Reading Eli Lilly (LLY) Through the Lens of “How Medicines Reach Patients”: Explosive Growth in Obesity and Diabetes, and the Next Decade of Competition in Supply, Access, and Formulation

* This report is based on data as of 2026-01-06.

First, for middle schoolers: What does LLY do, and how does it make money?

Eli Lilly (LLY) is a major pharmaceutical company that researches and develops medicines used in hospitals and clinics, then sells them globally. Its core strengths include metabolic disease (diabetes and obesity) as well as specialty areas like oncology, immunology, and neuroscience.

At a high level, pharma compounds earnings by “discovering a new drug → securing regulatory approval → turning it into a therapy that stays in clinical use for years.” Blockbusters—especially in chronic diseases—tend to be taken continuously, which can scale revenue over time. But getting there requires clearing real-world hurdles: approval, safety monitoring, quality, supply, and reimbursement (i.e., whether payers will cover it).

Who are the customers? (An industry where the user and the payer often differ)

The direct customers are hospitals, clinics, pharmacies, and wholesalers. But the parties that actually pay are often insurers, public programs, employer health plans, and sometimes patients themselves (self-pay). In pharma, the “user” and the “payer” frequently aren’t the same, and adoption depends not just on clinical value but also on how much of the cost is covered.

How LLY makes money (revenue model)

• Generates revenue by selling internally developed drugs per administration (per dose, per pen, per month, etc.)
• When a drug succeeds, ongoing use can allow revenue to compound
• Because approval and reimbursement rules vary by country, commercial infrastructure and negotiating leverage matter
• Manufacturing, quality control, and supply capacity can cap revenue (demand can exist even when product can’t reliably be purchased)

Today’s earnings pillars: What is making LLY strong?

Pillar ①: Diabetes and obesity (the largest growth engine)

LLY’s biggest pillar today is injectable therapies for diabetes and obesity. Mounjaro anchors the diabetes franchise, and Zepbound anchors obesity (weight loss). With a massive patient population, intense public attention, and demand that can scale quickly, this has become an exceptionally important earnings engine for LLY.

The key point is straightforward: the stronger demand gets, the more “can supply keep up?” becomes the binding constraint on revenue. Shortages have been an issue in the past, and there have also been periods when authorities judged shortages to be resolved. Supply stability remains a core business issue.

Pillar ②: Oncology (stability as a large pillar)

LLY also has a meaningful oncology business, with Verzenio for breast cancer often cited as a flagship example. In oncology, physicians tend to weight efficacy and safety heavily, and once a therapy is established it can become a durable pillar. As label expansions progress (allowing the same drug to be used in additional diseases or patient populations), the revenue life cycle typically extends.

Pillar ③: Immunology, neuroscience, etc. (multiple mid-sized pillars)

LLY has a range of products across immunology, neuroscience, and other areas. They aren’t the headline drivers on the scale of metabolic disease or oncology, but they add an important layer of support to the portfolio. The more the company’s growth becomes concentrated in obesity/diabetes, the more this layer matters from a diversification standpoint (which ties into the Invisible Fragility section below).

Future direction: What does it go after after injectables?

The growth drivers can be organized into three

• Obesity and diabetes treatment needs are large and often become chronic therapy (revenue compounds)
• Expanding manufacturing capacity (how much can be produced) can lift revenue (supply tends to be the bottleneck)
• An oral pill (tablet) for patients who dislike injections could be the key to expanding the market

Future pillars: Oral therapy (orforglipron) and label expansion

One of the biggest potential inflection points is an oral option for obesity and diabetes. LLY is advancing orforglipron (a candidate that could become a once-daily tablet), with positive Phase 3 results shown and a pathway indicated toward regulatory filings. In middle-school terms: injectables are the hit product today, but if an oral drug with the same purpose becomes available, it could reach a much broader population.

Label expansion also matters in pharma. Instead of relying only on brand-new molecules, extending already-proven drugs into additional uses can expand the addressable market and lengthen product life.

Analogy: The popular classroom model

LLY’s obesity and diabetes business is like a popular after-school class. A strong reputation draws more students (patients), but without enough seats (supply capacity), they can’t enroll. If “online attendance” (oral pills) becomes available, the class could reach many more people.

