Is This Healthcare Stock Set To Rally?

Eli Lilly has been a frustrating hold so far this year. Shares are slightly down year to date, a rare stumble for a company that has delivered nearly 5x returns over the past five years.

For a stock that’s become a poster child of the weight-loss and diabetes boom, the slowdown in momentum has left investors wondering if the story has run its course.

The reality is almost the opposite because beneath the surface, Lilly’s fundamentals remain strong, and several overlooked details suggest that the lull could prove temporary.

Key Points

• While early weight-loss results disappointed Wall Street, pills are easier to adopt than injections and could rapidly expand the GLP-1 market.

• With over 40% of U.S. adults obese and tens of millions living with diabetes, Lilly is investing billions in global manufacturing capacity to meet anticipated demand.

• At nearly 50x trailing earnings, the stock seems expensive, but forward multiples and a PEG ratio below 1 suggest shares are attractively priced.

A Weight-Loss Pill That Could Be a Game-Changer

Lilly’s injectable drugs Mounjaro and Zepbound are generating billions in sales and fueling double-digit revenue growth.

But the bigger breakthrough could come in pill form. In early August, Lilly released data on orforglipron, its experimental oral GLP-1 therapy. Patients on the highest dose lost around 12% of body weight 1 year and change, solid results shy of the 15% Wall Street expected.

What many investors missed, however, was that later in the month the company unveiled new data showing orforglipron not only drove additional weight loss but also achieved meaningful reductions in blood sugar, hitting all of its primary endpoints.

Regulators typically care more about meeting trial goals than hitting arbitrary Wall Street expectations. Lilly now says it has the data needed to move toward approval, potentially setting up a launch in about a year.

Pills are likely to expand the GLP-1 market even faster than injections. In prior drug classes, think statins for cholesterol, patients overwhelmingly preferred oral versions.

If Lilly secures approval first, it may well lock in brand recognition, set dosing expectations, and create barriers for rivals still chasing the same market.

The Scale of the Opportunity

Obesity and diabetes represent two of the largest addressable markets in healthcare. The CDC estimates that roughly 38 million Americans have diabetes.

A treatment that works across both conditions doesn’t just create demand, it creates loyalty. Patients often stay on GLP-1s for years, if not decades, meaning revenue is recurring rather than one-time.

Investors may not realize that Lilly has expanded manufacturing capacity at a scale rarely seen in pharma. Building that infrastructure ahead of approval signals confidence not just in the science but in the company’s ability to meet what could be unprecedented demand.

Valuation Isn’t as Stretched as It Looks

On the surface, Lilly looks expensive at nearly 50x trailing earnings. But a deeper dive tells a different story. The forward P/E ratio drops to about 24, reflecting Wall Street’s expectation of rapid earnings growth over the next 12 months.

Many healthcare stocks have been under pressure this year due to fears of U.S. drug price reforms and global trade uncertainty. But GLP-1 therapies may prove largely insulated. These are not niche products, they’re widely recognized as cost-saving in the long term because they reduce the risks of heart disease, stroke, and other costly complications. That makes them less likely targets for aggressive pricing cuts compared with older, more commoditized drugs.

Why Lilly Still Looks Like a Long-Term Winner

Eli Lilly isn’t a speculative biotech betting on a single pipeline drug. It’s a diversified pharmaceutical powerhouse with deep pockets, established products, and the infrastructure to scale globally. Investors who fixate on quarterly setbacks may miss the broader trajectory: Lilly is positioning itself as the undisputed leader in one of the most lucrative drug classes in history.

Yes, the stock commands a premium—but given its growth prospects, that premium may be justified. If orforglipron secures approval and uptake resembles that of injectables, Lilly could be on track to add tens of billions in annual revenue. And for long-term investors willing to look past near-term noise, that’s the kind of growth story worth paying for.