Will Policy Shifts Accelerate Demand for Eli Lilly's GLP-1 Drugs?

Eli Lilly LLY, a dominant player in the global obesity market, derives most of its revenues from its blockbuster GLP-1 medicines, Mounjaro for type II diabetes (T2D) and Zepbound for obesity. Despite being on the market for slightly more than three years, Mounjaro and Zepbound have seen exceptional sales growth, with demand rising rapidly. These therapies account for more than 50% of the company’s total revenues.

In 2025, the drugs generated combined sales of $36.5 billion, comprising around 56% of the company’s total revenues. Robust growth trends in the U.S. incretin analogs market and positive uptake trends in new international markets led to strong sales growth in 2025. The trend is expected to continue in 2026.

Lilly is also preparing to expand its portfolio with orforglipron, an oral GLP-1 therapy currently under regulatory review in the United States, the EU and other markets. If approved, the company expects to launch it for obesity in the United States in the second quarter of 2026, with international rollouts likely in 2027. As a pill, it could attract patients reluctant to use injections and broaden the overall market for GLP-1 treatments.

To consolidate its position in the GLP-1 market and materialize its bullish 2026 financial guidance, Eli Lilly is looking to expand access to its obesity and diabetes drugs. Recent policy and product developments could also significantly strengthen LLY’s growth outlook in the obesity treatment market.

Earlier this week, Lilly announced that the U.S. government’s impending CMMI BALANCE Model will expand Medicare coverage for GLP-1 therapies, allowing drugs like Zepbound, Mounjaro and orforglipron, if approved, to be offered through participating Medicare Part D plans starting in 2027. Under the program, most beneficiaries’ out-of-pocket costs could be capped at about $50 per month after the deductible, improving affordability and access. Before that, the Medicare GLP-1 Bridge Model will launch in July 2026, which may support earlier adoption of Lilly’s obesity treatments.

Expanded Medicare coverage, lower patient costs and a potential oral therapy launch could significantly boost demand for Lilly’s obesity drugs. While some Medicaid programs, including California, may scale back obesity drug coverage in 2026, wider federal access initiatives and possible adoption by more states in 2027 could offset this pressure and help Lilly strengthen its leadership in the fast-growing obesity treatment market.

Eli Lilly is also attempting to boost adoption of its GLP-1 drugs by highlighting safety concerns around compounded “knock-off” versions of tirzepatide. The company warned that some compounded products mix tirzepatide with vitamin B12, which may create a potentially harmful impurity with unknown effects in humans. Lilly argues these products lack clinical testing and regulatory review, unlike its approved medicines, Mounjaro and Zepbound, and is pushing regulators to curb their distribution to steer patients toward approved therapies, which could help strengthen uptake of its branded GLP-1 treatments.Top of Form

Competition Heating Up in the Obesity Space

Eli Lilly and Novo Nordisk NVO presently dominate the global obesity market. Mounjaro and Zepbound directly compete with NVO’s semaglutide medicines, Ozempic for T2D and Wegovy for obesity. Both companies derive a significant share of their revenues from these blockbuster GLP-1 therapies. Similar to Lilly, Novo Nordisk has also introduced price reductions under Medicare programs to stimulate demand and regain some lost market share in the increasingly competitive GLP-1 segment.

Novo Nordisk recently achieved an important milestone by securing FDA approval for an oral version of Wegovy in late December, followed by its commercial launch in early January. The approval made Wegovy the first GLP-1 receptor agonist available as a pill for weight management, offering a needle-free option that could help broaden patient access.

The obesity space has garnered much of the spotlight over the past year due to the sizeable and still underpenetrated market opportunity. Smaller biotech firms, like Viking Therapeutics VKTX, are also advancing GLP-1-based therapies to challenge the incumbents. Viking Therapeutics’ dual GIPR/GLP-1 receptor agonist, VK2735, is being developed both as oral and subcutaneous formulations for the treatment of obesity. Viking Therapeutics plans to advance oral VK2735 into phase III development for obesity in the third quarter of 2026.

LLY Stock’s Price, Valuation and Estimates

Shares of Eli Lilly have gained 32.4% in the past six months compared with the industry’s 20.4% growth. The company has also outperformed the sector and the S&P 500 during the same time frame, as seen in the chart below.

LLY Stock Price Movement

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From a valuation standpoint, LLY stock is expensive. Going by the price/earnings ratio, the company’s shares currently trade at 28.03 forward earnings, higher than 17.99 for the industry. However, the stock is trading below its five-year mean of 34.57.

LLY Stock Valuation

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Estimates for Eli Lilly’s 2026 earnings have improved from $33.11 to $34.16 per share in the past 60 days, and estimates for 2027 earnings have improved from $41.48 to $41.90 per share over the same time frame.

LLY Estimate Movement

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Eli Lilly currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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