Key points to understand this company: Three barriers (R&D, supply, insurance)

The core question in pharma—including for LLY—is whether it can (1) win in R&D, (2) manufacture and deliver at scale (supply), and (3) secure coverage under insurance (access design). When those line up, a drug becomes more than a one-time hit—it becomes a long-duration earnings engine.

Long-term “company archetype”: LLY through the Lynch lens

Using Lynch’s six categories, LLY is best framed as a Fast Grower (growth stock)-leaning hybrid with meaningful Stalwart (large-cap quality) characteristics. That said, a purely mechanical screen can flag it as “not a clean fit,” mainly because the past 5-year EPS growth rate is approximately +6.1% annualized, below the typical Fast Grower threshold (20% per year).

Long-term data supporting the archetype (only the key numbers)

• Revenue CAGR: past 5 years approx. +15.1%, past 10 years approx. +8.7% (5-year has stepped up versus 10-year)
• EPS CAGR: past 5 years approx. +6.1%, past 10 years approx. +18.5% (the picture differs materially between 5 and 10 years)
• ROE (FY): approx. 74.6% in the latest FY (toward the higher end of the past 5-year distribution, though ROE can swing with changes in equity levels)

The large gap between the “5-year” and “10-year” EPS views reflects how the chosen window changes the story. It’s better to treat this as different regimes rather than a contradiction.

Long-term fundamentals: Strong revenue and margins, but highly volatile FCF

Underlying revenue and earnings power (growth has stepped up from 10 years to 5 years)

Revenue has grown at a moderate pace of approximately +8.7% annualized over the past 10 years, accelerating to approximately +15.1% annualized over the past 5 years. Meanwhile, net income CAGR is approximately +16.0% over the past 10 years but approximately +4.9% over the past 5 years, making the most recent five-year window look comparatively softer.

Margins and ROE (profitability is high)

Profitability has remained elevated, with the latest FY (2024) operating margin at approximately 38.9% and gross margin at approximately 81.3%. ROE is also high at approximately 74.6% in the latest FY. However, because ROE can swing materially as equity levels change, the key caution is simple: don’t jump from ROE alone to conclusions about underlying business “ease of earning.”

FCF (free cash flow): The “fact” of large year-to-year swings

FCF CAGR is approximately -17.7% over the past 10 years and approximately -34.7% over the past 5 years. These figures are heavily shaped by recent volatility. In fact, annual FCF was approximately -$3.15bn in 2023, followed by approximately +$0.41bn in 2024. Rather than labeling this as abnormal, the cleanest framing is: this period includes regimes where “accounting profit growth” and “free cash flow growth” diverge.

Sources of EPS growth (revenue, margins, share count)

Over the long run, EPS growth has been driven primarily by revenue growth, with margin expansion providing incremental lift in certain years, and share count reduction contributing as a secondary factor. Shares outstanding have declined from roughly 1.1bn in the early 2010s to approximately 0.90bn in the latest FY (2024). Revenue expanded to approximately $45.0bn in 2024.

Near-term momentum (TTM / 8 quarters): Is the archetype holding?

LLY can look “hybrid” over a full cycle, but near-term momentum is clearly strong, and the overall read is Accelerating. Because this matters directly for investment decisions, it’s useful to separate the “alignment” across EPS, revenue, margins, and cash.

EPS (TTM): +121.5%—a powerful acceleration

EPS (TTM) is 20.49, up +121.5% year over year. That’s far above the past 5-year EPS growth rate (approximately +6.1% annualized) and supports a more “growth-stock-leaning” profile over the past year. Over the most recent two years (8 quarters), EPS shows strong upward consistency.

Revenue (TTM): +45.4%—top line is also accelerating

Revenue (TTM) is $59.420bn, up +45.4% year over year. This clearly exceeds the past 5-year revenue CAGR (approximately +15.1% annualized) and has also been strongly consistent over the most recent two years (8 quarters).

Margins (FY): Upward over the past three years

Operating margin (FY) has increased from approximately 30.3% in 2022 → approximately 31.6% in 2023 → approximately 38.9% in 2024. This supports the idea of “high-quality momentum,” with profitability improving alongside revenue growth. These margins are FY-based; if they differ from TTM, treat it as a difference in how the period reads.

