Eli Lilly: Navigating the industry’s drug-pricing reform pressures and pulling ahead

• Eli Lilly is a leading global biopharmaceutical company operating across four key therapeutic segments: Cardiometabolic Health, Oncology, Immunology, and Neuroscience.

• The company delivered strong 1Q26 results, with 56% YoY revenue growth and 156% EPS growth, driven by robust GLP-1 volume expansion despite pricing pressure. Management also raised full-year revenue and EPS guidance.

• The GLP-1 market is effectively a duopoly between Eli Lilly and Novo Nordisk, supported by rapidly expanding demand driven by rising obesity prevalence. Eli Lilly has further broadened access through the launch of oral GLP-1 therapy, extending adoption beyond injectable treatments.

• Tirzepatide’s best-in-class clinical efficacy, alongside expanding insurance coverage, is driving sustained volume growth and reinforcing Eli Lilly’s leadership in the incretin market despite ongoing pricing pressures.

• Beyond GLP-1, Eli Lilly’s diversified portfolio and 42 Phase III programs, supported by strategic acquisitions, reduce reliance on its obesity franchise and enhance long-term earnings durability.

• We assign a Buy rating with a target price of USD 1,348, implying approximately 23% upside as of 18 June 2026, based on a 26x PE applied to projected 2028 earnings.

As the healthcare industry faces a looming USD 300 billion patent cliff by 2030 and headwinds from lower drug prices under the Most-Favoured-Nation (MFN) and Inflation Reduction Act (IRA) policies, Eli Lilly continues to stand out. As of 17 June 2026, the stock is up 3.5% year-to-date, compared with a 3.7% decline in the MSCI World Health Care Index.

Supported by strong demand for its flagship obesity and diabetes therapies, a diversified portfolio and pipeline beyond these products, and the absence of any major near-term patent expirations, we believe Eli Lilly is well positioned to navigate the challenges facing the healthcare sector.

Company Overview

Eli Lilly is a leading global biopharmaceutical company that discovers, develops, manufactures, and markets human pharmaceutical products that are sold in approximately 90 countries.

Its key therapeutic areas include:

• Cardiometabolic Health – including tirzepatide (marketed as Mounjaro for type 2 diabetes and Zepbound for obesity), Trulicity (type 2 diabetes), and Jardiance (type 2 diabetes)

• Oncology – including Jaypirca (chronic lymphocytic leukemia) and Verzenio (breast cancer)

• Immunology – including Omvoh (ulcerative colitis and Crohn’s disease) and Ebglyss (atopic dermatitis)

• Neuroscience – including Kisunla (early-stage Alzheimer's disease) and Emgality (migraine)

As of 1Q26, tirzepatide accounted for nearly 65% of the company’s revenue, driven by robust demand for Mounjaro and Zepbound. Geographically, the United States contributed 61% of revenue, with the remainder generated from international markets, including Europe, Japan, and China.

Figure 1: Eli Lilly is geographically well-diversified

Latest Earnings Highlight: 1Q26

Eli Lilly delivered a strong operational performance in the first quarter of 2026 that exceeded consensus expectations and led to an upward revision in full-year guidance.

Worldwide revenue increased 56% year-over-year to USD 19.8 billion, driven by a 65% surge in sales volumes that more than offset a 13% decline in realised prices. Non-GAAP gross margin declined by 0.9 percentage points to 82.6%, primarily due to lower drug prices.

In the US, prices were reduced after Eli Lilly agreed to adopt MFN pricing in exchange for tariff exemptions and expanded access to the Medicare market, which had previously excluded coverage for obesity treatments. Outside the US, lower realised prices were mainly attributable to the inclusion of Mounjaro on China's National Reimbursed Drug List (NRDL).

CEO David Ricks noted that the obesity market is highly price-sensitive because a significant portion of treatment costs is paid out of pocket. Consequently, lower prices can drive a disproportionate increase in demand, with volume growth more than offsetting the impact of price reductions.

Beyond its obesity and diabetes franchise, revenue from key products across the Immunology, Oncology, and Neuroscience segments grew 160% YoY, highlighting the strength of Eli Lilly's broader portfolio.

