Evaluating Eli Lilly's Q2 Momentum: Can Mounjaro and Zepbound Sustain Long-Term Growth Amid Competitive Pressures?

Eli Lilly's Q2 2025 earnings report, due on August 7, will serve as a critical test of whether its blockbuster drugs Mounjaro and Zepbound can maintain their meteoric growth in a rapidly evolving GLP-1 market. These two drugs, which accounted for nearly 50% of the company's year-over-year revenue growth in Q1 2025, are now central to both investor optimism and skepticism. While their current momentum is undeniable, the sustainability of this growth hinges on navigating competitive threats, pricing pressures, and regulatory hurdles.

The Engine of Growth: Mounjaro and Zepbound

Mounjaro and Zepbound have redefined Eli Lilly's financial landscape. In Q1 2025, Mounjaro generated $4 billion in revenue (up over 100% year-over-year), while Zepbound surged to $2.3 billion, quadrupling from $517 million in the prior year. Analysts project Q2 sales of $4.58 billion and $3.1 billion, respectively, driven by expanded international access, improved supply chain efficiency, and U.S. demand. These figures underscore their role as the company's primary growth engines, but they also highlight a dependency that could become a vulnerability.

The drugs' success stems from their dual use in diabetes and obesity management, a market segment now valued in the hundreds of billions. However, this same segment is attracting fierce competition. Novo Nordisk's Ozempic and Wegovy remain dominant, while Amgen's Ozempic rival, Wegovy, and Viking Therapeutics' emerging GLP-1/GIP combinations are gaining traction. The question is whether Mounjaro and Zepbound can retain their market share as newer, potentially more potent therapies enter the fray.

Medicare Coverage: A Potential Game Changer

One of the most significant near-term catalysts for Zepbound is its potential inclusion in a Medicare pilot program for weight management. Currently, Zepbound is only approved for treating obstructive sleep apnea in obese adults, leaving its use for general weight loss out of reach for many patients. Medicare coverage would remove a critical financial barrier, as the drug costs over $700 monthly without insurance. If approved, this could expand Zepbound's market by millions of patients, directly boosting Eli Lilly's revenue.

Yet, this expansion is not guaranteed. The U.S. government's pilot program is still in evaluation, and even if Zepbound is included, reimbursement rates and patient eligibility criteria could limit its impact. Investors must weigh the likelihood of this regulatory win against the risk of delayed approval or restrictive terms.

Supply Chain and Pricing Pressures

Eli Lilly has made strides in scaling production, with plans to increase incretin-based drug output by 60% in H1 2025 compared to H1 2024. However, supply constraints remain a wildcard. The company's ability to meet demand will be scrutinized in Q2, particularly as international markets like Japan and Europe ramp up adoption. Any bottlenecks could erode market share to competitors with more flexible supply chains.

Pricing pressures are another headwind. In the U.S., Medicare Part D reforms and private insurer negotiations are compressing realized prices. While Mounjaro and Zepbound's high margins offer some buffer, sustained price erosion could dampen their long-term profitability. This is especially relevant as Novo Nordisk and Amgen leverage their scale to negotiate better terms with payers.

The Pipeline: A Lifeline for Long-Term Growth

Beyond Mounjaro and Zepbound, Eli Lilly's pipeline offers a critical hedge against market saturation. Its oral GLP-1 candidate, orforglipron, is a standout. With positive Phase 3 results already announced, the drug is poised to enter the market in 2026 as a convenient alternative to injectables. This could diversify the company's revenue streams and reduce reliance on its current GLP-1 portfolio.

Recent acquisitions, including Verve Therapeutics (gene therapy) and Scorpion Therapeutics (oncology), also signal a strategic pivot toward high-growth areas. These moves aim to offset declines in older products like Humulin and Forteo while positioning Lilly as a leader in obesity, diabetes, and cancer.

Investment Implications

For investors, the key takeaway is that Eli Lilly's near-term success is well-earned but not assured. The Q2 earnings report will provide clarity on whether the company can sustain its current growth trajectory. If Mounjaro and Zepbound meet or exceed expectations, the stock could see a rebound from its recent underperformance. However, long-term investors must also consider the risks:

1. Competitive Erosion: New entrants with superior efficacy or convenience could chip away at market share.
2. Regulatory Delays: A missed Medicare coverage deadline for Zepbound would delay a major revenue tailwind.
3. Pricing Pressures: Sustained margin compression in the U.S. could offset international gains.

Despite these risks, the company's robust pipeline and strategic acquisitions provide a compelling case for long-term growth. Investors with a 3–5 year horizon may find value in LLY, particularly if the stock trades at a discount to its intrinsic value post-earnings. However, those with shorter timeframes should monitor Q2 results closely for signs of weakening momentum.

In conclusion, Eli Lilly's Q2 performance will be a litmus test for its ability to balance short-term execution with long-term innovation. While Mounjaro and Zepbound have redefined the company's fortunes, their sustainability will depend on navigating a complex landscape of competition, regulation, and pricing dynamics. For now, the stage is set for a pivotal moment in the company's journey.