FCF (TTM): Positive level, but extreme YoY volatility

Free cash flow (TTM) is positive at $9.021bn, but the year-over-year growth rate is -514.0%, a very large negative. Rather than reducing this to “FCF was bad,” the more accurate framing is that the prior-year TTM may have included negative FCF, which can distort the TTM year-over-year change. The key fact is that while earnings (EPS) and revenue are rising sharply, cash (FCF) is not moving in lockstep.

Also, when annualized over the most recent two years (8 quarters), EPS is approximately +88.0% per year, revenue approximately +32.0% per year, and net income approximately +87.4% per year, while FCF cannot be calculated at the same granularity due to insufficient data. Put differently, the “durability of acceleration” can’t be checked with the same precision on the cash side.

Financial soundness (bankruptcy-risk lens): Leverage is notable, but interest coverage is ample

The question investors care about is whether “high growth is being pursued with financial strain.” LLY pairs notable leverage (debt burden) with strong interest-paying capacity.

• Debt-to-equity (FY): approximately 2.37x
• Net Debt / EBITDA (FY): approximately 1.98x
• Interest coverage (FY): approximately 17.2x
• Cash ratio (FY): approximately 0.12
• Current ratio (latest quarter): approximately 1.55; quick ratio (latest quarter): approximately 1.24

Current and quick ratios above 1 suggest some short-term liquidity, but the cash ratio is low, so it’s hard to describe LLY as having “deep cash on hand.” The appropriate fact pattern isn’t a bankruptcy call—it’s simply: leverage is notable, but interest coverage is ample.

Dividend: Low yield, but a strong dividend-growth track (view alongside leverage)

LLY is less an income stock and more a growth company where dividends are one component of capital allocation.

Where the dividend stands today (yield)

• Dividend yield (TTM, stock price = $1,041.51): approximately 0.76% (below 1%)
• 5-year average yield: approximately 1.57%; 10-year average yield: approximately 3.17% (recently below historical averages)
• Dividend per share (TTM): $5.793

Dividend growth (dividend increases)

• Dividend per share CAGR: past 5 years approx. +15.5% annualized; past 10 years approx. +10.6% annualized
• Most recent 1-year dividend increase pace (TTM YoY change): approximately +15.7%

The yield is low, so the cash income is unlikely to be meaningful for most investors. But the dividend has been growing at a double-digit rate. The most consistent way to view this is not “high yield,” but “supplementary shareholder returns with a dividend-growth track record.”

Dividend safety (capacity to pay)

• Earnings-based payout ratio (TTM): approximately 28.3% (low burden on earnings)
• FCF (TTM): approximately $9.02bn; FCF-based payout ratio (TTM): approximately 57.7% (looks heavier than earnings-based)
• Dividend coverage by FCF (TTM): approximately 1.73x (covered by cash within the latest TTM window)

Overall, dividend stability isn’t weak enough to call “unstable.” But because leverage is also notable (debt-to-equity approximately 2.37x), it’s best to evaluate the dividend alongside the capital structure rather than in isolation. “Moderate” is the prudent framing.

Dividend durability (track record)

• Years of dividend payments: 36 years
• Consecutive years of dividend increases: 10 years
• Most recent year with a dividend cut (or effective cut): 2014

The long payment history and recent streak of increases are strengths. Still, because there have been years when the dividend declined, it’s appropriate not to treat the dividend as “unbreakable.”

Capital allocation snapshot (dividends vs. growth investment)

LLY pays a dividend, but with a latest TTM yield of approximately 0.76%, shareholder returns are not centered on income. Meanwhile, the latest TTM free cash flow margin is approximately 15.2%, indicating cash-generation capacity relative to revenue. The key question is how management balances growth investment (capacity expansion, R&D, commercialization) with shareholder returns.

Valuation “where we are now”: Taking stock of 6 metrics versus LLY’s own history (no investment call)

Here we’re not comparing LLY to the market or peers. The goal is simply to place today’s valuation within LLY’s own historical ranges. Price-based metrics assume a stock price of $1,041.51.

