Eli Lilly (LLY 2.07%) is winning the race in the GLP-1 weight-loss drug niche. It was second to market, but its Mounjaro and Zepbound shots have proven to be more effective than Novo Nordisk's (NVO 1.76%) Ozempic/Wegovy, which was first to market. This is good news, but there are risks you should consider before buying Eli Lilly.
Eli Lilly's big hidden risk
Wall Street is massively excited by the success of Eli Lilly's Mounjaro and Zepbound shots. That success, however, is also a big hidden risk. At the end of 2025, these two drugs accounted for 56% of the company's revenue. That is a huge amount of revenue tied to just two drugs.
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Mounjaro's sales rose 99% year over year. Zepbound did even better, with sales increasing by a shocking 175%. Basically, almost all of the company's 45% top-line increase in 2025 was related to just these two GLP-1 weight loss drugs. That potentially sets up some very big problems for Eli Lilly.
Are investors too excited about Eli Lilly?
For starters, emotional investors often go to extremes. With Eli Lilly's price-to-earnings ratio sitting at 45x, it seems like Wall Street may be pricing in perfection here. Granted, the company provided strong guidance for 2026 when it reported 2025 earnings, but with a valuation that high, anything less would have likely resulted in a share price pullback.
This highlights some other risks associated with Eli Lilly's GLP-1 success. Novo Nordisk just beat Eli Lilly to market with a GLP-1 pill, giving this competitor an opportunity to regain market share. And Pfizer is another large pharmaceutical stock that's trying to break into the GLP-1 space. In other words, competition is fierce, and Eli Lilly may not remain the industry leader forever.
NYSE: LLY
Key Data Points
The longer-term problem here is that new drugs are granted only a limited period of market exclusivity. When patent protection expires, generic competition generally comes in and leads to material revenue declines for the branded drug. So even in the best-case scenario, Eli Lilly's GLP-1 success can't last.
Don't blindly buy Eli Lilly
Make sure you understand how reliant Eli Lilly is on its GLP-1 drugs before you buy the stock. If you don't, you might find that the stock's valuation, competition, and the normal business cycles of the drug sector all turn into big headwinds you weren't expecting.
