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Price: $1411.95
Discount category: Far above intrinsic value
Next earnings: 2027-01-29
Next earnings is estimate: Yes
Company name: Eli Lilly
Sector: Pharmaceuticals
About: Eli Lilly discovers, makes and sells medicines. Its largest product is tirzepatide, sold as Mounjaro for type 2 diabetes and as Zepbound for obesity. Foundayo (orforglipron), a GLP-1 pill for obesity, received FDA approval on April 1, 2026. Lilly also sells medicines for cancer (Verzenio, Jaypirca, Inluriyo), immune diseases (Taltz, Ebglyss, Omvoh) and Alzheimer's disease (Kisunla). In the first nine months of 2026, revenue was $67.2 billion, and Mounjaro, Zepbound and Foundayo gave 66% of it. In Q3 2026, U.S. revenue was $15.1 billion and revenue outside the U.S. was $9.3 billion. Lilly sells some obesity medicines directly to patients through LillyDirect.
Thesis: Lilly trades at a premium because investors pay for very fast growth from Mounjaro, Zepbound and the new obesity pill Foundayo, and for a pipeline led by retatrutide. Lilly leads the market for incretin medicines, its tirzepatide compound patent runs to an estimated 2036 in the U.S., and it has built large manufacturing capacity. But the premium needs volume to grow faster than prices fall. Realized prices fell 15% in Q3 2026, because of lower Zepbound prices in the U.S., the addition of Mounjaro to China's national reimbursement list and Lilly's voluntary price agreements with the U.S. government. Medicare access through the GLP-1 Bridge program runs only from July 1, 2026 to December 31, 2027, and long-term Medicare coverage is not decided. Other GLP-1 medicines, including pills, and compounded and illegal copies add pressure. Lilly also spends large sums on acquisitions: acquired IPR&D charges were $7.5 billion in the first nine months of 2026. For the premium to be earned, three things must be true. Volume growth must keep outpacing price cuts, so that revenue grows by more than 20% in 2027. Foundayo must win a large share of new obesity patients and an FDA approval for type 2 diabetes. Retatrutide must stay on plan for a U.S. submission in Q1 2027. The Q4 2026 report with 2027 guidance, expected in late January 2027, is the next test. If price cuts outpace volume or retatrutide slips, the premium can get smaller over the next four to six quarters.
Risks: Prices fall as access grows. Realized prices fell 15% in Q3 2026. U.S. price agreements, policy that links U.S. prices to other rich countries, and long-term Medicare coverage that is not decided can cut revenue per patient further. Mounjaro, Zepbound and Foundayo gave 66% of revenue in the first nine months of 2026. A safety problem, a supply problem or a strong rival medicine can hurt most of the business. Other GLP-1 medicines, including pills, compete for patients. Compounded and illegal copies, such as black market retatrutide, also take demand and can harm patients. Lilly buys many companies and records large acquired IPR&D charges: $7.5 billion in the first nine months of 2026. Debt rose to $49.5 billion. Failed programs can waste this money. Lilly builds many new plants. Delays or quality problems can limit supply, and new tariffs on medicines can raise costs.
Balance sheet: Cash: $9.0B Debt: $49.5B Net debt: $40.5B Undrawn credit line: $10.1B Debt due within 12 months: $2.5B Lilly funds its growth with operating cash flow and debt. At September 30, 2026, long-term debt including the current part had a carrying value of $49.5 billion, up from $42.5 billion at December 31, 2025. Of this, $2.5 billion is due within 12 months. Cash and cash equivalents were $4.9 billion, and investments were $4.1 billion. In May 2026, Lilly issued $9.0 billion of notes to repay commercial paper and to pay part of the Centessa and Kelonia purchases. In the first nine months of 2026, operating cash flow was $27.4 billion, capital spending for new plants was $8.4 billion and buybacks were $4.3 billion. Lilly had $10.1 billion of unused committed bank credit facilities: a $6.0 billion 364-day facility renewed in August 2026 and a $4.0 billion facility to August 2031 support its commercial paper. $6.6 billion is left under its $15.0 billion buyback program. As of 2026-09-30.
Checkpoints: Jan 29, 2027 (estimate): Q4 2026 results and 2027 guidance. Pending. Watch: 2027 revenue guidance with growth above 20% and a stable performance margin passes; guidance where price cuts outweigh volume growth fails. Q1 2027 (estimate): Retatrutide submission to the FDA. Pending. Watch: A U.S. submission of retatrutide for obesity in Q1 2027 as planned passes; a delay or a new safety concern fails.
Recent events: 2026-10-29: Lilly reported Q3 2026 results. Revenue rose 39% to $24.4 billion, with volume up 53% and realized prices down 15%. Revenue included about $900 million of one-time benefits. EPS was $7.22 reported and $7.48 non-GAAP, after acquired IPR&D charges of $4.57 per share. Lilly raised its 2026 guidance to revenue of $91 billion to $92 billion and non-GAAP EPS of $35.00 to $36.00. The FDA approved Mounjaro to lower cardiovascular risk in type 2 diabetes and Onswik, a once-weekly insulin. Retatrutide beat Ozempic in a head-to-head trial in type 2 diabetes. After the quarter, Lilly completed its purchase of Merida Biosciences. 2026-08-05: Lilly reported Q2 2026 results. Revenue rose 48% to $23.0 billion, and EPS was $7.94 reported and $8.38 non-GAAP, after acquired IPR&D charges of $3.03 per share. Lilly raised its 2026 revenue guidance to $85 billion to $87 billion. It said that the retatrutide data are complete for obesity, sleep apnea and knee osteoarthritis pain, and that it plans to submit retatrutide to the FDA in Q1 2027. It completed the purchases of Orna, Ajax, Centessa and Kelonia, and it committed $4.5 billion more to its Indiana sites. 2026-07-01: Medicare beneficiaries got access to discounted Lilly obesity medicines under the Medicare GLP-1 Bridge program, which runs to December 31, 2027. 2026-05-20: Lilly completed a $9.0 billion notes offering, with floating rate notes due 2028 and 2029 and fixed rate notes. It used the money to repay commercial paper and to pay part of the Centessa and Kelonia purchases. 2026-04-01: The FDA approved Foundayo (orforglipron), a daily GLP-1 pill for obesity that patients can take at any time without food or water limits. Lilly started to ship it on April 6, 2026. 2026-02-04: Lilly reported Q4 2025 results. Revenue rose 43% to $19.3 billion, and EPS was $7.39 reported and $7.54 non-GAAP. It gave 2026 guidance of revenue of $80 billion to $83 billion and non-GAAP EPS of $33.50 to $35.00. 2025-11-06: Lilly agreed with the U.S. government to expand access to obesity medicines at lower prices, including for Medicare and Medicaid patients.