PEG (valuation relative to growth)

PEG is currently 0.42, near the low end of the normal range over the past 5 years and below the normal range over the past 10 years—putting it on the cheaper side versus LLY’s own history. Over the past two years, the trend has been downward.

P/E (valuation relative to earnings)

P/E (TTM) is 50.84x, toward the upper end of the past 5-year range and above the normal range over the past 10 years—high on a longer-term view. Over the past two years, it appears the period may include a decline from a FY-based peak (e.g., approximately 65.4x in 2024) toward current levels.

Free cash flow yield

FCF yield (TTM) is 0.97%. Over the past 5 years it sits within the range but remains low; over the past 10 years it is below the range, placing it in a low zone on a longer-term view. Over the past two years, it includes a recovery from negative to near-zero levels and an upward direction.

ROE (capital efficiency)

ROE (FY) is 74.62%, in a high zone (though still within the range) over both the past 5 and 10 years. Over the past two years, it suggests high-level maintenance (flat to slightly upward).

Free cash flow margin

FCF margin (TTM) is 15.18%, roughly in the normal to slightly favorable area within the past 5- and 10-year distributions. At the same time, the past two years include large swings—periods that included negative territory followed by temporarily high levels—so the clean summary is: upward regimes, but with high volatility.

Net Debt / EBITDA (inverse indicator: lower implies greater cash flexibility)

Net Debt / EBITDA (FY) is 1.98x. Because this is an inverse indicator where smaller (more negative) values imply greater cash flexibility, it sits within the past 5-year range but toward the upper side (larger values), and slightly above the past 10-year range—somewhat high on a longer-term view. Over the past two years, it includes an upward direction (toward larger values).

Conclusion across the six metrics: The metrics are not pointing in the same direction

There’s a mixed picture: PEG is low, P/E is high, and FCF yield is low. On quality and balance-sheet capacity, ROE is high, FCF margin is in the normal range, and Net Debt / EBITDA is somewhat high. The only takeaway here is factual: LLY’s current positioning is not sending a single, consistent signal across metrics—not that it’s good or bad.

Cash flow tendencies: How to read the alignment between EPS and FCF

Near term, LLY’s EPS and revenue are growing strongly, but FCF is volatile both annually and on a TTM basis, with periods where it doesn’t move at the same pace. While common explanations could include investment (e.g., capacity expansion) or working-capital effects, we won’t speculate here. The appropriate framing is a “quality” observation: there are regimes where reported profit growth and cash generation don’t line up cleanly.

For investors, it’s not only about whether growth slows. It’s also about how well earnings convert into cash (cash conversion quality), because that directly affects the ability to fund capacity expansion, R&D, and commercialization at the same time.

Why LLY has been winning: The success story (the core of value)

LLY’s core value is its ability to consistently deliver therapies backed by clinical data and approvals into the market within a heavily regulated industry. A drug doesn’t win simply because it “works.” Success requires coordinated execution across approval, safety monitoring, quality, supply, and reimbursement—and that integrated capability itself becomes a barrier to entry.

Top 3 factors valued by customers (clinical settings and patients)

• Clinically intuitive outcomes: weight and blood glucose are visible in the patient experience, which can make it easier to sustain motivation
• End-to-end ability to run treatment: adoption is more likely when quality, stable supply, and operational handling of safety information are in place
• A posture of expanding options: expanding dose/formulation/access pathways (e.g., vial offerings for self-pay patients, stepwise price reductions)

Top 3 sources of customer dissatisfaction (where friction sits)

• Cost burden and uncertainty of insurance coverage: perceived value and willingness-to-pay can diverge, and self-pay can become the biggest friction point for persistence
• Supply constraints and uneven availability: during demand surges, supply can become the ceiling on growth
• Administration experience (injections) and general concerns about side effects: injection aversion and procedural burden can become the “last barrier”

Is the story still intact? Recent developments and narrative consistency

LLY’s narrative has shifted from “demand is exploding—can supply keep up?” toward “how do we drive adoption through access design (price, distribution, formulation)?” That evolution is consistent with the broader success story: integrated capability to move drugs through the system in a way that works as real-world treatment.

