3 Reasons It's Not Too Late to Buy Eli Lilly Stock

Eli Lilly reported Q1 revenue of $19.8 billion, up 56% year over year, with adjusted EPS rising 156% to $8.55, driven by surging GLP-1 sales. Mounjaro sales climbed 125% to $8.7 billion and Zepbound revenue rose to $4.2 billion, while the newly approved oral GLP-1 Foundayo is broadening the patient base. An FDA proposal to remove tirzepatide from the compounding-eligible list could further support pricing and sales, though the stock already trades at 28.5x forward earnings.

Analysis

LLY is behaving less like a single-product obesity story and more like a platform company with multiple shots on goal. The market still appears to underwrite a “peak GLP-1” narrative, but the setup is that demand expansion plus formulation expansion can offset share gains by competitors for longer than expected. The most important second-order effect is that oral access broadens the addressable market beyond the injection-tolerant, which should keep patient acquisition costs low and extend growth even if prescription intensity normalizes.

The regulatory overhang is the key near-term catalyst, but the market may be underestimating the speed at which compounding headwinds can translate into realized pricing power. If the FDA action sticks, compounding volumes should roll off over weeks to months rather than quarters, which would improve branded mix and reduce coupon pressure; that matters more for margins than unit growth. The counterpoint is execution risk: any partial carve-outs, legal challenges, or shortage-related exceptions could keep a cheaper gray market alive and cap upside in the stock.

The broader pipeline matters because it changes how investors should think about terminal multiple risk. If non-GLP-1 assets continue scaling, LLY’s valuation can migrate from “single-theme duration trade” to “multi-asset growth compounder,” which justifies a premium even if GLP-1 growth decelerates. Conversely, the consensus may be overconfident that competitive entry only matters on price; the real risk is future payer behavior, where employer and PBM benefit design could shift utilization toward lower-cost alternatives once multiple branded options exist.

Key Decisions for Investors

• Stay long LLY on a 3-6 month horizon, but size for headline risk; risk/reward remains favorable so long as compounding restrictions tighten and oral adoption continues to expand the addressable pool.
• For new exposure, prefer call spreads over outright stock: buy LLY 6-9 month call spreads to capture rerating potential while limiting downside if FDA timing slips or legal challenges delay enforcement.
• Pair trade: long LLY / short a basket of telehealth and compounding-enabled distributors over the next 1-2 quarters, targeting a compression in the spread as branded pricing power improves.
• Use any post-rally pullback to add, not chase; the better entry is on enforcement-related volatility rather than after upbeat prescription commentary.
• Monitor payer commentary and rebate announcements closely; if discounting widens again, trim into strength because margin inflection is the first thing the market will reprice.