Eli Lilly $LLY plans rare 40-year bond in 2025 debt deal signalling strong long-term growth outlook

In the high-stakes arena of corporate finance, Eli Lilly and Company’s move to issue a 40-year bond stands out as a bold statement of confidence amid elevated borrowing costs. This rare long-term debt offering, part of a broader push into the US investment-grade market, underscores the pharmaceutical giant’s strategic positioning in a landscape where extended maturities are increasingly uncommon. With interest rates hovering at levels that deter many issuers from locking in for decades, Lilly’s decision highlights its robust fundamentals and the market’s appetite for blue-chip credits in the healthcare sector.

The Rarity of 40-Year Bonds in Today’s Market

Long-duration bonds like the 40-year variety have become something of an endangered species in the US corporate debt market. Historically, such instruments allowed companies to secure funding at fixed rates over extended periods, providing stability against interest rate volatility. However, with benchmark yields on 10-year US Treasuries climbing above 4% in recent years—far from the near-zero environment of the early 2020s—issuers have shied away from committing to such lengthy terms. Data from the past decade shows that 40-year or longer corporate bonds accounted for less than 5% of total investment-grade issuance, according to figures compiled up to 2023. Eli Lilly’s inclusion of this tranche in its latest deal bucks the trend, signalling not just access to capital but a belief in sustained low-cost funding availability for top-tier borrowers.

This issuance arrives at a time when the broader debt market is navigating choppy waters. Investment-grade spreads have tightened modestly in 2025, reflecting investor hunger for yield in a post-pandemic recovery phase, yet the spectre of inflation and potential rate hikes lingers. For Lilly, tapping this market with a 40-year bond could lock in rates that, while higher than historical lows, remain attractive relative to the company’s growth trajectory. Analysts note that such moves often reflect optimism about future cash flows, particularly for firms with strong pipelines in high-demand areas like obesity and diabetes treatments.

Eli Lilly’s Financial Strength and Strategic Rationale

Eli Lilly, with a market capitalisation exceeding $627 billion as of the latest trading session, commands a premium valuation in the pharmaceutical industry. Its shares trade at a forward price-to-earnings ratio of 30.89, underpinned by expected earnings per share of $22.66 for the forward period. This pricing reflects the blockbuster success of drugs such as Mounjaro and Zepbound, which have propelled revenue growth amid surging demand for GLP-1 agonists. The company’s book value stands at $20.38 per share, with a price-to-book ratio of 34.36, indicating market confidence in its intangible assets, including a deep research and development portfolio.

The decision to issue debt, including the unusual 40-year component, likely serves multiple purposes. Primarily, it provides a cost-effective means to fund acquisitions, research initiatives, or share buybacks without diluting equity. Lilly has a history of strategic deals, such as its 2024 acquisition of Morphic Holding for $3.2 billion, which was partially financed through a $5 billion bond sale. Extending maturities to 40 years allows the company to spread repayment over generations, aligning with the long-tail revenue potential of its drug patents. In a market where shorter-term notes dominate—typically 5 to 10 years—this approach minimises refinancing risk in an uncertain rate environment.

From a credit perspective, Lilly’s investment-grade status affords it favourable terms. Rating agencies have consistently affirmed its standing, with sentiment from sources like JPMorgan maintaining an ‘Overweight’ rating and a $1,100 price target as of August 2025. This optimism stems from Lilly’s earnings momentum, with trailing twelve-month EPS at $15.29 and forward estimates pointing to substantial growth. However, not all views are uniformly bullish; Leerink downgraded the stock to ‘Market Perform’ with a $715 target in early August 2025, citing valuation concerns amid competitive pressures in the weight-loss drug space.

Market Implications and Investor Considerations

The broader implications of Lilly’s bond deal extend to the investment-grade debt landscape. By successfully placing a 40-year bond, the company could encourage other high-quality issuers to test similar waters, potentially deepening the market for long-duration paper. Investors, particularly institutional players like pension funds seeking duration matching, may find appeal in these instruments despite the yield curve’s current inversion. Yields on such bonds, while not publicly priced at the time of writing, are expected to reflect a premium over shorter maturities, offering a hedge against inflation for yield-hungry portfolios.

