The pharmaceutical company had a clinical setback earlier this year, but that’s now in the rearview mirror.
Over the past five years, Eli Lilly (LLY 1.43%) has outperformed the broader market, largely thanks to its progress in the GLP-1 arena. Its major breakthroughs in the field are already leading to incredible commercial success.
But Lilly isn’t done just yet. Recent clinical developments may set the stage for further stock-market gains, and potentially allow the drugmaker to maintain that momentum through the end of the decade. Let’s find out what Eli Lilly has been up to, and what that means for investors.
The next generation of GLP-1 medicines
Eli Lilly’s tirzepatide, marketed under the brands Mounjaro for diabetes and Zepbound for weight management, is highly effective — and generating billions of dollars in sales per quarter already. However, the medicine is administered subcutaneously once a week. This route has several drawbacks compared to oral pills.
First, the latter are often cheaper to manufacture. With an oral GLP-1 medicine, drugmakers might be able to pass cost savings onto consumers, making them more accessible than their subcutaneous counterparts.
Image source: Getty Images.
Second, oral pills are easier on patients who abhor needles and injections. That’s why Lilly and other companies in the field have been racing to develop novel oral GLP-1 therapies. There is already one such treatment on the market: Novo Nordisk‘s Rybelsus, which was first approved in the U.S. in 2019 and is indicated for the treatment of type 2 diabetes.
But Eli Lilly is on the verge of launching its own oral option. The company’s orforglipron performed well in a series of phase 3 studies in diabetes and obesity. What’s more, Lilly recently released results from a 52-week study in diabetes patients that pitted orforglipron and Rybelsus head-to-head. During the trial, the highest dose of orforglipron resulted in an average blood-sugar reduction of 1.9%, compared to 1.5% for Rybelsus. Additionally, orforglipron induced an average weight loss of 8.2%, versus 5.3% for Rybelsus.
Once again, Lilly is showing its dominance in this area, even against the company with a first-mover advantage. And if orforglipron is approved by year-end, Eli Lilly’s shares could soar. Although the pharmaceutical giant has yet to complete regulatory submissions for orforglipron, some Wall Street analysts believe that the medicine is an excellent candidate for a new program launched by the U.S. Food and Drug Administration, which reduces the 10-month review time for drug applications to a mere one or two months.
Is Lilly overvalued?
No one would question that Eli Lilly is performing extremely well. In the past couple of years, it has arguably produced more positive clinical data in the rapidly growing field of weight management than the rest of the industry combined. And the drugmaker is reaping the rewards of a job well done; its financial results speak for themselves. Second-quarter revenue jumped by 38% year over year to $15.6 billion, while non-GAAP (adjusted) net earnings per share grew 61% to $6.31. Lilly even increased its guidance for the full year 2025.
However, the stock was recently trading at 24.7 times forward earnings estimates, while the average for the healthcare industry is 16.5.
That said, Eli Lilly is worth a hefty premium. Its revenue and earnings are already growing faster than those of its peers. And there are good reasons to believe the pharmaceutical leader will keep that up through the next few years (at the very least), as it continues to benefit from its groundbreaking work in the GLP-1 market. According to some analysts, orforglipron could generate as much as $12.7 billion in revenue by 2030.
Will this medicine cannibalize sales from Lilly’s other GLP-1 products? Not at all. Tirzepatide is still growing strongly and could generate nearly $62 billion in revenue by 2030, a figure unheard-of in the industry. A few years ago, some analysts predicted that tirzepatide would peak at $25 billion, which would have been pretty impressive. It’s already set to eclipse that number this year, just three years after it first hit the market. Lilly’s success in the GLP-1 market has been remarkable and should continue driving solid top-line growth.
Furthermore, several other products will contribute. Lilly’s Alzheimer’s disease medicine Kisunla has grabbed barely any headlines, but it could also achieve blockbuster status, as could Ebglyss, a new treatment for eczema.
Eli Lilly’s outstanding results and prospects justify its valuation, leaving plenty of upside for the company. The stock might not soar based on the recent clinical trial data for orforglipron showing its superiority to Rybelsus unless it leads to regulatory approval by year-end. But Lilly still looks likely to deliver market-beating returns over the next five years.