From supply to access: A shift in the theme

• 1–2 years ago: the central question was whether supply could keep up with demand (shortages were easy headline material)
• Recently: price reductions for self-pay patients, direct-to-consumer channels, and dose expansion—access design has moved to the forefront

The point is that demand alone is no longer enough to maximize growth; payment and distribution design is increasingly a business driver.

How competition is being discussed: From injectable advantage to “timeline competition for oral pills”

With a competitor launching an oral obesity drug in the U.S. and pushing adoption at a lower price point, competition tied to patient experience (avoiding injections) has become more prominent. LLY has shown positive trial results and a filing outlook for orforglipron, but the “gap period” until launch could become a competitive pressure point.

Invisible Fragility: Eight issues that are easy to miss when things are strong

This isn’t a claim that “something breaks tomorrow.” It’s a checklist of structural vulnerabilities that can be easy to overlook when the narrative is strong.

• Concentration: the more growth concentrates in diabetes/obesity, the more changes in regulation, reimbursement, competition, and safety debates can ripple across the entire company
• Rapid competitive shifts: formulation (injectable/oral), price, and access channels (insurance/self-pay/direct-to-consumer/telehealth) become key competitive axes, and the adoption pathway itself can shift quickly
• Shift in the main battlefield of differentiation: even with strong efficacy, if comparisons increasingly emphasize injection burden and ease of persistence, advantages outside efficacy can erode (the gap until oral launch is a key issue)
• Supply chain dependence: supply constraints don’t just limit sales; they can also undermine trust in treatment continuity, and could re-emerge if demand re-accelerates
• Deterioration in organizational culture: within the scope of this news search, decisive primary information could not be sufficiently confirmed, so we avoid a firm conclusion (left as an area with insufficient information)
• Profitability deterioration (metric divergence): revenue, earnings, and margins are strong, but cash flow is highly volatile; if that divergence becomes persistent, it could constrain investment capacity
• Financial burden: interest-paying capacity is currently high, but the durability of running capacity expansion and R&D while carrying leverage remains a key issue
• Industry structure change: as the self-pay market grows, price acceptance, purchasing pathways, and persistence rates are more likely to become binding constraints on growth

Competitive landscape: A two-layer structure—integrated capability among large pharma + product competition in obesity

LLY competes on two layers at once: (1) “integrated capability among large pharma” (R&D, regulatory execution, manufacturing/quality, distribution/reimbursement) and (2) “product competition,” especially in obesity/diabetes (not just efficacy, but also formulation, persistence, availability, and self-pay pricing).

Key competitive players (representative examples)

• Novo Nordisk: a top-tier direct competitor in obesity/diabetes (GLP-1). Launching an oral obesity drug and targeting adoption via price, channels, telehealth, etc.
• Amgen: advancing candidates that could compete in obesity on different convenience axes such as dosing frequency
• Pfizer: oral GLP-1 has partially retreated (development discontinued), but room remains for re-entry via alternative approaches
• Merck / Roche / Johnson and Johnson / Bristol Myers Squibb: likely competitors in oncology
• AbbVie / Johnson and Johnson: likely competitors in immunology/inflammation

Competition map: Where it can win, and where it can lose

• Obesity/diabetes (injectables): beyond efficacy and safety, competition centers on supply capacity, dose lineup, access channels (pharmacies, telehealth, direct-to-consumer), and self-pay pricing
• Obesity/diabetes (oral): administration experience (avoiding injections), persistence, price/channel design, and launch timing are the competitive axes
• Next-generation obesity: comparison axes could broaden to dosing frequency, discontinuation due to early side effects, supply, etc.
• Oncology: incorporation into standard of care, combination regimens, and label expansion are key battlegrounds
• Immunology/inflammation: practical competition around long-term data, convenience, reimbursement terms, etc.

Switching costs (how easily switching can occur)

In chronic diseases, once efficacy, side effects, and the persistence experience are established, inertia tends to build among patients and providers, and switching friction increases when insurance formularies and prior authorization are involved. That said, switching incentives can rise when a new form offers a clear benefit—like avoiding injections (oral)—or when self-pay price differences are large.

