By Jacob Sonenshine
Eli Lilly's most recent acquisition shows its aspirations beyond weight loss drugs. There's time for investors to get in and buy the stock.
Lilly agreed this week to buy privately held Kelonia Therapeutics for $3.25 billion. The deal could be worth $7 billion if Kelonia hits certain milestones.
Kelonia is known for its "In vivo CAR-T therapy," an intravenous injection that offers a cheaper, faster, and potentially more effective way to fight cancer. The treatment doesn't require the use of a lab dish outside the patient's body, reducing the amount of work and time needed to treat the patient. Kelonia is even trying to solidify the drug's use for autoimmune diseases. The company is pre-revenue, but the multiple-myeloma treatment is in Phase 1 of clinical trials.
Eli Lilly stock dropped in immediate reaction to this announcement, a common occurrence for large companies making acquisitions. Shares recovered today, but are down 17% since closing at a record high in November. Analysts have lifted sales and earnings estimates since late 2025, according to FactSet, but investors have taken profits after the stock's rally over the past five years.
Now, shares look attractive at 25 times expected analyst earnings for the coming 12 months, versus the S&P 500's 21 times. The stock has averaged a multiple nearly double the index's in the past three years. The market clearly has concerns about GLP-1 competition, but Lilly is executing well across its business. It has growth potential outside of GLP-1s, making the valuation look appealing.
The acquisition further expands Lilly's oncology capabilities, an area where it has made other purchases recently. It acquired five smaller companies in the In vivo CAR-T space since 2024. In February it purchased Orna Therapeutics, which also provides an injection aimed at treating cancer and autoimmune diseases, for $2.4 billion. Orna takes a slightly different approach than Kelonia to cancer treatment, so this helps Lilly get several shots at taking market share in cancer treatments.
"We are positive on a potential deal, as it would add a complementary in vivo approach that could broaden Lilly's push to build oncology," writes BMO analyst Evan Seigerman.
The acquisition helps Lilly "diversify the pipeline for long-term growth beyond the GLP-1 franchise," adds UBS analyst Michael Yee.
Total oncology spending was $256 billion in 2025, according to Fortune Business Insights. This is expected to grow to almost $700 billion by 2034. Taking a small part of this total addressable market can drive a material amount of additional revenue for Lilly. Analysts anticipate $81.9 billion in total 2026 sales.
Oncology can also help Lilly protect against any competitive speed bumps in GLP-1s. Novo Nordisk is the primary competitor in that area, though Amgen, Gilead Sciences, and Merck are also developing weight loss therapies.
For now, Lilly's weight loss business is still thriving. With Zepbound as one of the most effective and best-selling weight loss offerings on the market, and the fact that its Foundayo is one of the first oral GLP-1s, analysts expect the company's total GLP-1 sales to grow 14% annually through 2031 to about $45 billion.
Most of its other businesses should grow as well, though a few drugs are in decline as they lose patent exclusivity. Still, analysts forecast total sales to grow 13% to $133.9 billion by 2031. Lilly has beaten sales estimates the last four quarters, including for Zepbound.
The growth can lift earnings by 18% annually over their period, as profit margins rise. Analysts forecast more moderate growth of large expenses such as research and development and general and administrative, as management moves past the early days of ramping up those costs for its growth opportunities.
For anyone who missed the past few years of Lilly's rally, now is a chance to jump in.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
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(END) Dow Jones Newswires
April 24, 2026 21:31 ET (01:31 GMT)
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