Eli Lilly Q2 preview: BofA sees focus on policy risks, obesity pipeline

Bank of America reiterated its 'Buy' rating and $1,000 price objective for Eli Lilly (LLY) ahead of its Q2 earnings, citing durable growth and strong positioning in the obesity and diabetes markets. While BoFA made only minor upward adjustments to 2025 revenue (+1%) and EPS (+1.9%) driven by higher Zepbound sales, investor focus during the earnings call is expected to center on US drug pricing policy risks, including potential 'most favored nation' rules and Section 232 tariffs, alongside updates on key product pipelines like obesity treatments and new launches such as Kisunla.

Analysis

Ahead of Eli Lilly's second-quarter earnings on August 7, Bank of America has reiterated its 'Buy' rating and a $1,000 price objective, signaling strong conviction in the company's growth prospects. This outlook is anchored by Eli Lilly's dominant position in the incretin-based obesity and diabetes markets, with the bank noting the stock is 'not ‘expensive’ on a PE-to-growth basis'. While BofA's long-term forecasts for key pipeline assets like Mounjaro and retatrutide are unchanged, it has marginally increased its 2025 estimates, projecting a 1% rise in revenue and a 1.9% increase in EPS, driven by higher sales expectations for the weight-loss drug Zepbound. The primary focus for investors during the upcoming earnings call will be twofold: assessing significant policy risks, including potential 'most favored nation' pricing rules and Section 232 pharmaceutical tariffs, and monitoring fundamental execution through clinical trial updates and the brand performance of key obesity treatments and new launches like Kisunla for Alzheimer's disease.

Key Decisions for Investors

• Investors should monitor Eli Lilly’s August 7 earnings call for management commentary on US drug pricing policy risks, as these regulatory threats are highlighted as the primary overhang on the stock's otherwise positive outlook.
• Given the reiterated 'Buy' rating and BofA's view that the stock is reasonably valued on a price-to-earnings-growth basis, long-term investors may see any policy-induced weakness as a potential buying opportunity, assuming the fundamental growth story remains intact.
• Pay close attention to sales figures for Zepbound and commercialization updates for new products like Kisunla, as continued strong performance is critical to substantiating the company's high growth expectations and valuation.
• Consider the company's duopolistic market positioning in the high-growth incretin drug class as a key factor supporting its long-term competitive advantage against potential market or regulatory volatility.