Eli Lilly hit $1 trillion in market value on Friday, becoming the first pharmacist to enter an exclusive club dominated by tech giants and underscoring its rise as a weight-loss powerhouse.
A more than 35% rally in the company’s stock this year has been largely driven by the explosive growth of the weight-loss drug market.
In the last two years, with the arrival of new highly effective obesity treatments on the market, the category has established itself as one of the most lucrative segments in the healthcare sector.
Sales of Lilly’s tirzepatide, marketed as Mounjaro for type 2 diabetes and Zepbound for obesity, have also surpassed Merck’s Keytruda as the world’s best-selling drug.
Novo Nordisk had the head start in the sector, but Mounjaro and Zepbound have gained popularity and helped the company eclipse its rival in recipes.
Lilly moved ahead in part because Novo’s Wegovy launch in 2021 was hampered by supply shortages, giving it room to gain ground. The U.S. company’s drugs have also demonstrated greater clinical efficacy, and Lilly has been quicker to scale up manufacturing and distribution.
The company’s shares, which briefly hit an all-time high, were trading nearly 1% higher at $1,051.
Lilly now trades at one of the highest valuations among Big Pharma, about 50 times its expected earnings over the next 12 months, according to LSEG data, reflecting investor bets that demand for obesity drugs will remain strong.
The stock has also far outperformed the broader U.S. equity market. Since the launch of Zepbound in late 2023, Lilly is up more than 75%, compared to a more than 50% increase for the S&P 500 in the same period.
In the last reported quarter, Lilly reported 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.
You may be interested in: Google aims to avoid breaking up advertising business while antitrust trial concludes
Lilly raised its annual revenue forecast by more than $2 billion
“The current valuation points to investor confidence in the long-term durability of the company’s metabolic health franchise. It also suggests investors favor Lilly over Novo in the arms race against obesity,” said Evan Seigerman, an analyst at BMO Capital Markets.
In October, Lilly raised its full-year revenue forecast by more than $2 billion at the mid-term, due to rising global demand for its obesity and diabetes drugs.
Wall Street estimates the weight-loss drug market will 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 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 has already been a “sales phenomenon,” and that orforglipron is poised to benefit from the “advances made by its injectable predecessors.”
Lilly is poised to benefit from a deal with the Trump administration and its planned billion-dollar investment to boost U.S. manufacturing.
Analysts have noted that the pricing deal with the White House could hurt revenue in the short term, but it significantly expands access, adding up to 40 million potential U.S. candidates for obesity treatment.
Lilly is starting to look like the “Magnificent Seven” again, said James Shin, head of Biopharma Equity Research at Deutsche Bank, referring to tech heavyweights like Nvidia and Microsoft that have driven much of the market’s returns this year.
At one point, investors considered it part of that elite group, but after some disappointing headlines and results, it fell out of favor.
Now, however, it could provide an alternative for investors, especially given recent concerns and weaknesses in some AI stocks, he added.
Still, analysts and investors are watching whether Lilly can maintain its current growth as prices for Mounjaro and Zepbound come under pressure, and whether its expansion plans, along with its diversified portfolio and deals, will offset a potential margin squeeze.
With information from Reuters
Do you use Facebook more? Follow us to always be informed
