Under the Spotlight: Eli Lilly ($LLY)

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As the energy market recovers from one of the wildest weeks on record, healthcare may not be the first place most investors are looking right now. Fair enough. Markets have been fixated on war, shipping routes and the knock-on effect on crude and LNG prices.

But away from that noise, another high-stakes battle is playing out in the global drug market. Healthcare stocks are normally considered defensive. They tend to hold up when markets wobble but rarely deliver the explosive growth investors chase in tech.

One exception right now is Eli Lilly ($LLY). The U.S. drug giant has surged more than 30% in six months to fresh highs. What’s driving that move is one of the fastest growing and most competitive new markets in healthcare: obesity drugs.

These treatments, originally developed for diabetes, are now being used for weight loss. Demand has exploded following positive clinical results, pushing Lilly’s revenue up 45% in 2025 to a record US$65.2B, with sales rising 43% in the December quarter alone.

Drug boom

The two rival names sitting at the center of the drug boom are Eli Lilly and Danish pharmaceutical giant Novo Nordisk ($NVO). 

Novo effectively created the modern obesity drug market with Ozempic and Wegovy, both part of a class of medicines known as GLP-1 receptor agonists, which help regulate blood sugar and reduce appetite. Lilly followed with its weight loss drug Mounjaro and diabetes counterpart Zepbound. 

That science race has evolved into a commercial one, with Lilly quickly closing the gap on its main rival over the past 12 months. Lilly’s Mounjaro generated US$23B in revenue in 2025 while Zepbound added US$13.5B. In the December quarter alone, Mounjaro revenue jumped 110% year on year to US$7.4B while Zepbound rose 122%.

The two drugs now account for a significant share of Lilly’s growth. Lilly expects revenue to increase by roughly 25% this year, while Novo has warned that sales may slow as competition intensifies and pricing pressure increases. 

But the next phase of the competition may be decided less by injections and more by convenience.

Novo has begun rolling out an oral pill version of Wegovy in the United States and Lilly is racing to follow with its own pill, orforglipron. Tablets are typically easier to produce and distribute than injectable drugs, and are often preferred by patients. 

Novo also plans to cut U.S. list prices for Wegovy and Ozempic from 2027, reducing Wegovy to about US$675 per month. Lilly had already begun lowering effective prices for Zepbound through direct distribution channels. 

Meanwhile, growing competition from telehealth providers and compounded alternatives has put further pressure on margins.

Growth story

Management is guiding 2026 revenue of US$80B to US$83B and non-GAAP earnings per share of US$33.50 to US$35.00, both ahead of Wall Street expectations at the time of its February results.

While obesity drugs dominate the investment narrative, Lilly is not dependent on a single therapy area.

Its breast cancer drug Verzenio generated US$5.7B in revenue in 2025, while treatments such as Jaypirca, Taltz and Kisunla expand across oncology, immunology, neuroscience and Alzheimer’s disease.

Still, obesity remains the key growth engine. The next major catalyst is orforglipron, which is set to launch in the U.S. by mid 2026 if approved by regulators. The company has already built roughly US$1.5B in inventory ahead of a potential rollout and recently announced a US$3B investment in China to expand oral drug production

It follows another planned US$3B facility in the Netherlands focused on pill manufacturing. Both form part of an expansion designed to prevent supply shortages that have plagued the sector.

Clinical risk

This is still pharma, which means the ride can get bumpier than the word ‘defensive’ suggests. Drug stocks can move sharply on trial data, FDA decisions, manufacturing setbacks or safety headlines, even when the long-term story remains intact.

Lilly gave investors a reminder of that last August, when its shares plunged nearly 15% in a day after trial data for orforglipron disappointed investors. That was one of the sharpest falls the stock had seen in decades. 

On the other side of the ledger, Novo shares sank 16% in February after disappointing data for its next-generation obesity drug CagriSema, while Lilly shares jumped 5% on the same news.

Regulation is another wildcard. The FDA recently warned 30 telehealth firms over misleading marketing of compounded GLP-1 drugs, showing how quickly regulators can step in when copycat or off-label sales get too aggressive. Even when a warning is not directed at Lilly itself, the company’s share price can still move because the whole obesity-drug ecosystem is now tightly linked.

Valuation check

Wall Street has a broadly positive read on the drugmaker. Of 35 analysts covering $LLY on LSEG, 11 have rated the stock a ‘strong buy’ at current levels, while 16 rate it a ‘buy’. 

And with an average 12-month price target of US$1,208, there’s a comfortable gap of over 20% from its latest price.

But it is worth noting the stock is not cheap by traditional metrics. Lilly is trading on a price to earnings (P/E) ratio of 43.5 based on current market data, which is a rich multiple for any healthcare name, even one growing this fast. 

It shows that investors are valuing $LLY as more like a growth stock than a pharmaceutical, which typically trades at half that. Nvidia ($NVDA) by comparison, has a lower P/E of 37.95.

So the analyst case is fairly straightforward. Lilly has the scale, the pipeline, the manufacturing expansion and, right now, the stronger momentum in obesity drugs. The bear case is also straightforward. Much of that optimism is already in the share price

Buy or sell?

If you are looking at Eli Lilly today, it still leans more like a buy than a sell, but only for investors comfortable paying up for quality. The company is delivering real revenue growth, not just a good story. Its obesity franchise is huge, its pipeline is deep and the oral drug launch could open the next leg of growth if approval lands on time.

The risk is valuation. At this size, Lilly probably doesn’t have much room for error. A slower launch, heavier price competition, weaker reimbursement or disappointing trial data could all knock the stock around. That does not make it a bad company. It just makes expectations matter almost as much as execution.

The bottom line is that Eli Lilly still looks like one of the strongest companies in global healthcare. But unlike the old-school defensive pharma names, this one behaves more like a growth stock in a lab coat. Great when the news flow is good. Less relaxing when it is not.

This is not financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. The author of this article and other employees of Stakeshop Pty Ltd may hold positions or have financial interests in the company (or companies) discussed above. As always, do your own research and consider seeking financial, legal and taxation advice before investing.