Why Eli Lilly Stock Sank 18% This Week

Core Insights - Eli Lilly's stock has experienced an 18% decline this week, contributing to a 35% drawdown from its all-time highs, despite a market cap exceeding $500 billion [1][2] - The company has seen a remarkable 300% increase in stock value over the past five years, primarily driven by its successful weight loss drugs [1] Financial Performance - For the second quarter, Eli Lilly reported a 38% year-over-year revenue growth, reaching $15.5 billion, largely attributed to its weight loss drug sales [3] - Mounjaro's revenue surged 68% year-over-year to $5.2 billion, while Zepbound's revenue skyrocketed 172% to $3.4 billion; net income rose 91% to $5.56 billion [4] Market Challenges - The stock's decline is attributed to two main factors: uncertainty regarding U.S. pharmaceutical tariffs on foreign imports, which may affect the company's cost structure, and disappointing trial results for a new weight-loss drug, orfoglipron, which showed high dropout rates [5] Valuation and Future Outlook - Eli Lilly is projecting earnings per share (EPS) of just over $20 for the year, with a forward price-to-earnings (P/E) ratio of 28, indicating a cheaper valuation compared to the previous year [7] - The growth trajectory from its blockbuster drugs is expected to continue throughout the decade, potentially leading to further operating leverage and EPS growth, making the stock an attractive option for investors [8]