Eli Lilly (LLY-N) US$1-trillion in market value on Friday, making it the first drugmaker to enter the exclusive club dominated by tech giants and underscoring its rise as a weight-loss powerhouse.
A more than 35-per-cent rally in the company’s stock this year has largely been driven by the explosive growth of the weight-loss drug market.
In the last two years as new, highly effective obesity treatments hit the market, the category has moved from being an also-ran to one of the most lucrative segments in healthcare with steadily rising demand.
Novo Nordisk (NVO-N) had the early lead in the space, but Lilly’s drugs - Mounjaro and Zepbound - have surged in popularity and helped eclipse its rival in prescriptions.
Lilly shares, which briefly hit record high, were trading nearly 1 per cent higher at US$1,051.
Lilly now trades at one of the richest valuations in big pharma, at about 50 times its anticipated earnings over the next 12 months, according to LSEG data, reflecting investors’ belief that demand for obesity drugs will remain strong.
Shares have also far outpaced the broader U.S. equity market. Since the launch of Zepbound in late 2023, Lilly has gained more than 75 per cent, compared with an over 50-per-cent rise in the S&P 500 over the same period.
In the latest reported quarter, Lilly posted combined revenue of more than US$10.09-billion from its obesity and diabetes portfolio, accounting for more than half of its total revenue of US$17.6-billion.
“Lilly joins a coveted trillion-dollar market cap group as the investment public begins to fully appreciate the robust innovation Eli Lilly has given to patients,” said Kevin Gade, chief operating officer at Lilly shareholder Bahl and Gaynor.
In October, the company lifted its annual revenue forecast by more than US$2-billion at the midpoint on surging global demand for its obesity and diabetes drugs.
Wall Street estimates the weight-loss drug market to be worth US$150-billion by 2030, with Lilly and Novo together controlling the majority of projected global sales.
Investors are now focused on Lilly’s oral obesity 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 have already been a “sales phenomenon,” and orforglipron is poised to benefit from the “inroads made by its injectable predecessors.”
Lilly is also set to benefit from a deal with the Trump administration and its planned billions in investment to boost U.S. production.
Analysts have said the pricing deal with the White House may weigh on near-term revenue but significantly expands access, adding as many as 40 million potential U.S. candidates for obesity treatment.
Lilly is starting to resemble the “Magnificent Seven” again, said James Shin, director of Biopharma Equity Research at Deutsche Bank, referring to the tech heavyweights including Nvidia and Microsoft that have powered much of the market’s returns this year.
At one point, investors viewed it as part of that elite group, but after some disappointing headlines and earnings, it slipped out of favor.
Now, however, it seems poised to rejoin that circle, possibly even as an alternative for investors, especially given recent concerns and weakness in some AI stocks, he added.
Still, analysts and investors are watching if Lilly can sustain its current growth as prices of Mounjaro and Zepbound come under pressure, and whether its scale-up plans, along with its diversified pipeline and dealmaking will offset margin pressure.