Aging And Obesity Trends Will Expand Global Chronic Markets

Key Takeaways

• Small molecule innovation, manufacturing scale, and direct-to-consumer models position Eli Lilly for market dominance, outperformance, and premium pricing resilience.
  
• Demographic trends, new technologies, and ongoing R&D investments are set to drive sustained volume growth, innovation, and long-term earnings expansion.
  
• Heavy reliance on key drugs, pricing pressures, growing R&D costs, and payer power threaten Lilly's revenue stability, margins, and long-term earnings amid uncertain regulatory and competitive landscapes.

Catalysts

Eli Lilly and Company discovers, develops, and markets human pharmaceuticals in the United States, Europe, China, Japan, and internationally.

• Analysts broadly agree that strong orforglipron Phase III data and the anticipated convenience and scalability of a once-daily oral GLP-1 could boost revenue, but this likely understates the potential for orforglipron to fully unlock primary care and global obesity markets, as small molecule production enables mass adoption and rapid international penetration, potentially accelerating revenue growth far beyond consensus.
  
• The consensus expects robust manufacturing investments to ensure supply and optimize margins, but given Lilly's 1.8x dose capacity increase, first-in-class scale-up, and rapid facility expansion, performance margin gains and ability to outproduce competitors could lead to sustained net margin expansion and market share dominance not yet reflected in valuation.
  
• Most models underestimate the impact of the aging global population and rising chronic disease prevalence, which together are set to create durable, double-digit volume growth in Eli Lilly's core diabetes, obesity, and neurodegeneration franchises, driving structural revenue and earnings tailwinds for the next decade.
  
• The rapid uptake of LillyDirect's direct-to-consumer and cash-pay model is fundamentally changing the channel mix, providing price transparency, bypassing traditional intermediaries, and enabling premium pricing and margin resilience even as reimbursement headwinds or price reforms emerge.
  
• Ongoing investments in next-generation therapeutics such as single-dose gene-editing cardiovascular drugs, AI-powered R&D, and expansion into pain and liver disease (e.g., through SiteOne and Verve acquisitions) position Eli Lilly for step-change innovation cycles, with the potential to deliver transformative new high-margin revenue streams and further boost long-term earnings power.

Eli Lilly Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Eli Lilly compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Eli Lilly's revenue will grow by 23.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 25.9% today to 39.2% in 3 years time.
• The bullish analysts expect earnings to reach $39.7 billion (and earnings per share of $44.68) by about August 2028, up from $13.8 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 31.8x on those 2028 earnings, down from 44.5x today. This future PE is greater than the current PE for the US Pharmaceuticals industry at 19.3x.
• Analysts expect the number of shares outstanding to decline by 0.3% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Eli Lilly Future Earnings Per Share Growth

Risks

• Growing U.S. and global pressure for drug pricing reform, combined with Lilly's own initiatives to reduce patient out-of-pocket costs and offer discounted direct-to-consumer access, signals long-term downward pressure on realized prices that could materially impact revenue growth and compress net margins.
  
• A heavy reliance on blockbuster incretin products such as Mounjaro and Zepbound, with revenue growth largely driven by these assets, exposes Lilly to significant risk if competitors successfully introduce generics, biosimilars, or higher efficacy alternatives, increasing the volatility of future revenues and earnings.
  
• Expanding research and development investments, highlighted by a 23% year-over-year increase in R&D spend, while pipeline productivity and regulatory timelines remain uncertain, raises the risk of declining net margins and erratic earnings if new products face market or approval setbacks.
  
• The increasing negotiating clout of consolidated pharmacy benefit managers and insurers, as illustrated by the recent exclusion of Zepbound from the CVS formulary, demonstrates how Lilly's access to major segments can be abruptly restricted, reducing prescription volume growth, disrupting market share, and eroding revenues.
  
• Potential for heightened regulatory and legislative scrutiny over data privacy and digital health initiatives, as well as public and political backlash over perceived drug affordability or adverse safety events, could increase compliance costs, generate litigation expenses, and impose reputational damage, all of which threaten long-term earnings stability.

Valuation

• The assumed bullish price target for Eli Lilly is $1166.34, which represents two standard deviations above the consensus price target of $895.77. This valuation is based on what can be assumed as the expectations of Eli Lilly's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $1190.0, and the most bearish reporting a price target of just $650.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $101.3 billion, earnings will come to $39.7 billion, and it would be trading on a PE ratio of 31.8x, assuming you use a discount rate of 6.8%.
  
• Given the current share price of $684.43, the bullish analyst price target of $1166.34 is 41.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.