Shares of Eli Lilly have climbed nearly 300% since the first GLP-1 drug was approved four years ago, pushing its market capitalization above $1 trillion and cementing its position among the world's most valuable pharmaceutical companies. Despite the substantial rally, some Wall Street analysts believe the stock still has further room to run.
Berenberg analyst Kerry Holford upgraded Eli Lilly from "Hold" to "Buy" this week, setting a price target of $1,400. She argues that thanks to strong growth from marketed products and a rich pipeline of investigational drugs, Eli Lilly's sales growth will remain significantly ahead of its peers through 2030. Holford noted that while the market has fully recognized Eli Lilly's leadership in obesity care, it still underestimates the company's R&D efficiency, pipeline breadth, and the potential of its non-obesity businesses.
Eli Lilly's core growth engines are the GLP-1 drugs Mounjaro and Zepbound. Mounjaro was approved in 2022 for treating type 2 diabetes, and later gained approval under the Zepbound brand for obesity treatment. Prescription volumes have already surpassed Novo Nordisk's Wegovy, making it the most-prescribed weight management medication in the United States.
Holford said investor expectations for Eli Lilly to maintain its lead in the obesity market are already high, but she remains confident in the company's ability to do so. Additionally, Eli Lilly's oral GLP-1 drug Foundayo is awaiting regulatory approval for diabetes treatment. She believes that once approved, the drug could "unlock significant demand," further expanding the GLP-1 franchise.
Non-Obesity Pipeline Remains Undervalued by the Market
Holford believes the part of Eli Lilly that is truly not yet fully priced in is its R&D pipeline outside of obesity. The success of Mounjaro and Zepbound has generated ample cash flow, enabling the company to increase investment in other therapeutic areas.
According to Holford's estimates, Eli Lilly has committed approximately $60 billion across more than 25 business development deals this year alone, including up to $7.8 billion to acquire sleep disorder drug developer Centessa Pharmaceuticals, up to $7 billion to acquire cancer drug developer Kelonia Therapeutics, and $3.8 billion to acquire psychedelic drug developer AtaiBeckley.
"We believe this non-obesity pipeline is undervalued by investors," Holford wrote.
Eli Lilly currently trades at a forward price-to-earnings ratio of roughly 26 times, higher than peers in the S&P 500 pharmaceutical index and above five of the "Magnificent Seven" tech stocks. However, Holford believes Eli Lilly's R&D efficiency and pipeline potential are sufficient to justify this valuation. As existing products continue to scale and new drug candidates advance, Eli Lilly's growth story is gradually evolving from being solely GLP-1 driven to a broader innovative medicine business.