Non-GAAP diluted earnings per share reached USD 8.55, representing a 156% increase over the first quarter of 2025 and beating the consensus estimate of USD 6.84 by 25%.

On the back of this performance, management raised its full-year 2026 revenue guidance by USD 2.0 billion to USD 82.0–85.0 billion and increased its non-GAAP EPS guidance by USD 2.0 to USD 35.5–37.0.

Table 1: Eli Lilly’s 1Q26 financial highlights

	1Q25	1Q26	Beat/Miss vs Estimate	YoY change
Revenue	12,729	19,799	11.4%	55.5%
Gross Margin	83.5%	82.6%	-0.84%	-0.9 pts
Operating Income	3,853	9,322	21.9%	141.9%
Net Income	3,004	7,663	24.1%	155.1%
Diluted EPS	3.34	8.55	25.1%	156.0%
Source: Eli Lilly 1Q Earnings Presentation, Bloomberg. Data as of 30 April 2026. Figures are in USD millions except percentages and per share amounts and reflect non-GAAP numbers.

Table 2: Strong growth of key products

Key Product Revenues	1Q25	1Q26	Year-over-Year Change
Mounjaro	3,842	8,662	125%
Zepbound	2,312	4,160	80%
Jaypirca	92	165	79%
Ebglyss	60	145	141%
Kisunla	22	124	NM
Omvoh	37	80	115%
Inluriyo	-	35	NM
Total Revenue (All Products)	12,729	19,799	56%
Source: Eli Lilly 1Q Press Release. Data as of 30 April 2026. Figures are in USD millions except percentages.

Industry Overview

The global market for anti-obesity and type 2 diabetes medications is expanding rapidly, driven by the strong clinical efficacy of GLP-1 (Glucagon-Like Peptide-1) receptor agonists, a class of incretin-based therapies that mimic gut hormones involved in insulin secretion and appetite regulation. These drugs help patients better manage blood sugar levels and body weight. According to Coherent Market Insights, the global anti-obesity drug market is projected to grow at a compounded annual growth rate (CAGR) of 18.2%, increasing from USD 30.58 billion in 2026 to USD 98.63 billion by 2033, supported by the rising prevalence of obesity and growing demand for effective non-surgical weight-loss treatments.

Competitive Landscape

The competitive landscape is currently defined by a duopoly between Eli Lilly and Company and Novo Nordisk. Historically, Novo Nordisk held a dominant position following the earlier regulatory approvals of semaglutide, marketed as Ozempic for type 2 diabetes and Wegovy for obesity. However, the balance has shifted as Eli Lilly’s dual-agonist tirzepatide has demonstrated superior clinical efficacy. In head-to-head trials, tirzepatide (Zepbound) delivered a mean body weight reduction of 20.2% over 72 weeks, compared with 13.7% for semaglutide (Wegovy).

As a result, Eli Lilly has steadily gained market share. As of 1Q26, the company held 60.1% of the US incretin analogue market, compared with 39.4% for Novo Nordisk. Eli Lilly has also taken the lead internationally, capturing 53.2% market share versus Novo Nordisk's 46.8%.

The industry is now entering a critical new phase with the introduction of oral GLP-1 formulations, which are reshaping treatment accessibility and patient preference. In January 2026, Novo Nordisk launched the first oral GLP-1 therapy for obesity in the US—oral Wegovy—followed by Eli Lilly’s rapid launch of Foundayo (orforglipron) in April 2026. Oral Wegovy must be taken in the morning on an empty stomach, and food and drinks can only be consumed at least 30 minutes after taking it. By contrast, Foundayo offers greater dosing flexibility, as it can be taken at any time of day without food or water restrictions.

Despite this convenience advantage, oral Wegovy saw stronger initial uptake, likely reflecting first-mover advantage and established familiarity with semaglutide. Foundayo, on the other hand, is a new drug and has demonstrated higher gastrointestinal-related discontinuation rates compared with oral Wegovy.