10-year competitive scenarios (bull/base/bear)

• Bull: injectables remain the core while oral options also become established; friction around supply and availability declines; label expansion and product mix absorb price/channel competition
• Base: injectables are maintained, but oral becomes standard for new starts or maintenance therapy, with segmentation by patient cohort. Competition remains an execution battle around persistence, channels, and self-pay design
• Bear: oral adoption is faster than expected, reducing the relative advantage of injectable-centric positioning. Self-pay expansion and price competition accelerate, and the comparison set is reshaped by next-generation drugs (dosing frequency or different mechanisms)

Competitive KPIs investors should monitor (observation points, not market calls)

• Formulation mix: which patient cohorts and use cases drive the shift from injectables to oral
• Access channels: how the mix across pharmacies, telehealth, and direct-to-consumer evolves (importance of self-pay pathways)
• Supply signals: signs of re-emergence such as stockouts in specific doses, shipment adjustments, or prescribing restrictions
• Price and access design: revisions to self-pay pricing, dose expansion, addition of purchasing pathways, and their impact
• Competitor pipelines: clinical progress of candidates with different dosing frequency or mechanisms
• Regulatory and supply perimeter: how the competitive playing field changes, such as tightening of duplicative supply after shortages are deemed resolved

Moat: LLY’s strength is not the “drug” alone, but integrated operations

LLY’s moat is its integrated operating machine—execution across clinical development, approvals, manufacturing, and reimbursement. In categories prone to shortages, supply capacity and quality control become competitive dimensions and can act as real barriers to entry.

At the same time, the ways the moat can be pressured are also clear. As more options emerge within the same class and differentiation shifts toward formulation and channels, “efficacy-first” differentiation tends to explain less. The durability question is whether LLY can keep expanding options that reduce patient friction—across injectables, oral, dosing, and access pathways—while treating capacity expansion and access design with the same urgency as product competition.

Structural positioning in the AI era: LLY is more likely to be “amplified” than “replaced”

Structurally, LLY delivers real-world value through pharmaceuticals (medical outcomes), not by selling AI infrastructure. It is fundamentally positioned on the “app” side—delivering outcomes.

Areas where AI could strengthen LLY (7 lenses)

• Network effects: data flywheels could emerge via collaborative-learning platforms for R&D data (a design where external companies participate and learning improves)
• Data advantage: higher-quality internal experimental data can matter more than models, and LLY is emphasizing accumulated data as a learning asset
• AI integration depth: expanding from drug discovery to enterprise-wide AI operations including compute resources and operating platforms (making AI infrastructure part of the operating backbone)
• Mission criticality: the core is regulated execution through “approval, supply, and reimbursement,” where AI can act as an amplifier
• Barriers to entry: beyond regulation, quality, manufacturing, and commercial networks, data accumulation and compute resources could become incremental barriers
• AI substitution risk: end-to-end substitution risk for core operations is relatively low, while the risk that AI accelerates discovery and intensifies competition for candidate molecules could rise
• Structural layer: fundamentally on the app side, but in research it is moving toward partially building and externally selling industry-specific AI platforms (middle layer)

Summary: Not AI alone, but whether it can be coupled with “supply and access”

AI isn’t just a talking point for LLY; it can become fuel that raises R&D productivity and speeds decision-making. But the more AI expands the discovery funnel, the more competition can intensify. The advantage, therefore, is not AI by itself—it’s whether LLY can still execute outcomes through regulation, supply, and reimbursement.

Leadership and culture: Consistency in access emphasis, and the facts of organizational change

The key figure for understanding LLY’s management is CEO David A. Ricks. One notable point is that the recent narrative—making obesity/diabetes central, expanding supply capacity, elevating access design, and integrating AI into R&D—does not materially conflict with themes in public communications.

