Investing in the Dip: Evaluating ETF Exposure to Eli Lilly Amid Sector Volatility and GLP-1 Growth

The pharmaceutical sector is no stranger to volatility, but Eli Lilly (LLY) has become a focal point of both optimism and uncertainty in 2025. The company's blockbuster drugs Zepbound and Mounjaro have driven record revenue, with Q2 2025 sales of $3.38 billion and $5.20 billion, respectively. Yet, a single data point—a subpar Phase 3 trial for its oral GLP-1 candidate orforglipron—triggered a 14% stock plunge, erasing $100 billion in market value. For investors, this creates a paradox: LLY's long-term dominance in the GLP-1 space remains intact, but short-term pain has left ETFs with significant exposure to the stock at a potential inflection point.

The ETFs with the Most Direct Exposure to LLY

To identify the best “buy the dip” opportunities, we must first assess which ETFs hold LLY with the highest weightings. The data reveals a clear hierarchy:

1. iShares U.S. Pharmaceuticals ETF (IHE): At 20.9% of assets, LLY is the second-largest holding in this $555.5 million fund. IHE tracks the Dow Jones U.S. Select Pharmaceuticals Index, offering broad exposure to the sector. Its low expense ratio (38 bps) and high liquidity (35,000 average daily shares) make it a compelling option for investors seeking sector-wide access to LLY's growth potential.
2. VanEck Vectors Pharmaceutical ETF (PPH): LLY accounts for 16.3% of PPH's portfolio, making it the fund's top holding. With $498.7 million in AUM and a 36 bps fee, PPH is a concentrated bet on pharmaceutical innovation. Its robust trading volume (465,000 average daily shares) suggests strong institutional support.
3. Roundhill GLP-1 & Weight Loss ETF (OZEM): As the world's first GLP-1-focused ETF, OZEM holds LLY at 14.29%. This actively managed fund is uniquely positioned to benefit from the obesity drug boom, with a 59 bps expense ratio and a portfolio skewed toward high-growth biotech and pharma firms.

Sector Volatility vs. Long-Term Catalysts

The GLP-1 sector is a double-edged sword. While LLY's recent setback has rattled investor confidence, the underlying fundamentals remain robust. The global obesity treatment market is projected to grow from $14.22 billion in 2025 to $17.72 billion by 2029, driven by expanding indications for GLP-1 drugs in diabetes, cardiovascular disease, and NASH. LLY's pipeline—anchored by tirzepatide and its recent acquisitions of SiteOne and Verve Therapeutics—positions it to diversify beyond GLP-1 and mitigate sector-specific risks.

However, this growth is not without challenges. Over 16 new weight-management drugs are expected to enter the market by 2029, intensifying competition. For ETFs like OZEM, which are heavily weighted toward LLY, this means both upside potential and heightened exposure to clinical trial outcomes.

Strategic ETF Selection for “Buy the Dip”

For investors seeking to capitalize on LLY's dip, the choice of ETF depends on risk tolerance and time horizon:

• High-Conviction Play: OZEM offers the most direct exposure to LLY's GLP-1 dominance. Its active management allows the fund to adjust holdings in response to sector shifts, but its 14.29% LLY weighting means it will closely mirror the stock's volatility.
• Balanced Sector Bet: IHE and PPH provide diversified pharmaceutical exposure while still capturing LLY's growth. These funds are less sensitive to single-stock events but may lag in upside potential compared to OZEM.
• Defensive Positioning: The iShares ESG MSCI USA Min Vol Factor ETF (ESMV) and Fidelity Low Volatility Factor ETF (FDLO) hold LLY at lower weightings but offer stability, making them suitable for risk-averse investors.

The Case for a “Buy the Dip” Strategy

LLY's recent correction has created an attractive entry point for investors who believe in its long-term narrative. The company's 57% share of the U.S. incretin drug market, combined with its leadership in injectable GLP-1 therapies, ensures it will remain a sector bellwether. For ETFs like OZEM and IHE, the dip offers a chance to accumulate shares at a discount, assuming LLY's fundamentals hold.

However, caution is warranted. The GLP-1 sector's reliance on clinical data means future earnings reports or trial results could trigger further volatility. Investors should monitor LLY's regulatory filings and competitor developments, such as Novo Nordisk's Wegovy trials, to gauge the sector's trajectory.

Conclusion: Balancing Risk and Reward

The ETFs with the highest LLY exposure—OZEM, IHE, and PPH—present compelling “buy the dip” opportunities for those willing to navigate sector volatility. While LLY's recent setback is significant, its long-term growth drivers remain intact. For investors with a multi-year horizon, these funds offer a way to participate in the GLP-1 revolution while diversifying across the pharmaceutical ecosystem. As always, due diligence on fund liquidity, expense ratios, and portfolio concentration is essential to align with individual risk profiles.