After Eli Lilly's nearly 300% surge in four years, Wall Street remains bullish: The "hidden pipeline" beyond GLP-1 is underestimated

Eli Lilly's stock price has risen nearly 300% since its first GLP-1 drug was approved four years ago, with its market capitalization surpassing 1 trillion dollars, placing it among the world's most valuable pharmaceutical companies. Now, even after such substantial gains, Wall Street analysts still believe there is room for further upside.

Berenberg analyst Kerry Holford this week upgraded Eli Lilly's rating from "Hold" to "Buy," setting a target price of 1,400 dollars. She believes that, thanks to strong growth from marketed products and a robust pipeline under development, Eli Lilly's sales growth will significantly outpace its peers through 2030. Holford noted that while the market has already fully recognized Eli Lilly's leadership in the obesity sector, its R&D efficiency, pipeline breadth, and potential in non-obesity businesses remain underestimated.

Eli Lilly's core growth drivers are the GLP-1 drugs Mounjaro and Zepbound. Mounjaro was approved in 2022 for the treatment of type 2 diabetes and subsequently approved under the Zepbound brand for obesity treatment. It now has surpassed Novo Nordisk's Wegovy in prescriptions, making it the most prescribed weight management drug in the United States.

Holford stated that investors have very high expectations for Eli Lilly to maintain its leading position in the obesity market, and she remains confident on this front. Moreover, Eli Lilly’s oral GLP-1 drug Foundayo is currently awaiting regulatory approval for diabetes treatment. She believes that once approved, the drug is expected to “unlock significant demand,” further expanding the GLP-1 business.

Non-obesity pipeline remains underestimated by the market

Holford believes the area that has yet to be fully priced in for Eli Lilly is the R&D pipeline outside of obesity. The success of Mounjaro and Zepbound has provided the company with ample cash, allowing it to significantly increase investment in other therapeutic areas.

According to Holford's estimates, Eli Lilly has committed about 60 billion dollars this year in more than 25 business development transactions, including up to 7.8 billion dollars to acquire sleep disorder drug developer Centessa Pharmaceuticals, up to 7 billion dollars to acquire cancer drug developer Kelonia Therapeutics, as well as 3.8 billion dollars to acquire psychedelic drug developer AtaiBeckley.

"We believe this non-obesity pipeline is underestimated by investors," Holford wrote.

Eli Lilly currently has a forward price-to-earnings ratio of around 26 times, which is higher than its peers in the S&P 500 pharmaceutical index and also exceeds five of the "Big Seven" technology companies. However, Holford believes Eli Lilly’s R&D efficiency and pipeline potential are sufficient to support this valuation level. As existing products continue to grow and new drug pipelines move forward, Eli Lilly's growth rationale is gradually expanding from a single GLP-1 driver to a broader innovative pharmaceuticals business.