Novo Nordisk was the first company to introduce the GLP-1 shot.
Eli Lilly’s GLP-1 shot quickly became the industry leader after its introduction.
Novo Nordisk has now become the first drugmaker to receive FDA approval for a GLP-1 pill.
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Eli Lillywho (NYSE: LLY ) The stock price is up nearly 35% over the past year. It has grown almost 200% in the last three years. And it has grown more than 500% in the last five years. If you had bought this stock five years ago, you would have benefited from its skyrocketing growth. What is behind this performance, and can it last?
The big story surrounding Eli Lilly is its leading position in the GLP-1 weight loss drug market. Two of its GLP-1 drugs, Mounjaro and Zepbound, have been big hits. In fact, in the third quarter of 2025, Mounjaro’s sales grew by a whopping 109% year over year. That staggering growth was eclipsed by Zepbound, which saw a staggering 185% increase in sales in the quarter.
Image source: Getty Images.
Sales of Mounjaro and Zepbound have been a powerful driver of Eli Lilly’s performance in that they made up 57% of the company’s sales in the third quarter of 2025. What’s interesting here is that Eli Lilly was actually the second pharmaceutical company to market with a GLP-1 drug. It was the first in the market Novo Nordisk(NYSE: NVO ).
The facts just laid out set the stage for the story behind the hidden risks investors face with Eli Lilly’s rising stock. The unfortunate part is that risk is just business as usual in the highly competitive, technological, and regulated healthcare sector.
It’s clear that Wall Street is rewarding Eli Lilly for its dominance in the GLP-1 space. While the stock’s 53 times price-to-earnings ratio isn’t out of line with its five-year average for this metric, it’s well above the average pharma stock’s P/E of about 30 times. If that dominance were to be challenged or lost, investors would respond by repricing the shares, ultimately giving them a lower valuation.
The first sign of such a threat is here as Novo Nordisk received FDA approval to sell a pill version of its GLP-1 drug. GLP-1 shots have been a bit of a hit, but people prefer the pills to the shots. It would not be surprising to see Novo Nordisk’s pill regain some market share from Eli Lilly. This type of innovation is relatively common in the pharmaceutical industry. Eli Lilly’s GLP-1 offering was, originally, just a good product, and it quickly gained a leading market position.
There is a very real possibility that Eli Lilly’s GLP-1 drug could lose ground to a more effective weight loss drug or a more convenient delivery method. To be fair, Eli Lilly isn’t sitting around doing nothing. It’s also working on pills, but so are other companies.
For example, Pfizer(NYSE: PFE ) It recently acquired a company with a pipeline of weight-loss drugs, and agreed to distribute a Chinese company’s GLP-1 pill if that pill is approved.
This risk is exacerbated by the fact that Eli Lilly relies heavily on GLP-1 drugs Mounjaro and Zepbound to support its top line. However, there are risks to consider even if Eli Lilly remains the dominant GLP-1 company. Pharmaceutical companies are given a time-limited period to sell the drugs they discover. Its aim is to help companies recoup the costs of developing important medicines. When patent protection expires, however, companies often face what is known as a patent cliff.
A patent cliff occurs when generic versions of a blockbuster drug begin to pull sales away from the original blockbuster. While Eli Lilly has some time to go before facing a patent cliff with Mounjaro and Zepbound, it is inevitable that it will eventually face one. Given the importance of these two drugs to the company’s income statement, the loss of patent protection would pose a significant problem.
While there is no way to predict the future, Eli Lilly faces many obvious risks. However, neither risk is unusual for a pharmaceutical company. The key issue is that the risks are exacerbated by the importance of Mounjaro and Zepbound to Eli Lilly’s business. If you own or buy Eli Lilly because of its leading position in the GLP-1 drug space, you should carefully consider a future where the company’s GLP-1 drugs are no longer as important to the world and the company as they are today.
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has and recommends positions in Pfizer. The Motley Fool recommends Novo Nordisk. Motley Fool has a disclosure policy.
Warning: This Skyrocketing Stock Has Hidden Risks was originally published by The Motley Fool
