Eli Lilly’s SWOT analysis: stock’s growth potential in obesity market faces challenges

Eli Lilly and Company, a global pharmaceutical giant with a market capitalization of $657.66 billion, has been making waves in the healthcare sector with its innovative treatments for diabetes, obesity, oncology, and neuroscience. As the company continues to expand its product portfolio and pipeline, investors and analysts are closely watching its performance in the highly competitive pharmaceutical market. According to InvestingPro data, Eli Lilly maintains a "GREAT" financial health score and stands as a prominent player in the Pharmaceuticals industry. This comprehensive analysis examines Eli Lilly’s strengths, weaknesses, opportunities, and threats, providing insights into the company’s future prospects.

Company Overview and Recent Developments

Eli Lilly has positioned itself as a leader in the pharmaceutical industry, with a particular focus on diabetes and obesity treatments. The company’s recent developments have been largely positive, with significant progress in clinical trials and strategic acquisitions.

In the third quarter of 2025, Eli Lilly is expected to release data from the ATTAIN-1 and ATTAIN-2 trials for orforglipron, a promising obesity treatment. These results will be crucial for the company’s plans to submit the drug for FDA approval by the end of 2025, with potential approval in 2026. The 48-week Phase 3 ACHIEVE-1 data for orforglipron, presented at the ADA meeting, showed better weight loss than semaglutide with comparable A1c control, positioning the drug well in the competitive GLP-1 agonist market.

In a strategic move to expand its presence in the pain management sector, Eli Lilly acquired SiteOne Therapeutics for up to $1 billion. This acquisition provides Lilly with access to SiteOne’s Phase 2 ready Nav 1.8 inhibitor, STC-004, which is expected to bolster the company’s pain pipeline and compete with other players in the market.

Product Portfolio and Pipeline

Eli Lilly’s product portfolio is anchored by several key drugs that have shown strong market performance. Mounjaro (tirzepatide) and Zepbound, the company’s flagship treatments for diabetes and obesity, respectively, have been gaining market share and driving revenue growth. Analysts have noted that Mounjaro’s prescription numbers are converging with those of Ozempic, a competing drug from Novo Nordisk, indicating strong market uptake.

The company’s pipeline is robust, with several promising candidates in late-stage development. Orforglipron, an oral GLP-1 receptor agonist, is a key focus for Eli Lilly in the obesity treatment market. The company is also advancing Muvalaplin to Phase III trials, demonstrating its continued interest in the Lp(a) space for cardiovascular disease treatment.

In the oncology sector, Verzenio has been a strong performer, although it has faced some recent softness due to wholesaler buying patterns and competitive pressures. The company’s oncology franchise is expected to contribute positively to future growth.

Financial Performance and Projections

Eli Lilly’s financial performance has been impressive, with analysts projecting significant growth in both revenue and earnings per share (EPS) over the coming years. The company has demonstrated strong momentum with revenue growth of 36.83% in the last twelve months, reaching $53.26 billion. BMO Capital Markets estimates EPS of $12.99 for 2024, $21.86 for 2025, and $30.72 for 2026. Revenue projections are equally optimistic, with estimates of $45,043 million for 2024, rising to $58,933 million for 2025.

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The company’s guidance for FY2025 includes revenue expectations of $58.0-61.0 billion, with a slight reduction in diluted non-GAAP EPS to $20.78-22.28. Despite these adjustments, analysts remain bullish on Eli Lilly’s growth prospects, citing the company’s strong position in the diabetes and obesity markets as key drivers.

Competitive Landscape

Eli Lilly operates in a highly competitive pharmaceutical market, with its main rival in the GLP-1 and obesity treatment space being Novo Nordisk. The recent deal between Novo Nordisk and CVS Caremark caused some market concern, leading to a temporary drop in Eli Lilly’s share price. However, analysts suggest that these concerns may be overblown, as Eli Lilly’s fundamentals remain strong.

The company’s manufacturing advantage over Novo Nordisk has been noted as a potential edge in meeting the growing demand for GLP-1 agonists. However, some analysts have expressed caution about the high expectations for Lilly’s market share in this therapeutic area, given potential economic sensitivities.

Bear Case

How might increased competition in the GLP-1 market affect Eli Lilly’s market share?

The GLP-1 market is becoming increasingly crowded, with multiple pharmaceutical companies vying for a share of this lucrative segment. As competitors like Novo Nordisk continue to innovate and expand their product offerings, Eli Lilly may face challenges in maintaining its market position. The recent deal between Novo Nordisk and CVS Caremark highlights the potential for formulary decisions to impact market dynamics quickly.

Additionally, as more players enter the market, there is a risk of price erosion, which could impact Eli Lilly’s profit margins. Analysts have noted that the pace of price erosion for Eli Lilly’s products is expected to remain moderate until 2028, after which new entrants may accelerate this trend. This could lead to pressure on the company’s revenue growth and profitability in the long term.

What are the potential risks associated with the high valuation of Eli Lilly’s stock?

