Eli Lilly: The Weight of Expectations

by

Right, let’s talk about Eli Lilly. Everyone’s terribly excited, aren’t they? The GLP-1 drugs – Mounjaro, Zepbound – they’re having a moment. A huge moment. Which explains why the stock price is currently doing a rather dramatic impression of a rocket. A P/E ratio of 53? Honestly, it’s a bit much, isn’t it? Like, someone needs to tell Wall Street to breathe into a paper bag. I mean, I’m not saying it’s unjustified, exactly… just a little… optimistic. I’ve seen more realistic valuations on vintage handbags.

How Expensive Is “Expensive”?

Okay, let’s be clear. The valuation isn’t the problem problem. It’s the starting point. And right now, it’s a high one. The S&P 500 is doing alright for itself, hovering near all-time highs, but its P/E is a comparatively sensible 28. The iShares U.S. Pharmaceuticals ETF? A modest 30. Lilly’s at 53. Do the math. I’m not a mathematician, but even I can see that’s a significant gap. It’s like showing up to a potluck with a diamond-encrusted soufflé. Impressive, sure, but a bit… much.

The third quarter of 2023 saw Mounjaro sales up 109% year-over-year. Zepbound even managed a whopping 185%. Incredible growth, yes. But let’s not pretend this is sustainable. It’s a sugar rush, and we all know what happens after a sugar rush, don’t we? A crash. A rather unpleasant one, potentially.

The Inevitable Cliff

Here’s the thing. Mounjaro and Zepbound currently account for over 50% of Lilly’s revenue. Fifty percent! That’s… precarious, isn’t it? Like building a house of cards on a trampoline. It’s a brilliant strategy while it lasts, but it’s inherently temporary. Pharmaceutical companies get a limited period of exclusivity. Then, the generics arrive, and suddenly, everyone’s having a party at your expense. It’s called a patent cliff, and it’s as terrifying as it sounds. We’re talking a decade or so, give or take, before investors start to get twitchy. And believe me, they will get twitchy.

Loading widget...

But it might not even take that long. Novo Nordisk, those clever Danes, launched a pill version of Wegovy at the start of 2026. A pill! People like pills. They’re convenient. They don’t require stabbing yourself with a needle. It’s just… logical. And Lilly’s offerings are, well, not pills. See where I’m going with this?

Lilly is working on its own pills, naturally. But innovation doesn’t stand still. It’s a competitive landscape, and everyone’s trying to one-up everyone else. Remember how Lilly’s shots muscled in on Wegovy’s territory? The same thing could easily happen in reverse. It’s a bit like watching a particularly vicious game of corporate chess.

Everyone’s Aiming for the Crown

As the current leader in the GLP-1 space, Lilly has a target painted on its back. Pfizer recently acquired a company with a promising GLP-1 pipeline, and they’ve agreed to distribute a Chinese company’s pill if it gets approved. It’s a free-for-all. And with Lilly’s valuation already so… enthusiastic, Wall Street might be pricing in a bit too much optimism. I mean, I appreciate a good dream as much as the next person, but someone needs to bring a dose of reality to the party.

Lilly is busy acquiring companies, which is smart. They’re diversifying their pipeline, looking for the next blockbuster. Management knows this cash gusher from GLP-1 won’t last forever. They’re playing the long game, which is commendable. But let’s be honest, even the most meticulously planned long game can be derailed by a rogue tweet or a surprisingly effective competitor. It’s the nature of the beast, isn’t it?

Read More

2026-01-27 17:12