Yet, risks abound. Elevated borrowing costs could pressure margins if revenue growth falters—Lilly’s shares have seen volatility, with a 52-week range from $623.78 to $972.53, and a recent session close at $700.00 after a -17.54% change. The 50-day moving average sits at $764.06, indicating downward pressure, while the 200-day average of $793.43 suggests a longer-term uptrend that this issuance might support through enhanced financial flexibility.

Analyst models project continued expansion, with consensus estimates forecasting revenue acceleration driven by new approvals and market share gains. For instance, internal projections based on historical trends suggest Lilly could achieve compound annual growth rates of 15-20% in its key segments through 2030, justifying the long-term debt strategy. However, external factors like regulatory scrutiny on drug pricing or patent cliffs could alter this outlook.

Comparative Context and Historical Precedents

Comparing Lilly’s move to peers, few pharmaceutical firms have ventured into 40-year territory recently. Historical precedents include issuances during low-rate periods, such as Lilly’s own 7.125% notes due in June 2025, which were placed in a more benign environment. The current deal, expected to price amid 2025’s rate dynamics, may yield around 5-6% for the long tranche, based on comparable benchmarks from earlier in the year.

In the wider corporate bond market, volumes have surged in 2025, with investment-grade issuance topping $1 trillion year-to-date as per market reports. Lilly’s participation reinforces the sector’s resilience, particularly for healthcare names benefiting from demographic tailwinds like ageing populations and rising chronic disease prevalence.

This table encapsulates Lilly’s current market positioning, which underpins its ability to attract investors to a rare 40-year bond. For fixed-income enthusiasts, the deal represents a play on enduring credit quality; for equity holders, it signals proactive balance sheet management.

Looking Ahead: Opportunities and Cautions

As Eli Lilly proceeds with this issuance, the market will watch closely for pricing details and investor reception. Success could validate long-duration strategies in a high-rate world, while any hiccups might highlight liquidity concerns. Investors considering participation should weigh the company’s growth narrative against macroeconomic headwinds, with analyst sentiment leaning positive—evidenced by a consensus ‘Buy’ rating of 1.7 on a scale where 1 is strong buy.

In essence, this bond offering is more than a fundraising exercise; it’s a litmus test for corporate America’s adaptability. With Lilly’s track record, it may well set a precedent, reminding us that in finance, as in pharmacology, timing and duration can be everything.

References

• Bloomberg. (2025, August 18). Eli Lilly taps high-grade bond market with rare 40-year paper. https://www.bloomberg.com/news/articles/2025-08-18/eli-lilly-taps-high-grade-bond-market-with-rare-40-year-paper
• Investopedia. (2025). Eli Lilly will sell $5 billion in bonds to fund Morphic acquisition. https://www.investopedia.com/eli-lilly-will-sell-usd5-billion-in-bonds-to-fund-morphic-acquisition-8694234
• Yahoo Finance. (2025). JPMorgan maintains ‘Overweight’ rating on Eli Lilly. https://finance.yahoo.com/news/jpmorgan-maintains-overweight-rating-eli-061355653.html
• CBonds. (2025). Lilly bond data. https://cbonds.com/bonds/55763/
• Wikipedia. (n.d.). Eli Lilly and Company. https://en.wikipedia.org/wiki/Eli_Lilly_and_Company
• Insider Monkey. (2025). Eli Lilly and Company (LLY) releases Q2 2025 results. https://www.insidermonkey.com/blog/eli-lilly-and-company-lly-releases-q2-2025-results-1592037/
• Business Insider. (2025). Eli Lilly 2064 Note overview. https://markets.businessinsider.com/bonds/eli_lilly_and_companydl-notes_202424-64-bond-2064-us532457ct39
• Reuters. (2025). Eli Lilly launches $2.5B debt in 3-part sale. https://www.reuters.com/article/markets/us/eli-lilly-launches-25-bln-debt-in-3-part-sale-idUSN07272621/
• Public.com. (2025). Lilly corporate bond details. https://public.com/bonds/corporate/eli-lilly-and-co/lly-5.1-02-09-2064-532457cn6
• Yahoo Finance. (2025). Leerink downgrades Eli Lilly. https://ca.finance.yahoo.com/news/leerink-downgrades-eli-lilly-company-114611545.html
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