This Drug Stock Has Crushed the S&P 500 Over the Last Decade
Sales of Eli Lilly’s Mounjaro and Zepbound have been nothing short of amazing, with both GLP-1 drugs experiencing significant sales increases in 2025. Eli Lilly is leading the way in this still-developing drug niche, resulting in a stock surge of over 1,100% in the past decade, outperforming the S&P 500 index by a wide margin.
However, before jumping on the Eli Lilly bandwagon, it’s important to consider some risks associated with the company. Despite recent stock price fluctuations, Eli Lilly’s price-to-earnings ratio remains high at 39x, compared to the industry average of 23x. While the company’s P/E ratio has dipped below its five-year average, it still remains expensive relative to other drug companies.
One significant risk facing Eli Lilly is the limited patent protection period for drugs like Mounjaro and Zepbound. Once these patents expire, generics are likely to flood the market, potentially reducing the company’s revenue from these drugs. This could pose a challenge to Eli Lilly’s current dominance in the weight-loss category.
Moreover, the pharmaceutical sector is highly competitive, with companies like Novo Nordisk and Pfizer working on their own versions of GLP-1 drugs. There is no guarantee that Eli Lilly can maintain its lead in this rapidly evolving niche.
Recognizing these risks, Eli Lilly has been using its profits from GLP-1 drugs to acquire companies with promising drugs in other areas. While this strategy is prudent, there is no guarantee that these new drugs will be as successful as hoped. Drug development is a complex and uncertain process, with many drugs failing to meet expectations.
In light of these challenges, investors should carefully consider the risks before investing in Eli Lilly. While the company has seen impressive growth, it’s essential to weigh the potential downsides as well. By diversifying its pipeline and exploring new opportunities, Eli Lilly aims to mitigate these risks and continue its success in the pharmaceutical industry.
