Stock Analysis & Valuation Eli Lilly and Company (LLY.DE)

• Previous Close: €873.50
• Sector Valuation Confidence Level: High

Valuation method	Value, €	Upside, %
Artificial intelligence (AI)	387.00	-56
Intrinsic value (DCF)	720.34	-18
Graham-Dodd Method		n/a
Graham Formula	394.40	-55

Strategic Investment Analysis

Company Overview

Eli Lilly and Company (LLY.DE) is a global pharmaceutical leader headquartered in Indianapolis, Indiana, with a rich history dating back to 1876. The company specializes in discovering, developing, and marketing innovative human pharmaceuticals across multiple therapeutic areas, including diabetes, oncology, immunology, neuroscience, and COVID-19 treatments. Eli Lilly's flagship products include Trulicity and Jardiance for type 2 diabetes, Taltz for autoimmune diseases, and Verzenio for breast cancer, among others. The company operates in a highly competitive and regulated industry, leveraging its strong R&D capabilities and strategic collaborations with biotech firms like Incyte Corporation and AbCellera Biologics to maintain a robust pipeline. With a market capitalization exceeding €596 billion, Eli Lilly is a key player in the healthcare sector, known for its commitment to addressing unmet medical needs and improving patient outcomes worldwide. Its diversified portfolio and global presence position it well for sustained growth in the dynamic pharmaceutical market.

Investment Summary

Eli Lilly and Company presents a compelling investment opportunity due to its strong portfolio of blockbuster drugs, robust pipeline, and solid financial performance. The company reported €45 billion in revenue and €10.59 billion in net income for the latest fiscal year, with a diluted EPS of €11.71. Its operating cash flow of €8.82 billion and a dividend per share of €5.38 underscore its financial stability. However, investors should be mindful of risks such as patent expirations, regulatory hurdles, and intense competition in the pharmaceutical industry. The company's low beta of 0.472 suggests relative stability compared to the broader market, making it an attractive option for risk-averse investors seeking exposure to the healthcare sector.

Competitive Analysis

Eli Lilly and Company holds a competitive edge through its diversified product portfolio and strong R&D focus, particularly in diabetes and oncology. The company's diabetes franchise, led by Trulicity and Jardiance, competes effectively with Novo Nordisk's GLP-1 agonists and SGLT2 inhibitors. In oncology, Verzenio and Retevmo position Lilly as a strong contender against Roche's and Merck's offerings. The company's immunology drugs, such as Taltz, face competition from AbbVie's Humira and Amgen's Enbrel. Eli Lilly's strategic collaborations with biotech firms enhance its pipeline and innovation capabilities, providing a buffer against generic competition. However, the company's reliance on a few key products for a significant portion of its revenue poses a risk, especially as biosimilars enter the market. Its global footprint and strong salesforce provide a competitive advantage in market penetration and physician engagement.

Major Competitors

• Novo Nordisk A/S (NVO): Novo Nordisk is a global leader in diabetes care, with strong offerings in GLP-1 agonists like Ozempic and insulin products. Its focus on diabetes gives it a competitive edge over Eli Lilly in this segment, but it lacks the diversified portfolio in oncology and immunology that Lilly possesses. Novo's strong R&D pipeline in obesity treatments is a notable strength.
• Merck & Co., Inc. (MRK): Merck is a formidable competitor in oncology, with blockbuster drugs like Keytruda dominating the PD-1 inhibitor market. While Merck's oncology pipeline is stronger, Eli Lilly has a more balanced portfolio across multiple therapeutic areas. Merck's significant vaccine business, including Gardasil, provides additional revenue streams that Lilly does not have.
• Pfizer Inc. (PFE): Pfizer's broad portfolio spans vaccines, oncology, and immunology, competing directly with Eli Lilly in several areas. Pfizer's COVID-19 vaccine and oral antiviral Paxlovid have provided significant revenue, but its reliance on these products poses a risk as demand wanes. Eli Lilly's more focused approach in diabetes and oncology may offer better long-term stability.
• AbbVie Inc. (ABBV): AbbVie's immunology drugs, particularly Humira, have historically dominated the market, though biosimilar competition is now a challenge. AbbVie's strength in immunology and hematologic oncology contrasts with Eli Lilly's broader focus. AbbVie's recent acquisitions, like Allergan, diversify its portfolio but also increase integration risks.
• Bristol-Myers Squibb Company (BMY): Bristol-Myers Squibb is a leader in oncology and cardiovascular diseases, with drugs like Opdivo and Eliquis. Its oncology pipeline is robust, but it lacks the strong diabetes portfolio that Eli Lilly has. Bristol-Myers' recent acquisitions, such as Celgene, have bolstered its pipeline but also increased debt levels.