Key Points
Eli Lilly's Mounjaro and Zepbound are the leading drugs in the GLP-1 space.
The company's GLP-1 success has resulted in a lofty valuation for the stock.
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It is hard to explain how impressive Eli Lilly's (NYSE: LLY) GLP-1 success has been. In 2025, sales of the company's Mounjaro and Zepbound rose 99% and 175%, respectively. The two drugs have grown so rapidly that they now account for 56% of Eli Lilly's revenues.
There's likely to be more growth ahead, too, as demand for these weight loss drugs remains strong. However, it may still be too late for you to buy Eli Lilly. Here's why.
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Eli Lilly is winning, for now
The interesting thing about Mounjaro and Zepbound is that they weren't the first GLP-1 weight loss drugs to hit the market. Novo Nordisk (NYSE: NVO) was first to market with Wegovy. However, Eli Lilly's drugs proved to be more effective and quickly took the lead in the new drug category. That's an important fact to keep in mind because it underscores the pharmaceutical sector's competitiveness.
Notably, Novo Nordisk just released a GLP-1 pill, beating Eli Lilly to market again. That will give Novo Nordisk time to regain market share as Eli Lilly works to get its own pill approved by the FDA. Pfizer (NYSE: PFE) is working in the GLP-1 space. If Pfizer can get its long-acting weight-loss drug to market, Mounjaro and Zepbound will have to compete with yet another GLP-1 drug.
Image source: Getty Images.
Right now, Eli Lilly is on top, but it may not hold that spot forever. In fact, the patent protections that are allowing it to enjoy outsize profits today are time-limited. So, at some point in the not-too-distant future, the company's GLP-1 success will fade as generic versions of its drugs enter the market.
Eli Lilly is an expensive stock
The big problem with buying Eli Lilly today is that Wall Street has already priced in the company's success. The stock's price-to-earnings ratio is a lofty 43x. That's below the company's five-year average P/E, but it is dramatically higher than the S&P 500 index's (SNPINDEX: ^GSPC) average P/E of roughly 28x and the 23x P/E of the average drug stock.
There are two ways to lower a company's P/E. The stock price can fall, or earnings can increase. For Eli Lilly's P/E ratio to drop back to the industry average, earnings would have to rise dramatically from current levels. Just to get the P/E down to the S&P 500's level would require a fairly large earnings advance. Given the competitive landscape in the GLP-1 market, achieving that may not be as easy as Wall Street seems to hope.
In other words, Eli Lilly's share price already reflects much of the positive news. What it doesn't yet seem to reflect is any potential bad news. Essentially, Eli Lilly's stock looks priced for perfection. When its lock on the GLP-1 market ends, which will eventually happen thanks to intense competition or the end of its patents, the premium the stock is being afforded could quickly deflate.
It is also worth noting that Eli Lilly's dividend yield is just 0.6% compared to 4.8% for Novo Nordisk and 6.4% for Pfizer. Value investors and dividend investors will probably want to look elsewhere.
Most investors should tread with caution
The pharmaceutical sector is highly competitive and technically complicated. Industry-leading peers like Pfizer and Novo Nordisk are already pushing GLP-1 drugs in new directions, keeping the heat on Eli Lilly. With such a high valuation, Eli Lilly's share price leaves little room for adversity. Eli Lilly is a very well run drug company, but it is highly likely that it is too late to buy into the company's GLP-1 success, given how enamored investors seem with the stock today.
Should you buy stock in Eli Lilly right now?
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
