Eli Lilly: Beyond Weight Loss

Eli Lilly (NYSE: LLY) is now known for its weight loss drugs. Its stock has risen 150% since mid-2022 because of high demand for Mounjaro (tirzepatide approved to treat type 2 diabetes) and Zepbound (tirzepatide approved for weight loss). For many investors, that's the whole story: Lilly found a big health trend and is making huge profits.

Weight loss drugs are hot right now, but focusing only on treating obesity misses the point on Lilly. These drugs are proving to have benefits beyond weight loss. A recent study funded by Eli Lilly and called Surmount-MMO showed that Lilly's tirzepatide cut major heart issues like heart attacks and strokes by 22% in overweight patients. This news could help the company compete in a large market aimed at treating things like heart disease, kidney failure, and sleep apnea.

If investors only see Lilly as an anti-obesity company, they might not realize how much these drugs could change healthcare.

Inspecting the numbers

Lilly's got a lot of financial horsepower. In 2024, earnings doubled to $10.6 billion, with profit margin climbing to 23.5%. In August, the company increased the midpoint of 2025 full-year revenue guidance by $1.5 billion to put it in a range of $60 billion to $62 billion.

These numbers are important because they give Lilly options. Drug creation is risky and expensive, but a company raking in money can invest a lot without financial issues. Lilly can fund new ideas and weather short-term headwinds better than smaller competitors.

Bigger markets

The obesity market is large, but treating heart disease is even bigger. Heart disease is still the top cause of death worldwide, costing the U.S. healthcare system an estimated $418 billion in 2020-21 (CDC data ). Drugs that lower risks by 20% to 30% could reach millions who might not seek out an "obesity drug" to change their appearance, but would take one for heart health.

Image source: Getty Images.

With possible benefits for kidney disease and sleep apnea as well, Lilly is entering areas where people are very willing to get treatment. Anyone basing estimates of future sales only on obesity might be missing billions in potential income.

Risks to consider

Of course, there are risks. Competition is growing. Novo Nordisk already has its own popular semaglutide -- which is approved as Wegovy for weight loss and as Ozempic to treat type 2 diabetes -- and other companies are trying to enter the weight loss market. As more drugs become available, prices may drop.

There's also the chance of increased government oversight that could put a damper on sales. Weight loss drugs are already being watched by insurers and lawmakers worried about rising costs. If governments step in to push drug prices down, profits could decrease.

Even if the risks don't scare investors, they need to know that Lilly's stock is expensive, trading at about 27 times earnings estimates, compared to an average of competitors around 14-17. Buyers are betting on continued success treating obesity and expansion into heart health and other areas. If this expansion takes too long, the stock price could fall.

Why the bigger picture matters

Lilly seems expensive at first glance. But underneath, it's a company with great operations, leading innovation, and study results that suggest its growth is just beginning.

Yes, competitors will challenge it, and regulators might lower prices. But Lilly's size, profits, and first-mover advantage put it in an enviable position. More importantly, its future may not be about weight loss, but about tackling heart health and other common issues, unlocking an extra leg of growth for investors. For investors who can look beyond the short term, Lilly is more than just an obesity stock.

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