Prediction: Eli Lilly's Newest GLP-1 Drug Will Be a Game-Changer for the Stock

Drugmaker Eli Lilly (NYSE: LLY) hasn't been exempt from the recent market pullback, but its stock shot higher following the announcement that its newest GLP-1 drug had successfully completed the first of several phase 3 drug trials.

The jump in share price propelled the stock into positive territory -- it was up nearly 9% year to date as of this writing, and up about 12% over the past 12 months.

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Let's look at why this news could be a game-changer for Eli Lilly and its stock.

Extending its weight loss portfolio

The successful phase 3 trial for Lilly's orforglipron brings the drug one step closer to being approved by the U.S. Food and Drug Administration (FDA). The first successful Achieve-1 study was done to evaluate the safety and efficacy of the drug in treating patients with type 2 diabetes. Several other Achieve phase 3 trials are being conducted, as well as several Attain trials examining the drug's usefulness in treating obese patients or overweight patients with at least one other underlying condition, such as hypertension or high cholesterol.

Lilly has a strong portfolio of GLP-1 drugs that have helped propel its growth. Last quarter alone, its two leading GLP-1 drugs, Mounjaro and Zepbound, generated a combined $5.4 billion in revenue. Zepbound revenue soared from $175.8 million to $1.9 billion, while Mounjaro sales jumped 60% to $3.5 billion. Both drugs have the same active ingredient -- tirzepatide -- and both are commonly used off-label for weight loss. But technically, Mounjaro is approved to help type 2 diabetes patients lower their blood glucose levels, while Zepbound is approved for weight loss in obese adults or overweight adults with at least one underlying condition.

While the recent phase 3 trial for orforglipron was specifically for type 2 diabetes and not weight loss, the study found that patients who took the drug lost considerable weight. On average, patients who took 12 mg doses lost 11.5 lbs, or 5.8% of their body weight, while patients who were administered 36 mg doses lost 15.8 lbs, or 7.6% of their body weight. The drug also showed side effects similar to those of other GLP-1 drugs. Because many of the sales of these medications are coming from off-label weight loss prescriptions, once orforglipron is approved -- even if only initially for type 2 diabetes -- we can expect demand and sales to be robust.

Image source: Getty Images.

What sets orforglipron apart from most other GLP-1 drugs on the market is that it's an oral drug. Most GLP-1 drugs used for weight loss, such as Mounjaro and Zepbound as well as Novo Nordisk's Ozempic and Wegovy, are administered by injection. Novo Nordisk does have an FDA-approved oral GLP-1 drug, Rybelsus, but its impact on weight loss has been moderate.

Orforglipron, being an oral drug, will benefit Lilly in a few ways. First, it helps expand Lilly's leadership in the weight loss and diabetes treatment categories with another likely blockbuster drug.

Second, it should broaden the market for the company's weight loss drugs, as some patients are just not comfortable with injections -- taking a pill is much less invasive than injecting a needle into your abdomen or thigh.

In addition, Lilly has said it should be able to scale up production of orforglipron without the same supply constraints that it's faced with Mounjaro and Zepbound. Its injectable drugs require both specialized injection pens and cold storage and shipping, so manufacturing and transport are often complex.

Orforglipron has neither of these requirements. If the drug doesn't become supply-constrained, it also shouldn't have to deal with competition from drug compounders. (The FDA allows pharmacies to make compounded versions of medications when there is a supply shortage, which is a problem Lilly ran into in the past with its injectable GLP-1 drugs.)

Is it too late to buy Eli Lilly stock?

Despite strong growth and the opportunity ahead with orforglipron, Lilly's stock still trades at an attractive valuation. It has a forward price-to-earnings (P/E) ratio of 36.5 times 2025 analyst estimates, but a price-to-earnings-to-growth (PEG) ratio of under 0.4. PEG ratios below 1 are generally considered undervalued, so 0.4 is very low.

When looking out to 2026 analyst estimates, its forward P/E drops to 28.4.

LLY PE Ratio (Forward) data by YCharts.

Even after its recent rally, Eli Lilly looks like a solid stock for investors to scoop up. It's a growth stock in a largely defensive industry that's riding a huge trend in weight loss drugs. And orforglipron looks like it could be a game-changer, driving even more growth for Lilly.

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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.