TLDR:
- Eli Lilly shares down 8.2% in past month due to market uncertainty and Medicare exclusion of weight-loss drugs
- Tirzepatide drugs Mounjaro and Zepbound generated $16.5 billion in 2024, accounting for 36% of total revenue
- New oral weight loss pill orforglipron showed 7.9% weight reduction in late-stage trial, pushing shares up 11% premarket
- Lilly investing $50 billion to expand manufacturing capacity for key products
- Competition in obesity market intensifying with Amgen, Viking Therapeutics and others developing similar treatments
Eli Lilly and Company’s stock has experienced a rollercoaster ride recently. After falling 8.2% in the past month, shares jumped 11% in premarket trading following positive results from a late-stage trial of its experimental weight loss pill.
The recent decline was largely attributed to global market uncertainty caused by tariff concerns. The Trump administration’s imposition of sweeping tariffs sparked fears of a global recession.
Although pharmaceuticals were exempted from the first round of reciprocal tariffs, investors worry they could be targeted in future rounds. This concern stems from the President’s stated goal of bringing pharmaceutical production back to the United States from European and Asian countries.
Both Lilly and competitor Novo Nordisk saw their stocks decline after Medicare excluded their expensive weight-loss medicines from Part D prescription drug coverage.
Tirzepatide Driving Growth
Lilly’s tirzepatide-based medications have become the company’s star performers. Diabetes drug Mounjaro and weight loss treatment Zepbound generated combined sales of $16.5 billion in 2024.
These products, despite being on the market for less than three years, now account for roughly 36% of the company’s total revenues.
However, quarter-over-quarter growth for these drugs was hampered in the second half of 2024. Supply constraints and channel dynamics led to slower-than-expected growth, raising questions about demand sustainability.
Lilly expects sales to rebound in 2025 as it launches these drugs in new international markets. The company has committed more than $50 billion since 2020 to build and expand manufacturing capacity in the United States and Europe.
New indications should also drive growth. In late December, the FDA approved Zepbound for moderate-to-severe obstructive sleep apnea in adults with obesity.
Lilly has also filed for approval of tirzepatide for heart failure and expects to announce data from a cardiovascular outcome study this year.
Breakthrough Oral Weight Loss Drug
In a major development, Lilly announced that its experimental pill, orforglipron, achieved impressive results in a late-stage trial. The highest dose led to a weight loss of nearly 8% and lowered blood sugar in overweight patients with type 2 diabetes.
This news sent the company’s stock soaring by almost 11% in premarket trading. Lilly has already begun stockpiling supplies of the pill and plans to file for regulatory approval by the end of this year.
Unlike injectable treatments such as Mounjaro and Zepbound, orforglipron is a synthetic small molecule drug that can be taken orally. This could significantly expand the market for weight loss treatments by offering patients a more convenient option.
Orforglipron targets GLP-1, similar to the company’s injectable treatments. But as a pill rather than an injection, it could appeal to patients who prefer not to use needles.
Growing Competition
The obesity market is heating up, with estimates suggesting it could expand to $100 billion by 2030. While Lilly and Novo Nordisk currently dominate this space, other companies are eager to enter.
Lilly is investing heavily in its obesity pipeline with several new molecules in clinical development. These include late-stage candidates orforglipron and retatrutide, a triple-acting incretin that combines GLP-1, GIP, and glucagon.
Companies like Amgen and Viking Therapeutics are making rapid progress with their own GLP-1-based candidates. Amgen plans to conduct phase III studies on its dual GIPR/GLP-1 receptor agonist, MariTide, starting in early 2025.
Viking Therapeutics is developing VK2735, another dual GIPR/GLP-1 receptor agonist, in both oral and injectable forms.
Other major pharmaceutical companies like Roche, Merck, and AbbVie are also looking to enter the obesity treatment market. They’re doing this by in-licensing obesity candidates from smaller biotechs.
Despite the competitive landscape, Lilly has performed well compared to the broader market. While its stock has declined 1.7% so far this year, it has outperformed the pharmaceutical industry, which has dropped 4.1%.
Lilly’s revenue outlook remains strong. For 2025, the company expects to record revenues between $58.0 billion and $61.0 billion, which would represent an impressive 32% year-over-year growth.
Lilly returned $3 billion to shareholders in 2024 through share repurchases and dividends. Its board of directors has approved a new $15 billion stock buyback plan and announced a 15% increase in quarterly dividends.
The company’s future looks promising. Supply issues for Mounjaro and Zepbound should gradually resolve as production capacity increases. Lilly is well-positioned to secure approvals for several new drugs and label expansions in the coming years.
While the stock trades at a premium to the industry and faces challenges like declining prices and increasing competition, its strong pipeline and record of successful drug launches support long-term growth potential.
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