The relative efficacy of the two oral therapies remains inconclusive in the absence of direct head-to-head trials for weight loss outcomes. Cross-trial comparisons between the OASIS 4 and ATTAIN-1 studies suggest that oral Wegovy may deliver greater average weight loss in non-diabetic patients. In contrast, head-to-head studies of patients with type 2 diabetes indicate that Foundayo offers superior blood sugar control and weight loss.

Figure 2: Adoption of Foundayo is off to a slow start relative to the Wegovy Pill

Source: IQVIA data cited by Jefferies and Citi, Fierce Pharm. Data as of 12 June 2026.

Investment Thesis

Leading GLP-1 franchise with growing adoption and no near-term patent risk

Eli Lilly’s tirzepatide (Zepbound/Mounjaro) has demonstrated best-in-class weight loss and glycemic control outcomes in the GLP-1 category. By targeting both GLP-1 and GIP (glucose-dependent insulinotropic polypeptide) receptors, tirzepatide delivers synergistic metabolic effects that outperform single-agonist GLP-1 therapies such as semaglutide.

Importantly, Eli Lilly faces no near-term loss-of-exclusivity, with tirzepatide patents expected to expire in 2036 in the US, 2037 in Europe, and 2040 in Japan, providing a long runway of protected growth.

Looking ahead, Eli Lilly’s pipeline further strengthens its leadership position. Its next-generation obesity candidate, retatrutide—a triple-agonist targeting GLP-1, GIP, and glucagon receptors—has demonstrated mean weight loss of 28.3% in Phase III trials, representing one of the most efficacious outcomes reported in the category to date.

Beyond clinical differentiation, Eli Lilly is also positioned for sustained volume growth as the GLP-1 market expands through multiple access channels, including oral formulations and improved insurance coverage.

The launch of oral GLP-1 therapies has meaningfully expanded the addressable patient population by offering a non-injectable option, particularly appealing to patients reluctant to use injections. While it is still early to determine whether patients will show a clear preference between Foundayo and oral Wegovy, initial evidence suggests that oral GLP-1s are expanding overall category penetration rather than simply cannibalising injectable therapies. Approximately 80% of patients on Eli Lilly’s oral therapy are new to the GLP-1 class, indicating that uptake is driven largely by previously untreated patients.

Pricing dynamics are also supporting demand. As seen in 1Q26 results, lower realised drug prices—influenced by MFN pricing—have driven more-than-proportional volume growth, reflecting the high price elasticity of demand in obesity treatments where many patients currently pay out of pocket.

On 28 May, Eli Lilly announced that its full obesity portfolio is now covered by the three of the largest US pharmacy benefit managers—CVS Caremark, Express Scripts, and Optum Rx—significantly expanding insurance-based access to FDA-approved obesity therapies.

A key near-term catalyst is the Medicare GLP-1 Bridge program, scheduled to begin on 1 July 2026. This is a temporary initiative designed to expand access to GLP-1 obesity treatments for Medicare beneficiaries while broader long-term Medicare coverage for anti-obesity drugs remains under policy review, amid historical budgetary and political resistance. It effectively serves as a transitional mechanism bridging current limited Medicare coverage with the potential for more permanent reimbursement frameworks in the future. The program will cap out-of-pocket costs at USD 50 per month for eligible seniors with obesity and will run through 31 December 2027.

Overall, Eli Lilly’s combination of best-in-class efficacy, a durable patent runway, expanding oral options, and improving reimbursement and access channels positions the company to capture sustained volume-driven growth and continued revenue expansion in the global incretin market.

Strong portfolio and pipeline growth beyond GLP-1

As earlier shown in Table 2, Eli Lilly’s non-obesity franchises continue to deliver strong growth momentum, with Ebglyss revenue increasing 141% year-over-year, Jaypirca up 79%, and Omvoh up 115%.

To sustain growth beyond its current cardiometabolic franchise, Eli Lilly is also advancing 42 active Phase  programs, underscoring the breadth of its late-stage pipeline.

