Eli Lilly Stock Rises 16% in a Week: Here's What You Should Know

Shares of Eli Lilly LLY have surged 16% in the past week, driven primarily by positive investor expectations around the broader pharmaceutical sector after Pfizer PFE announced a landmark agreement with the Trump administration.

Through its deal, Pfizer addresses the two major concerns that currently surround the broader pharmaceutical sector, drug pricing and tariffs. While the company will align the prices of its marketed drugs with those in other developed countries, it will also extend substantial discounts to American citizens who purchase its products through TrumpRx.gov, a new federal purchasing platform that is expected to go live next year.

In return, Pfizer is set to receive a three-year exemption from import tariffs on pharmaceutical ingredients, contingent on expanding its domestic manufacturing operations. In this regard, PFE intends to invest an additional $70 billion over the next few years to strengthen its U.S. research and production footprint.

The announcement has improved investor outlook for the overall pharma sector, as it signals a more cooperative stance between the Trump administration and Big Pharma. We view the Pfizer deal as a turning point that could ease regulatory and pricing pressures that have weighed on the industry since the onset of this year. Stocks of several major drugmakers, including Lilly, moved higher last week on expectations that similar policy incentives and tariff exemptions could soon extend to other industry players, especially the ones that have already committed to investing billions to boost domestic investments.

In February, Lilly announced plans to invest $27 billion to develop four new manufacturing sites in the United States this year. This brings its total domestic manufacturing expansion commitments since 2020 to over $50 billion. The increased manufacturing investment is expected to enhance production capacity for its medicines, particularly its popular GLP-1 products, Mounjaro and Zepbound.

Investors Express Optimism Around Pharma Sector

The Trump administration’s deal with Pfizer removes a major obstacle for the broader pharma industry. Besides Eli Lilly, shares of other pharma bigwigs like AbbVie ABBV and AstraZeneca AZN, among others, also surged on the belief that they could follow PFE’s example and sign similar deals, largely benefitting the broader pharma sector. While AbbVie’s stock gained 6% in the last week, AstraZeneca’s rose nearly 16%.

AbbVie announced plans to invest more than $10 billion over the next decade. As part of this plan, ABBV recently started expanding the bioresearch and manufacturing capabilities at its Worcester, MA, facility.

AstraZeneca announced plans to invest $50 billion in U.S. manufacturing and research and development (R&D) by 2030. AZN’s plan includes a new multi-billion-dollar manufacturing facility to be set up in Virginia.

Several other companies like GSK, J&J, Merck and Novartis have also committed billions to U.S. manufacturing and R&D investments.

LLY’s Price Performance, Valuation and Estimates

Shares of Eli Lilly have outperformed the industry year to date, as seen in the chart below.

From a valuation standpoint, Eli Lilly is trading at a premium to the industry. Based on the price/earnings (P/E) ratio, the company’s shares currently trade at 28.85 times forward earnings, slightly higher than its industry’s average of 15.96. The stock is also trading below its five-year mean of 34.54.

Movements in EPS estimates for 2025 and 2026 have been mixed in the past 60 days.

Eli Lilly currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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