After becoming the first healthcare stock to hit a $1 trillion market valuation in late 2025, Eli Lilly (LLY +0.54%) hasn't performed well since, with its shares down about 19% from their 52-week high of $1133.95. Some are worried about the company's runaway valuation, while others fear that, even as the drugmaker leads the market for weight management medicines, increased competition will erode its pricing power and depress its profits and margins. The bulls might have a different view, though, but which side is right?
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The expanding anti-obesity market
While it's true that there will be more competition in chronic weight management, Eli Lilly's lead in this space seems safe. What's more, newer launches will help the company solidify its top position while expanding its addressable market. Take orforglipron, an oral GLP-1 candidate Eli Lilly is gearing up to launch, hopefully in the second quarter. As management noted, the only oral therapy currently approved for weight loss, oral Wegovy, is attracting new patients, likely those who did not want to take older subcutaneous weight-loss medications.
Orforglipron could be a best-in-class medicine thanks to its strong clinical trial performance across both diabetes and obesity, including some studies in which it went head-to-head with other oral GLP-1s and performed better. Eli Lilly could also target an underserved niche with another candidate, retatrutide. In a phase 3 study, not only did retatrutide lead to an outstanding 28.7% mean weight loss after 68 weeks -- a number never before seen in a phase 3 clinical trial -- but it also significantly reduced knee pain.
Eli Lilly will target patients with high body mass indexes -- for whom current weight-loss options often plateau, leaving them with plenty of work to do -- with this drug.
NYSE: LLY
Key Data Points
Beyond weight management
But what if, even as it expands and Eli Lilly maintains its lead in it, the market for anti-obesity medicines doesn't reach the peaks some analysts anticipate? Eli Lilly is prepared for that scenario. Unlike its biggest rival, Novo Nordisk, Eli Lilly has billion-dollar drugs right now -- and likely others that will follow -- outside its core therapeutic area. The company's lineup includes medicines such as Verzenio, a cancer drug that generated $5.7 billion in sales last year, up 8% year over year.
Eli Lilly's Taltz, an immunosuppressant, grew its sales 9% year over year to $3.6 billion. True, their contributions pale in comparison to Eli Lilly's diabetes and obesity products, but that's why the company has been aggressively expanding beyond weight management. Eli Lilly now has a deep pipeline of candidates -- some acquired through licensing deals -- across many fields, including pain management, oncology, and immunology.
Meanwhile, Eli Lilly trades at 27x forward earnings, compared to the healthcare sector's average of 17.1x. Is Eli Lilly worth the premium? Considering it has been growing its revenue and earnings much faster than its similarly sized peers and still has a deep pipeline that should help power growth in the medium term, I think it is. The stock looks attractive right now.
