In the latest reported quarter, Lilly posted combined revenue of more than $10.09 billion from its obesity and diabetes portfolio, accounting for more than half of its total revenue of $17.6 billion.
“The current valuation points to investor confidence in the longer-term durability of the company’s metabolic health franchise. It also suggests that investors prefer Lilly over Novo in the obesity arms race,” said Evan Seigerman, analyst at BMO Capital Markets.
In October, Lilly lifted its annual revenue forecast by more than $2 billion at the midpoint on surging global demand for its obesity and diabetes drugs.
Wall Street estimates the weight-loss drug market to be worth $150 billion by 2030, with Lilly and Novo together controlling the majority of projected global sales.
Investors are now focused on Lilly’s oral obesity drug, orforglipron, which is expected to be approved early next year.
In a note last week, Citi analysts said the latest generation of GLP-1 drugs have already been a “sales phenomenon”, and orforglipron is poised to benefit from the “inroads made by its injectable predecessors.”
SUSTAINING THE MOMENTUM
Lilly is set to benefit from a deal with the Trump administration and its planned billions in investment to boost U.S. production.
Analysts have said the pricing deal with the White House may weigh on near-term revenue but significantly expands access, adding as many as 40 million potential U.S. candidates for obesity treatment.
Lilly is starting to resemble the “Magnificent Seven” again, said James Shin, director of Biopharma Equity Research at Deutsche Bank, referring to the tech heavyweights including Nvidia (NVDA.O), and Microsoft (MSFT.O), that have powered much of the market’s returns this year.
At one point, investors viewed it as part of that elite group, but after some disappointing headlines and earnings, it slipped out of favor.
Now, however, it can possibly pose as an alternative for investors, especially given recent concerns and weakness in some AI stocks, he added.
Still, analysts and investors are watching if Lilly can sustain its current growth as prices of Mounjaro and Zepbound come under pressure, and whether its scale-up plans, along with its diversified pipeline and dealmaking will offset a potential margin squeeze.
