Lilly's Q4 GLP-1 Demand Strong, but Pricing Pressure Challenges Overvalued Stock

What happened

Zacks Investment Research expects Eli Lilly's Q4 revenues to benefit from robust Mounjaro and Zepbound demand, aided by supply gains and global uptake offsetting pricing pressure. This aligns with the DeepValue report's view that GLP-1 drugs dominate Lilly's growth, contributing over half of sales with significant revenue increases. However, the report critically highlights that pricing erosion from TrumpRx/Medicare deals and oral GLP-1 competition from Novo Nordisk threatens net prices and margins. Despite supply improvements easing shortages, the key question is whether volume growth can sustainably compensate for these price cuts to maintain high revenue trajectories. With Lilly trading at elevated multiples like a P/E of 53 and EV/EBITDA of 66, the Q4 results must reveal resilient underlying economics to support its rich valuation.

Implication

Strong Q4 sales from Mounjaro and Zepbound may offer short-term optimism, but the DeepValue report's base case of $1,050 implies limited upside from current levels, demanding sustained high-volume growth. Pricing pressures from government programs and PBMs could accelerate, risking revenue deceleration if demand expansion lags. Lilly's heavy reliance on GLP-1 drugs exposes it to competitive threats, especially in oral segments where Novo leads with lower prices. Manufacturing investments provide supply relief, but they also increase debt and commitments, stressing cash flow sustainability. Ultimately, the stock's lack of margin of safety requires vigilant monitoring of pricing trends and pipeline execution to avoid downside.

Thesis delta

The Zacks article reinforces the strong demand narrative for Lilly's GLP-1 drugs, which is already priced into the stock at current levels. However, it does not address the critical risks of pricing erosion and competitive pressures detailed in the DeepValue report, leaving the thesis unchanged. Therefore, the investment call remains cautious, with any positive Q4 news unlikely to shift the overvaluation concern without evidence of durable net pricing stability.