3 Forces That Could Shake Eli Lilly Stock
Eli Lilly (LLY) is facing threats. Even the biggest names aren’t invincible. Stocks can drop sharply without warning, wiping out months or years of gains in a matter of weeks. History shows that sudden market swings can hit any company, no matter how dominant it seems.
Eli Lilly’s market capitalization has soared past $900 billion, fueled by explosive demand for its GLP-1 weight-loss drugs like Zepbound, which saw sales triple this year as the stock hit all-time highs. Yet, this remarkable ascent into record territory could face headwinds from intensifying competition as rivals like Pfizer enter the lucrative obesity market, coupled with persistent pricing scrutiny that could erode future margins despite recent policy agreements, subtly linking current momentum to potential vulnerability.
What Could Send The Stock Crashing?
- GLP-1 Competition: Intensifying market battle for GLP-1s, with rival Novo Nordisk and 16 new weight-loss drugs expected by 2029, threatens Eli Lilly’s over 50% GLP-1 sales share. Underperforming oral GLP-1 (orforglipron) trials in Q2 2025 caused a 14% stock drop, signaling pipeline risks.
- Regulatory/Legal: Potential 50-80% Medicare price cuts from the May 2025 MFN executive order directly threaten drugs like Jardiance. Also, the August 2025 dismissal of a lawsuit against compounded GLP-1s and Michigan’s consumer law case (decision by mid-2026) create legal and market share uncertainty.
- Patent Expirations: Trulicity, with $7.1 billion in 2023 sales, faces patent expiry in 2027. This major loss, part of an industry-wide 2025-2030 patent cliff, necessitates continuous R&D to offset revenue erosion from generic competition.
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Is Risk Showing Up In Financials Yet?
It certainly helps mitigate the risk if the fundamentals check out. For details on LLY Read Buy or Sell LLY Stock. Below are a few numbers that matter.
- Revenue Growth: 36.8% LTM and 23.4% last 3-year average.
- Cash Generation: Nearly -0.09% free cash flow margin and 43.0% operating margin LTM.
- Valuation: Eli Lilly stock trades at a P/E multiple of 64.3
| LLY | S&P Median | |
|---|---|---|
| Sector | Health Care | – |
| Industry | Pharmaceuticals | – |
| PE Ratio | 64.3 | 23.6 |
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| LTM* Revenue Growth | 36.8% | 6.1% |
| 3Y Average Annual Revenue Growth | 23.4% | 5.4% |
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| LTM* Operating Margin | 43.0% | 18.8% |
| 3Y Average Operating Margin | 35.6% | 18.2% |
| LTM* Free Cash Flow Margin | -0.1% | 13.5% |
*LTM: Last Twelve Months
How Bad Can It Really Get?
When looking at risk for Lilly, it’s clear the stock isn’t immune during big market sell-offs. During the Dot-Com bubble burst, it dropped about 43%. The Global Financial Crisis hit even harder, with a dip over 50%. Even smaller shocks like the 2018 correction and inflation scare sent shares down around 18-19%. The Covid sell-off pulled it down about 22%. So, while Lilly might have solid fundamentals, history shows it can still take a noticeable hit when markets turn negative.
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