Is Eli Lilly a Buy Before 2026?

Eli Lilly (NYSE: LLY) recently announced stellar results from a phase 3 clinical trial, Triumph-4, which evaluated efficacy and safety for the two highest doses of its next-generation anti-obesity candidate, retatrutide.

The trial showed that a 12 mg weekly injection of retatrutide (the highest evaluated dose) delivered an average of 28.7% reduction in body weight over 68 weeks, along with a decrease in pain from knee arthritis.

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Retatrutide is referred to as a "triple G" medication because it mimics the action of GLP-1, GIP, and glucagon, three naturally occurring metabolic hormones, in the body. The Triumph-4 trial outcomes exceed the average weight loss of roughly 20.9% reported in late-stage trials of the leading anti-obesity drug tirzepatide, which targets only GLP-1 and GIP. So if approved, the drug could be a potent competitor for existing anti-obesity drugs and further expand Eli Lilly's presence in the weight-loss market.

While the strategic value of this clinical trial is clear, several other factors could further strengthen the investment case for Eli Lilly ahead of 2026.

A robust weight-loss portfolio

Retatrutide may prove to be an excellent addition to Eli Lilly's anti-obesity portfolio. The company expects the drug to provide deeper and rapid weight loss than tirzepatide, making it suitable for patients either with very high body mass index (BMI) or suffering from obesity-related complications. That would put Lilly in a position to segment and target the weight-loss market by clinical severity. The company is also expecting readouts from seven additional phase 3 trials in 2026 evaluating retatrutide in obesity and type 2 diabetes.

With Morgan Stanley analysts estimating the global weight-loss medication market to be worth $150 billion by 2035, a differentiated and high-efficacy drug like retatrutide could capture a significant share over time. The market research company Evaluate expects retatrutide's annual revenue to reach around $5 billion by 2030.

Eli Lilly already dominates the existing U.S. market for drugs that mimic incretins (metabolic hormones that control blood sugar levels), accounting for a 57.9% share of total prescriptions. The company markets tirzepatide under the brand names Zepbound for weight management and Mounjaro for type 2 diabetes. Internationally, Mounjaro earns nearly 75% of its revenue from patients paying out of pocket, highlighting both the clinical need for the drug and customers' willingness to pay for it.

Lilly is submitting its once-daily oral medication to treat obesity, orforglipron, to the U.S. Food and Drug Administration (FDA) and hopes to receive approval as soon as March 2026. As this investigational drug reduces the injection burden for a broader patient base using GLP-1 drugs, Evaluate expects orforglipron's annual revenue to reach $8.3 billion by 2030.

Other catalysts

Obesity treatment is not Eli Lilly's only growth engine. There is also strong demand for its Alzheimer's medication Kisunla in the U.S. With that drug recently securing marketing authorization from the European Commission, Lilly anticipates launching Kisunla in multiple European markets throughout 2026. Investment bank Jefferies points out that the consensus Wall Street estimate is for the medication's annual sales to be nearly $5 billion at its peak.

The company is also advancing multiple late-stage oncology programs, including Verzenio in high-risk early breast cancer and Jaypirca in new-to-treatment chronic lymphocytic leukemia (CLL).

Additionally, Eli Lilly is expanding manufacturing capacity in the mainland U.S. and Puerto Rico to support future launches and the rising demand for anti-obesity drugs.

Strong financials

Management has raised Lilly's full-year revenue and earnings guidance to reflect the impact of these catalysts. The company expects full-year 2025 revenue in the range of $63 billion to $63.5 billion, up from $60 billion to $62 billion. Earnings per share (EPS) are estimated to be in the range of $21.80 to $22.50, up from $20.85 to $22.10.

Valuation

Eli Lilly stock now trades at nearly 32 times forward earnings, which appears rich at first glance. However, the valuation seems justified considering the company's continued leadership in the high-value obesity treatment market and its deep late-stage research pipeline.

Long-term investors who can ignore near-term volatility might consider picking up a small stake in this stock ahead of 2026.

Manali Pradhan, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Jefferies Financial Group. The Motley Fool has a disclosure policy.