Eli Lilly and Co

Lilly reported 48% second-quarter revenue growth and 33% non-GAAP EPS growth, which included acquisition charges. Management raised the midpoints of its 2026 guidance to $86 billion in revenue and $36 per share in non-GAAP EPS. Shares rose 5% on Aug. 5.

Why it matters: Impressive growth for tirzepatide, particularly internationally (branded as Mounjaro), allowed Lilly to raise full-year revenue guidance once again, now roughly $4.5 billion higher at the midpoint than at the start of 2026. Mounjaro (91% growth) and Zepbound (46% growth) led to nearly $15 billion in sales of the tirzepatide molecule in the second quarter, dominating Novo's injectable franchise, although the launch of oral GLP-1 Foundayo ($98 million in its first quarter) is still lagging Novo's Wegovy pill. Beyond cardiometabolic, Lilly saw strong double-digit growth across key products in immunology (Ebglyss, Omvoh), oncology (Inluriyo, Jaypirca), and neurology (Kisunla), adding a bit of diversification despite tirzepatide's dominance at 64% of total revenue in the quarter.

The bottom line: We're raising our fair value estimate for wide-moat Lilly to $980 from $900, after slight adjustments to several drugs in Lilly's portfolio, as well as our decision to raise our long-term operating margin assumptions and include a placeholder for several early-stage pipeline programs. Our valuation is still below recent prices, as market momentum remains solidly with Lilly and incorporates a P/E multiple of more than 30 times in 2026, while our new fair value estimate implies a 27 times multiple. Key upcoming catalysts will be Foundayo's international launch (through 2027), Foundayo's diabetes approval (later this year), and retatrutide's filing in obesity, osteoarthritis, and sleep apnea (in the first quarter of 2027).

BLANK PAGELilly's aggressive acquisition strategy in 2026 will be key in determining how wide the firm's moat will expand in the 2030s, and whether Lilly can expand broadly enough to cushion the eventual blow from tirzepatide generics starting in 2036.

For more information on Eli Lilly's portfolio and pipeline, please see our recent in-depth report, “Biopharma Product Pipelines Rise to Meet Steeper Patent Cliffs.”

We are raising our fair value estimate to $980 per share from $900, after raising our long-term operating margin assumptions as well as adding a placeholder to our long-term revenue assumptions for early-stage pipeline programs.

We see peak sales for Mounjaro/Zepbound around $80 billion in the early 2030s, and Foundayo peak sales above $30 billion by the mid-2030s.

Mounjaro and Zepbound are supporting solid margin expansion for Lilly based on operating leverage. Our assumptions for overall biopharma GLP-1 sales in 2035 reach $200 billion across diabetes, obesity, and overweight patients, with Lilly capturing $120 billion of the market. We think more than 20% of obese and overweight adults in the US will receive treatment in 10 years, with the vast majority receiving branded incretin therapies. Beyond the direct-to-patient and government payer prices negotiated in the deal with the Trump administration in November 2025, we think US prices could continue to fall as volume increases (in line with payer contracts) and new entrants launch (beginning in 2028), with average net prices falling from roughly $6,000 annually in 2025 to roughly $3,000 in self-pay and government channels in 2026.

In aggregate, the company looks well positioned to drive top-line growth. We project a 37% top-line growth rate in 2026 and a 16% growth rate in 2027, with double-digit growth through the end of the decade. We expect diabetes and weight-loss drugs Mounjaro/ Zepbound and Foundayo will stand out as important drivers for cash flows. Alzheimer's drug Kisunla should also ramp to meaningful sales following the drug's recent launch. Lilly has already significantly expanded operating margins, and we expect them to approach 50% over the next several years (excluding acquisition charges). We assume a 6% EBI growth rate between our 10-year explicit forecast and the perpetuity stage of our model, which accounts for Lilly's solid innovation, offset somewhat by tirzepatide generic competition during this period (2036).

Our WACC estimate for Lilly stands at 7.9%. Our beta of 0.7 reflects our view of both biopharma's generally defensive nature, the cash-pay GLP-1 market's discretionary nature, as well as Lilly's own fundamentals and market returns.

Patents, economies of scale, and a powerful distribution network support Eli Lilly’s wide moat. Lilly's patent-protected drugs carry strong pricing power, which enables the firm to generate returns on invested capital well in excess of its cost of capital. Further, the patents give the company time to develop the next generation of drugs before generic competition arises.

Lilly’s diversified product portfolio has historically meant that the company’s top drugs represent only a moderate amount of total sales, although the success of GLP-1/GIP therapy Mounjaro/Zepbound (tirzepatide) in diabetes and obesity has led it to grow to 56% of total sales in 2025. Between this drug and newer diabetes and obesity therapies like oral GLP-1 Foundayo (approved in obesity in 2026), injectable, high-efficacy retatrutide (triple agonist in phase 3) and well-tolerated eloralintide (amylin agonist in phase 3), Lilly is building a cardiometabolic portfolio that will grow to three-quarters of total company sales by 2030.

Compared with peers, Lilly faces a fairly minimal patent loss headwind, with older GLP-1 therapy Trulicity going generic in 2027, followed by diabetes drug Jardiance in 2029. Tirzepatide has patent protection through at least 2036, which buys Lilly time to grow sales of the rest of its pipeline, both in cardiometabolic indications but also in its other focus areas like neurology, immunology, and oncology. Lilly's massive tirzepatide cash flows have allowed it to invest in both internal development of new drugs as well as several external acquisitions. Lilly's powerful distribution network sets up the company as a strong partner for smaller drug companies that lack Lilly's resources. We think Lilly is supporting its wide moat, seizing this opportunity to gain access to external innovation and some high-risk, high-reward opportunities in new areas like wakefulness, pain management, vaccines, and in vivo CAR-T cell therapy.

We think the firm does face environmental, social, and governance risks, particularly related to potential US drug price-related policy reform to increase access by lowering drug prices (close to 60% of total sales are generated by prescription drug sales in the US). Ongoing product governance issues, including litigation related to side effects and patents, also weigh on the company. While we have factored these threats into our analysis, we don't see them as material to our moat rating for Eli Lilly.

Lilly's strong leadership in weight-loss drugs should drive industry-leading growth, given its approved drugs and well-positioned next-generation weight-loss drugs in the pipeline.

Lilly is following its maturing cancer drug Verzenio with newer oncology therapies Inluriyo and Jaypirca, maintaining strong oncology growth potential.

Lilly has launched a new Alzheimer’s drug (Kisunla) that could become a major blockbuster, especially since few treatment options exist for the disease.

The risks to success for Kisunla remain high because of bottlenecks in patient diagnosis, required scans and monitoring, and competition, particularly from Eisai/Biogen (Leqembi) and Roche (pipeline drug trontinemab).

Several of the company's next-generation cardiometabolic drugs could lead to cannibalization of current approved Lilly drugs, particularly the widely used Mounjaro/Zepbound.

Competition to weight-loss drug Zepbound could significantly increase over the next three years from established competitor Novo Nordisk as well as new entrants.