After Eli Lilly's stock price surged nearly 300% in four years, Wall Street remains bullish: the "hidden pipeline" beyond GLP-1 is undervalued.

Since the approval of its first GLP-1 drug four years ago, Eli Lilly's stock price has surged nearly 300%, pushing its market capitalization above $1 trillion and making it one of the world's most valuable pharmaceutical companies. Even now, despite the significant price increase, some Wall Street analysts believe there is still room for further growth.

Berenberg analyst Kerry Holford upgraded Eli Lilly's rating from "hold" to "buy" this week, setting a price target of $1,400. She believes that with strong growth in its marketed products and a rich pipeline of products in development, Eli Lilly's sales growth will continue to significantly outpace its peers in 2030. Holford points out that while the market has fully recognized Eli Lilly's leading position in the obesity field, it has underestimated the potential of its R&D efficiency, pipeline breadth, and non-obesity businesses.

Eli Lilly's core growth engines are the GLP-1 drugs Mounjaro and Zepbound. Mounjaro was approved in 2022 for the treatment of type 2 diabetes, and was subsequently approved under the brand name Zepbound for the treatment of obesity. Currently, its prescription volume has surpassed Novo Nordisk's Wegovy to become the most prescribed weight management drug in the United States.

Holford stated that investor expectations are already high for Eli Lilly to maintain its leading position in the obesity market, but she remains confident. Furthermore, Eli Lilly's oral GLP-1 drug, Foundayo, is awaiting regulatory approval for diabetes treatment. She believes that once approved, the drug is expected to "unleash substantial demand," further expanding the GLP-1 business.

The non-obesity pipeline is still undervalued by the market.

Holford believes that the truly undervalued part of Eli Lilly's pipeline lies beyond obesity. The success of Mounjaro and Zepbound has provided the company with ample cash reserves, enabling it to increase investment in other therapeutic areas.

According to Holford's estimates, Eli Lilly has committed approximately $60 billion this year to more than 25 business development deals, including the acquisition of Centessa Pharmaceuticals, a sleep disorder drug developer, for up to $7.8 billion; Kelonia Therapeutics, a cancer drug developer, for up to $7 billion; and AtaiBeckley, a psychedelic drug developer, for $3.8 billion.

“We believe this non-obesity pipeline is undervalued by investors,” Holford wrote.

Currently, Eli Lilly's forward price-to-earnings ratio is approximately 26, higher than its peers in the S&P 500 Healthcare Index and also exceeding five of the "Big Seven" tech companies. However, Holford believes that Eli Lilly's R&D efficiency and pipeline potential are sufficient to support this valuation level. As existing products continue to ramp up production and new drug pipelines advance, Eli Lilly's growth logic is gradually expanding from being driven solely by GLP-1 to a broader range of innovative drug businesses.

Risk warning and disclaimerInvesting involves risk; please exercise caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Any investment decisions made based on this information are at your own risk.