Eli Lilly and Company (LLY) investment Quality Rating (AA)

(AA) | Healthcare | Pharmaceuticals
By: Old York Financial
A Private Principal Research Report

the verdict

Old York Financial has assigned Eli Lilly (LLY) an Operational Quality (AA) Rating. Lilly is currently the "Metabolic Sovereign," weaponizing its GLP-1 platform (Mounjaro/Zepbound) to rewrite the economics of chronic disease. 2025 was a hyper-growth year with revenue surging 45% to $65.2 Billion and Net Income doubling to $20.6 Billion. It earns a (AA) rather than a (AAA) because, while its clinical moats are expanding, the company is in a "Heavy Infrastructure" phase, deploying tens of billions in CapEx to fix supply chain bottlenecks. For the Principal, Lilly is a high-velocity biotech machine transitioning into a global industrial giant, trading "Current Yield" for "Future Dominance."

the old york analysis

owner earnings: the manufacturing-heavy surplus In the Lilly model, we audit the cash production after accounting for the unprecedented $55B+ multi-year manufacturing expansion.

• 2025 Net Cash from Operations: $24.8 Billion (Estimated)

• (-) Capital Expenditures (2025): ($12.5 Billion)

• (+) Depreciation & Amortization: $2.1 Billion

• OLD YORK OWNER EARNINGS: $14.4 Billion

Analyst Note: Lilly’s "accounting profits" are spectacular, but "Owner Earnings" are currently being suppressed by the largest manufacturing build-out in pharma history. The company is literally building the "Gears" to satisfy a global obesity epidemic. While FCF is lower than Net Income today, this is a "Principal’s Investment" buying future capacity to own a $100B+ annual category.

growth & market dominance

• Total Revenue (2025): $65.2 Billion (Up 45%).

• Mounjaro & Zepbound Revenue: ~$28 Billion (Combined).

• Pricing Power: STRATEGIC. Lilly has maintained an 83% Gross Margin despite a 6% decline in realized prices, proving they can trade "Price" for "Massive Volume." Their new agreement with the U.S. government for $50/month access is a "Volume Multiplier" that will lock in millions of lifelong users.

• Moats: The "Next-Gen Pipeline." While competitors chase their tail, Lilly is already submitting the oral "pill" version (Orforglipron) and the "Triple-G" agonist (Retatrutide). They aren't just defending a moat; they are building a series of progressively better moats.

operational efficiency

• 5-Year ROIC (Avg): 21.01%

• 5-Year EPS CAGR: 26.11%

• 5-Year Price CAGR: 36.69%

• Share Change (5Y): -1.48%

• Analyst Note: An 83% Gross Margin is elite, but the 46.3% Operating Margin is what matters. Lilly is spending $10.5B+ annually on R&D to ensure they remain the disruptor, not the disrupted. The machine is running at 2x the efficiency of traditional "Big Pharma" peers.

the fortress check

• Debt / Equity: 1.60.

• Total Debt: $42.5 Billion.

• Debt to Owner Earnings: 2.9x.

• Capital Allocation: AGGRESSIVE GROWTH. Lilly returned $6.7 Billion to shareholders ($5.4B dividends / $1.3B buybacks) but its true "Return" is the $15B share repurchase program authorized for the next 3 years.

• The "Clinical" Gear: With $14B in cash generated and $80B+ revenue guided for 2026, Lilly’s leverage is a non-issue. They are borrowing at low rates to build high-margin factories a classic Sovereign move.

final determination

Rating: Old York Quality (AA)

Classification: The Metabolic Sovereign.

Eli Lilly is no longer a drug company; it is a "Metabolic Infrastructure" firm. It receives a (AA) because it has the best pipeline and margins in the sector, but must still prove it can execute the $55B manufacturing ramp without operational friction. For a principal, this is the highest-quality "Growth Sovereign" in the healthcare gallery.

Disclaimer: Old York Financial operates privately as a principal and sells corporate advisory. Old York Financial is not an accountant, a financial advisor, a broker, an agent, a lawyer, or a portfolio manager. This report is for informational purposes only.