Eli Lilly’s stock has been trading at a premium valuation, reflecting high market expectations for the company’s growth prospects. However, this high valuation also presents risks, particularly in uncertain economic conditions. HSBC Global Research’s downgrade of Eli Lilly from Buy to Reduce, with a reduced target price of $700, highlights concerns that the market’s expectations for Lilly’s market share in GLP therapeutics may be overly optimistic.

High-multiple stocks like Eli Lilly, currently trading at a P/E ratio of 46.54 and an EV/EBITDA of 28.0, are often more vulnerable to market volatility and economic uncertainties. Any disappointment in clinical trial results, regulatory setbacks, or underperformance in key product sales could lead to significant stock price corrections. InvestingPro analysis shows the stock trading at high valuation multiples across several metrics, though interestingly, it maintains a low P/E ratio relative to its near-term earnings growth potential. Investors should be cautious of the potential for market overreaction to negative news, given the high expectations built into the stock price.

Bull Case

How could Eli Lilly’s diverse pipeline contribute to long-term growth?

Eli Lilly’s pipeline is a key strength that positions the company for sustained long-term growth. The company’s focus on multiple therapeutic areas, including diabetes, obesity, oncology, and neuroscience, provides diversification and multiple avenues for future revenue streams. The recent acquisition of SiteOne Therapeutics further expands Lilly’s presence in the pain management sector, adding to its portfolio diversity.

Orforglipron, the company’s oral GLP-1 receptor agonist, has shown promising results in clinical trials and could be a significant growth driver if approved. The potential launch of this drug in the obesity treatment market by 2026 could further solidify Eli Lilly’s position as a leader in this rapidly growing therapeutic area. Additionally, the company’s ongoing efforts in gene editing through partnerships and its Lepodisiran CVOT demonstrate a commitment to cutting-edge research that could yield breakthrough treatments in the future.

What advantages does Eli Lilly have in the obesity treatment market?

Eli Lilly has established itself as a frontrunner in the obesity treatment market, with products like Zepbound gaining significant traction. The company’s experience and success in the diabetes market have provided a strong foundation for its expansion into obesity treatments, as there is significant overlap in patient populations and treatment approaches.

Analysts have noted that Eli Lilly is gaining market share in the obesity drug market, now leading over Novo Nordisk in some metrics. The company’s manufacturing capacity has been highlighted as an advantage, potentially allowing Eli Lilly to meet growing demand more effectively than its competitors. This capacity advantage could be crucial in capturing and maintaining market share as the obesity treatment market continues to expand.

Furthermore, Eli Lilly’s robust pipeline, including drugs like orforglipron and retatrutide, positions the company to offer a range of treatment options for patients with obesity. This diverse portfolio approach could help Eli Lilly address various patient needs and preferences, potentially leading to increased market penetration and sustained growth in the obesity treatment sector.

SWOT Analysis

Strengths

• Strong product portfolio in diabetes and obesity treatments
• Robust pipeline with promising candidates in late-stage development
• Manufacturing capacity advantage over competitors
• Diversified research focus across multiple therapeutic areas
• Strong financial performance and growth projections

Weaknesses

• Potential manufacturing capacity constraints for key products
• Dependence on a few key drugs for significant portion of revenue
• Vulnerability to patent expirations and generic competition

Opportunities

• Expanding obesity treatment market with high growth potential
• Potential approval and launch of orforglipron by 2026
• Strategic acquisitions to expand into new therapeutic areas
• Increasing focus on personalized medicine and gene editing technologies

Threats

• Intense competition in the GLP-1 and obesity treatment markets
• Potential pricing pressures and formulary exclusions
• Regulatory challenges and clinical trial risks
• Economic uncertainties affecting high-valuation stocks

Analysts Targets

• BMO Capital Markets: $840.00 (August 27, 2025)
• Cantor Fitzgerald: $975.00 (June 23, 2025)
• BMO Capital Markets: $900.00 (May 28, 2025)
• HSBC Global Research: $700.00 (April 28, 2025)
• Berenberg: $970.00 (March 24, 2025)
• Wells Fargo Securities: $970.00 (February 7, 2025)

Eli Lilly continues to attract mixed opinions from analysts, with price targets ranging from $700 to $975. The majority of analysts maintain a positive outlook on the company, citing its strong position in the diabetes and obesity markets, as well as its promising pipeline. However, some caution is evident, particularly regarding the high valuation and potential market challenges.

In conclusion, Eli Lilly’s strong product portfolio, robust pipeline, and strategic focus on high-growth therapeutic areas position the company well for future success. The company’s commitment to shareholder value is evidenced by its 55-year track record of maintaining dividend payments, with 10 consecutive years of dividend increases. However, investors should remain aware of the competitive pressures, potential pricing challenges, and the risks associated with the company’s high valuation.

For comprehensive analysis and exclusive insights into Eli Lilly’s performance, visit InvestingPro. Access our detailed Pro Research Report, which transforms complex Wall Street data into actionable intelligence, along with 12+ additional ProTips and advanced metrics not mentioned in this analysis. As the pharmaceutical landscape continues to evolve, Eli Lilly’s ability to execute on its pipeline and maintain its market leadership will be crucial in determining its long-term performance.

This analysis is based on information available up to September 1, 2025, and market conditions may have changed since then.

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