Vision (what it aims to achieve)

• Not just creating new drugs, but building “treatment that runs” by integrating regulation, quality, supply, and reimbursement—and reaching more patients
• Treating obesity as a “disease” and framing access barriers (insurance and self-pay) as a societal issue

Profile (externally observable tendencies) and values

• Tends to frame issues not only from the company’s perspective but as broader healthcare-system challenges
• Appears to pair principles with clear role ownership (who is responsible for what)
• Treats access improvement as part of the growth strategy while avoiding the simplification that “a company alone can solve everything”

How it tends to show up culturally / generalized patterns from employee reviews

LLY tends to position itself not as “only a research powerhouse,” but as a company built to create reach—through supply, distribution, insurance, and patient pathways. That orientation fits a world where competition increasingly shifts toward formulation, price, and channels. At the same time, when demand surges and capacity expansion and access design run in parallel, common challenges can emerge—higher operational load and more volatility in on-the-ground planning as priorities shift in the short term.

However, within this news search, there is not enough strong primary information to substantiate changes in employee experience, so we keep the framing cautious to avoid over-committing.

Organizational changes (facts that could affect culture)

• As of December 31, 2025, Anne White, head of Lilly Neuroscience, is scheduled to step down; a successor search is underway (it cannot be concluded that this alone will materially change culture)
• In May 2025, a leadership transition was announced that strengthens focus on the U.S. business (Lilly USA), reflecting in organizational design the importance of U.S. growth, commercialization, supply, and access

Understanding via a KPI tree: The causal structure that moves LLY’s enterprise value

LLY’s value doesn’t move solely on “having good drugs.” It moves on whether the company can translate those drugs into real-world adoption. Reframed as a KPI tree, these are the key observation points.

Ultimate outcomes

• Sustained growth in earnings (profits)
• Expansion and stabilization of cash generation (a state where investment and returns can be sustained)
• Maintenance and improvement of capital efficiency
• Refreshing revenue sources through new drugs and label expansions

Intermediate KPIs (Value Drivers)

• Revenue expansion in core areas (compounds as adoption and persistence increase)
• Strength of product mix (what grows changes the profit level)
• Profitability (whether it can be maintained even with capacity expansion and access initiatives)
• Cash conversion quality (the degree to which earnings convert into cash)
• Supply capacity and supply stability (whether demand can be converted into revenue)
• Pass-through rate of access design (insurance, self-pay, distribution pathways)
• Options across formulation, dosing, and access pathways (whether friction can be reduced)
• R&D productivity, pipeline depth, and progress in label expansion
• Execution capability in regulation, quality, and safety surveillance
• Financial operating flexibility (balance between leverage and interest-paying capacity)

Constraints and bottleneck hypotheses (Monitoring Points)

• Supply constraints: signs such as stockouts, shipment adjustments, or prescribing restrictions where “demand is not converted into revenue”
• Access friction: insurance coverage terms, magnitude of self-pay burden, and pathway changes such as direct-to-consumer or telehealth
• Administration friction: whether injection burden is becoming a barrier to adoption and persistence
• Shifts in competitive axes: whether weight is moving from efficacy comparisons to ease of persistence, price, and channels
• Tempo gap between earnings and cash: whether volatility is expanding or contracting (monitor the magnitude of volatility itself)
• Implementation load from running capacity expansion, R&D, and commercialization simultaneously: whether reprioritization is increasing
• Financial management: whether the leverage/interest-coverage combination is deteriorating
• Organizational change: whether leadership turnover is affecting execution in supply, access, or development

Two-minute Drill (2-minute essentials): The “skeleton” long-term investors should grasp

The key to understanding LLY as a long-term investment is its integrated ability to move drugs that clear science and regulation into the global healthcare system in a form that “runs.” In the enormous obesity/diabetes market, demand is a tailwind—but the revenue ceiling is set by supply and access (insurance, self-pay, and distribution pathways).

Near-term results show a clear high-growth phase, with revenue (TTM) +45.4% and EPS (TTM) +121.5%, alongside rising operating margin (FY). At the same time, FCF is highly volatile both annually and on a TTM basis, and there are regimes where earnings growth and cash growth don’t move at the same pace. That’s a structural monitoring point before drawing any bull/bear conclusion.

Competition is shifting from “efficacy comparisons” toward “injectable vs. oral,” “price and channels,” and “friction in persistence,” which makes the oral timeline a key variable. Financially, leverage is notable but interest coverage is high. Through a Lynch lens, it’s natural to focus on whether LLY can sustain growth investment and shareholder returns by watching cash conversion quality and the direction of leverage.