In parallel, the company is leveraging strong cash flows from its obesity portfolio to expand its pipeline through acquisitions. So far this year, Eli Lilly has announced over USD 20 billion in acquisitions, including deals involving Orna Therapeutics, Centessa Pharmaceuticals, Kelonia Therapeutics, and Ajax Therapeutics. It has also expanded into vaccines through the acquisition of developers such as Curevo, LimmaTech Biologics, and Vaccine Company.

Together, these initiatives support long-term portfolio diversification and help mitigate the risk of future earnings concentration. In particular, they reduce reliance on its current blockbuster diabetes and obesity drugs, Mounjaro and Zepbound, and help position the company to manage potential revenue pressures following eventual patent expirations in the next decade.

Figure 3: Eli Lilly has a wide pipeline of drugs

Source: Eli Lilly 1Q Earnings Presentation. Data as of 28 April 2026.

Initiate Buy Rating with Target Price of USD 1,348

We expect strong double-digit growth for Eli Lilly over the next few years, supported by its portfolio of drugs that face no immediate lose-of-exclusivity risks.

We assign a fair PE multiple of 26x to Eli Lilly, above its 5-year historical average forward PE of 24x but below its 3-year average of 28x. We believe the 5-year average understates the company's current earnings potential, as it includes a period before the launches of Mounjaro (mid 2022) and Zepbound (late 2023), which significantly enhanced Eli Lilly's long-term growth outlook. At the same time, we do not believe the stock should trade at the 3-year average multiple, given the potential for increasing competition in the obesity market and regulatory uncertainties over the longer term. As such, a 26x multiple appropriately balances Eli Lilly's improved growth profile with these risks.

Applying this fair PE of 26x to our projected 2028 earnings, we derive a target price of 1,348 for Eli Lilly, implying 21% upside potential as of 17 June 2026.

Table 3: Projections for Eli Lilly earnings

Eli Lilly	2025	2026E	2027E	2028E
Earnings Per Share (EPS)	26.2	36.1	44.6	51.9
Earnings Growth YoY	72.4%	37.9%	23.6%	16.4%
PE Ratio (X)	41.1	30.5	24.7	21.2
Target Price (based on a fair PE of 26X)				1,348
Upside Potential				22.7%
Source: Bloomberg Finance L.P., iFAST Estimates. Data as of 18 June 2026

Figure 4: Share prices are driven by earnings growth in the long run

Investment Risks

Product concentration and competitive risks

Approximately two-thirds of Eli Lilly’s revenue is derived from Mounjaro and Zepbound, leaving the company exposed to product concentration risk. The obesity market has attracted significant investment from pharmaceutical companies seeking to capture a share of this large and rapidly growing opportunity, which could intensify competitive pressures over time.

Beyond its primary competitor, Novo Nordisk, several pharmaceutical companies are advancing obesity treatments through both internal development and acquisitions. These include Pfizer, which gained access to the Phase II obesity candidate berobernatide through its acquisition of Metsera, Amgen with its internally developed Maritide, and European pharmaceutical companies such as Roche and AstraZeneca. In addition, several Chinese pharmaceutical companies have launched obesity treatments in their domestic market, with a number of these assets expected to expand internationally.

Should competing therapies demonstrate superior efficacy, improved tolerability, greater convenience, or more competitive pricing, Eli Lilly could face slower market share gains and increased pricing pressure, potentially weighing on its long-term growth. Nevertheless, most obesity therapies currently under development by competitors appear, at best, on par with Eli Lilly’s existing products, while the company’s next-generation pipeline has demonstrated the potential to deliver superior outcomes.

Regulatory price-setting

Eli Lilly faces the risk of accelerated revenue erosion ahead of traditional patent expirations due to the IRA. Selected products are subject to government-mandated price reductions relative to their pre-negotiation list prices.

Jardiance was selected in 2023, resulting in a 66% reduction versus its 2023 list price, with the revised price taking effect in 2026. Subsequently, Trulicity and Verzenio were selected in January 2026, with government-mandated price reductions scheduled to take effect in 2028.

Additional product selections in future IRA negotiation cycles could accelerate revenue declines for mature products and weigh on the company's long-term earnings growth.

Declaration:

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.