Novo Nordisk is the first company to launch a GLP-1 vaccine.
Eli Lilly and Company’s GLP-1 injection quickly became the industry leader after its launch.
Novo Nordisk has become the first drugmaker to receive FDA approval for a GLP-1 pill.
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Eli Lilly and Companyof (NYSE: LLY) Shares are up about 35% in the past year. It’s up nearly 200% in the past three years. It has grown more than 500% over the past five years. If you bought this stock five years ago, you would have benefited from its meteoric rise. What is the reason behind this performance? Can it last?
The big story for Eli Lilly is its leadership in the GLP-1 weight loss drug market. Its two GLP-1 drugs, Mounjaro and Zepbound, have been huge successes. In fact, in the third quarter of 2025, Mounjaro’s sales increased significantly by 109% year-on-year. That impressive growth was eclipsed by Zepbound, which saw sales jump a staggering 185% in the quarter.
Image source: Getty Images.
Sales of Mounjaro and Zepbound have been strong drivers of Eli Lilly’s results, accounting for 57% of the company’s third-quarter 2025 sales. Interestingly, Eli Lilly is actually the second pharmaceutical company to market a GLP-1 drug. The first to go on the market is Novo Nordisk(NYSE: NVO).
The facts just laid out set the stage for the story behind the hidden risks investors face as a result of Eli Lilly’s stock price surge. Unfortunately, in the highly competitive, technical, and heavily regulated healthcare industry, risk is really just business as usual.
Clearly, Wall Street is rewarding Eli Lilly for its dominance in GLP-1. While the stock’s price-to-earnings ratio of 53 times is not different from the five-year average for this metric, it is well above the average price-to-earnings multiple of around 30 times for pharmaceutical companies. If this dominance is challenged or lost, investors may react by repricing, ultimately giving them lower valuations.
The first sign of this threat has emerged, with Novo Nordisk gaining FDA approval to sell a pill version of its GLP-1 drug. GLP-1 injections have taken some hits, but people prefer pills to injections. It wouldn’t be surprising to see Novo Nordisk’s drug take back some market share from Eli Lilly. This type of innovation is relatively common in the pharmaceutical industry. Eli Lilly’s GLP-1 product was basically just a better product, and it quickly gained a leading market position.
Eli Lilly’s GLP-1 drug will likely be replaced by a more effective weight loss drug or a more convenient delivery method. To be fair, Eli Lilly isn’t sitting around. The company is also developing a drug that other companies are developing.
For example, Pfizer(NYSE: PFE) Just acquired a company with a promising pipeline of weight-loss drugs and agreed to distribute a Chinese company’s GLP-1 drug if the drug is approved.
This risk is heightened by the fact that Eli Lilly relies heavily on GLP-1 drugs Mounjaro and Zepbound to shore up its revenue. However, even if Eli Lilly remains the dominant player among GLP-1 companies, there are risks that need to be considered. Pharmaceutical companies are granted the exclusive right to market the drugs they discover for a certain period of time. This is intended to help companies recoup the costs of developing important drugs. However, when patent protection expires, companies often face what is known as a patent cliff.
A patent cliff occurs when generic versions of a blockbuster drug begin to drive down sales of the original blockbuster drug. While Eli Lilly still has some time before it faces a patent cliff for Mounjaro and Zepbound, it is inevitable that it will eventually. Given the importance of both drugs to the company’s profit and loss statement, the loss of patent protection would pose significant problems.
While it’s impossible to predict the future, Eli Lilly faces very clear risks. However, these risks are not uncommon for pharmaceutical companies. The main problem is that the importance of Mounjaro and Zepbound to Eli Lilly’s business heightens the risk. If you own or buy Eli Lilly because of its leadership in GLP-1 drugs, you should carefully consider that in the future the company’s GLP-1 drugs will not be 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 owns and recommends Pfizer. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
Warning: This skyrocketing stock hides risks originally published by The Motley Fool
