What is the Intent Behind Eli Lilly's Recent M&A Deals Spree?

Earlier this week, Eli Lilly LLY signed a definitive agreement to acquire Verve Therapeutics VERV for a total deal value of nearly $1.3 billion. The acquisition will add Verve’s pipeline of gene therapies targeting heart diseases, including VERVE-102, an investigational in vivo gene-editing treatment aimed at reducing cholesterol levels, to Lilly’s pipeline. The transaction, expected to be completed in the third quarter, is subject to customary closing conditions and clearance from regulatory authorities.

Once closed, Verve Therapeutics will be Lilly’s third targeted M&A deal this year. In January, it signed a $2.5 billion deal for Scorpion Therapeutics’ experimental oncology drug, STX-478, a novel mutant-selective PI3Kα inhibitor. Last month, Lilly announced its intent to acquire SiteOne Therapeutics in a deal valued at $1 billion to strengthen its neuroscience pipeline. The transaction includes STC-004, a Nav1.8 inhibitor ready for phase II development, being evaluated for pain treatment. The intent here is clear. Eli Lilly aims to strategically diversify beyond GLP-1 drugs by expanding into different therapeutic areas, like cardiovascular, oncology and neuroscience, which will benefit the company in the long term.

LLY currently dominates the GLP-1 drugs market, along with its arch-rival Novo Nordisk NVO. LLY markets its tirzepatide injections as Mounjaro for diabetes and Zepbound for obesity, while NVO markets its semaglutide injections as Ozempic for diabetes and Wegovy for obesity. Despite being on the market for a shorter duration than Novo Nordisk’s Ozempic/Wegovy, Lilly’s Mounjaro and Zepbound have witnessed strong sales, driven by rapid demand.

Focus on M&A in 2025

M&A have picked up a significant pace in 2025 in the pharma/biotech sector after a passive run in 2024. The recent spree of acquisitions signifies a focus on portfolio expansion and constant pipeline innovation amid the recent tariff threat.

Sanofi SNY is set to acquire Blueprint Medicines for a total deal value of up to $9.5 billion. The deal is intended to expand SNY’s portfolio in rare immunological diseases and add an early-stage pipeline in immunology. The impending acquisition will add BPMC’s only marketed product, Ayvakit (avapritinib), an inhibitor of KIT and PDGFRA proteins, to Sanofi’s commercial portfolio.

In April, pharma giant Johnson & Johnson acquired Intra-Cellular Therapies for approximately $14.6 billion and added antidepressant drug, Caplyta, to its neuroscience portfolio.

M&A activity is expected to accelerate further in 2025, given the massive cash reserve owned by major pharma and biotech companies and the intensifying pressure from investors to diversify business.

LLY’s Stock Price, Valuation and Estimates

Shares of Eli Lilly have risen 1.7% so far this year against the industry’s decline of 1.2%. The stock has also outperformed the sector and S&P 500 index, as seen in the chart below.

LLY Stock Outperforms Industry, Sector & S&P 500

From a valuation standpoint, Lilly’s stock is expensive. Going by the price/earnings ratio, the company’s shares currently trade at 30.06 forward earnings, higher than 15.05 for the industry. However, the stock is trading below its five-year mean of 34.54.

LLY Stock Valuation

Estimates for Eli Lilly’s 2025 earnings have declined from $23.06 to $21.95 per share in the past 60 days, and estimates for 2026 earnings have declined from $31.15 to $30.91 over the same timeframe.

LLY Estimate Movement

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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