Is Eli Lilly Stock a Buy? Here's What the Market Isn't Pricing in Yet.

Core Viewpoint - Viking Therapeutics is emerging as a potential competitor to Eli Lilly in the obesity treatment market, which is valued at $100 billion, particularly in light of recent challenges faced by Lilly's oral weight-loss pill [1][6]. Financial Performance of Eli Lilly - Eli Lilly reported a 38% revenue increase to $15.56 billion in the second quarter, with Mounjaro generating $5.2 billion (up 68%) and Zepbound delivering $3.38 billion (up 172% in the U.S.) [4]. - The company raised its full-year revenue guidance to $60 billion to $62 billion, with earnings per share expected between $21.75 and $23, reflecting a 61% increase in quarterly earnings to $6.31 per share and an 85% gross margin [5]. Challenges Faced by Eli Lilly - The results of the ATTAIN-1 trial for Orforglipron showed only 12.4% weight loss at the highest dose, which is lower than competitors like Novo Nordisk's Wegovy, which achieves 14% to 15% weight loss [6]. - This underperformance could limit Lilly's addressable oral market and weaken its mass-market capture strategy, impacting reimbursement rates [7]. Viking Therapeutics' Competitive Edge - Viking Therapeutics' VK-2735 is a dual GLP-1/GIP agonist that could disrupt Lilly's market position, with a subcutaneous formulation in Phase 3 and an oral version in Phase 2 [8][9]. - The subcutaneous version showed a 14.7% weight loss with better tolerability, while the oral version demonstrated weight loss persistence six days after the last dose, indicating potential durability [10]. Market Positioning and Timing - VK-2735 is targeting patients with a body mass index of 30 to 38, a segment that is likely to generate recurring revenue due to their desire for effective results without severe side effects [11]. - The timing of VK-2735's potential launch around 2027 could coincide with challenges for Lilly's Orforglipron, creating a significant competitive threat [12]. Valuation Concerns for Eli Lilly - Eli Lilly's market cap is based on a forward earnings multiple of 29, which assumes continued dominance in the obesity market, but the entry of VK-2735 could disrupt this expectation [13]. - Any loss of market share to Viking could significantly impact Lilly's growth and challenge its premium valuation, especially as its obesity treatments account for over half of its revenue [14][15]. Strategic Recommendations - Investors may consider taking profits from Lilly's recent performance and monitor Viking's Phase 2 oral results expected in the second half of 2025, as this could signal a significant shift in the market dynamics [16].