the United States.
Holford stated that investors already have high expectations for Eli Lilly and Co. to maintain its leading position in the obesity market, but she remains confident. In addition, Eli Lilly's oral GLP-1 drug Foundayo is awaiting regulatory approval for the treatment of diabetes. She believes that, once approved, the drug could "unlock substantial demand" and further expand the GLP-1 business.
The non-obesity pipeline remains undervalued by the market.
Holford believes that the portion of Eli Lilly and Co. that has yet to be fully priced in is its R&D pipeline beyond obesity. The success of Mounjaro and Zepbound has provided the company with ample cash, enabling it to increase investment in other therapeutic areas.
According to Holford's estimates, Eli Lilly and Co. has committed approximately $60 billion this year across more than 25 business development deals, including a maximum of $7.8 billion to acquire sleep-disorder drug developer Centessa Pharmaceuticals, up to $7 billion to acquire cancer-drug developer Kelonia Therapeutics, and a $3.8 billion acquisition of psychedelic drug developer AtaiBeckley.
"We believe this non-obesity pipeline is undervalued by investors," Holford wrote.
Currently, Eli Lilly and Co.'s forward price-to-earnings ratio stands at around 26 times, higher than that of its peers in the S&P 500 Healthcare Index and exceeding five of the Mag 7. However, Holford believes that Eli Lilly's R&D efficiency and pipeline potential are sufficient to justify this valuation level. As its existing products continue to ramp up in volume and its new drug pipeline advances, Eli Lilly's growth narrative is gradually expanding from being driven solely by GLP‑1 to encompass a broader portfolio of innovative medicines.