Eli Lilly and Company’s (LLY Quick QuoteLLY - Free Report) shares have lost 17% so far in May. Lilly announced mixed earnings results on May 1. It missed first-quarter estimates for earnings but beat the same for sales. Sales of key drugs, Mounjaro, Zepbound, Jardiance, and Taltz beat estimates, while only Verzenio missed expectations. Lilly’s new products also contributed to sales growth. Trulicity sales continued to decline in the quarter.

Lilly maintained its sales guidance for 2025 while lowering its earnings expectations to account for the charges recorded in the first quarter related to the acquisition of the Scorpion Therapeutics PI3Kα inhibitor program. Excluding these charges, the company’s EPS guidance was unchanged.

Despite the better-than-expected sales performance, Lilly’s stock nosedived 11% the day it announced the first-quarter results. However, this was not just for the earnings miss and the EPS guidance cut.

The stock also took a hit because CVS Caremark, a major pharmacy benefit manager (“PBM”), announced a partnership with rival Novo Nordisk (NVO Quick QuoteNVO - Free Report) to make NVO’s Wegovy its preferred GLP-1 therapy for weight loss, effective July 1.

NVO also recently announced partnerships with telehealth providers Hims & Hers Health to offer Wegovy at a discounted price to cash-paying patients.

However, we believe the stock’s sell-off following the first-quarter earnings was an overreaction. Let’s understand the company’s strengths and weaknesses to better analyze how to play the stock amid the recent price dip.

Mounjaro & Zepbound: Key Top-Line Drivers for Lilly

Lilly has a strong portfolio of medicines to treat diabetes and other cardiometabolic diseases and its cardiometabolic business is its most successful business, particularly with the success of its popular tirzepatide medicines, diabetes drug Mounjaro and weight loss medicine, Zepbound.

Despite being on the market for less than three years, Mounjaro and Zepbound became key top-line drivers for Lilly, with demand rising rapidly. Mounjaro and Zepbound generated combined sales of $6.15 billion in the first quarter of 2025, accounting for around 48% of the company’s total revenues.

Though sales of Mounjaro and Zepbound were below expectations in the second half of 2024, hurt by slower-than-expected growth and unfavorable channel dynamics, their sales picked up in the first quarter of 2025, driven by launches of the drugs in new international markets and improved supply from ramped-up production.

Both drugs enjoy increasing market share inthe United States. Mounjaro is the market leader in new prescription within type II diabetes incretin analogs. In the first quarter, Zepbound held the leading market share in the anti-obesity market, with total prescription and new prescription reaching 60% and 74% respectively.

LLY’s Efforts to Drive Mounjaro & Zepbound Sales

We believe that increased uptake in outside U.S. markets and deeper penetration into the U.S. market will continue to drive Mounjaro and Zepbound’s growth in future quarters.

Mounjaro was recently launched in China, and Lilly expects to increase commercial launches in the country in the second half of 2025 as supply improves. Lilly also launched Mounjaro in India and Mexico recently and plans to continue with additional country launches throughout 2025.

Approvals for new indications can also drive sales of Mounjaro and Zepbound higher. In late December, the FDA approved Zepbound for its second indication, moderate-to-severe obstructive sleep apnea in adults with obesity. In addition, LLY filed tirzepatide for heart failure, which further expands the opportunity for the candidate. It also expects to announce data from a cardiovascular outcome study on tirzepatide this year.

In 2025, Lilly launched additional Zepbound lower-priced vial doses and offered new savings for self-pay patients to boost sales.

LLY’s New Drugs & Pipeline Success

Other than Mounjaro and Zepbound, Lilly has gained approvals for some other new drugs in the past couple of years. These include Omvoh for ulcerative colitis and Crohn's disease, BTK inhibitor Jaypirca for mantle cell lymphoma and chronic lymphocytic leukemia, Ebglyss for moderate-to-severe atopic dermatitis and Kisunla (donanemab) for early symptomatic Alzheimer's disease. Its new drugs are also contributing to its top-line growth.

Lilly expects its new drugs, Mounjaro, Zepbound, Omvoh, Jaypirca, Ebglyss and Kisunla, along with the expanded use of existing drugs, to drive sales growth in 2025. It also expects the potential launch of new medicines like imlunestrant for metastatic breast cancer to contribute to growth in 2025.

Lilly is also making rapid pipeline progress in obesity, diabetesand cancer, with several key mid and late-stage data-readouts expected this year.

Lilly is investing broadly in obesity and has several new molecules currently in clinical development. These include two late-stage candidates, orforglipron, an oral GLP-1 small molecule, and retatrutide, a GGG tri-agonist and some mid-stage candidates, bimagrumab, eloralintide and mazdutide.

Data from the first of the seven phase III studies on orforglipron in type II diabetes and obesity was announced in April 2025. In the study, orforglipron lowered A1C by an average of 1.3% - 1.6% across doses and also reduced weight by an average of 16lb (7.9%) at the highest dose. Lilly expects to report additional results from the phase III ACHIEVE clinical program, as well as data from the phase III ATTAIN clinical program evaluating orforglipron for obesity, later this year. It plans to file regulatory applications for orforglipron in obesity by the end of this year and for type II diabetes in the first half of 2026.

Competition Heating Up in the Obesity Space

The obesity market is heating up and is expected to expand to $100 billion by 2030, according to data from Goldman Sachs. Lilly and Novo Nordisk presently dominate the market.

Several companies like Amgen (AMGN Quick QuoteAMGN - Free Report) and Viking Therapeutics (VKTX Quick QuoteVKTX - Free Report) are also making rapid progress in the development of GLP-1-based candidates in their clinical pipeline.

Amgen has begun a broad phase III program on its dual GIPR/GLP-1 receptor agonist, MariTide, across obesity, obesity-related conditions and type-II diabetes, with the first two phase III studies initiated in March. Viking Therapeutics’ dual GIPR/GLP-1 receptor agonist, VK2735, is being developed both as oral and subcutaneous formulations for the treatment of obesity. Phase III studies with the subcutaneous formulation of VK2735 are on track to begin in the second quarter.

AMGN and VKTX’s products can pose strong competition to Mounjaro/Zepbound and NVO’s Ozempic/Wegovy in the future.

Others like Roche, Merck and AbbVie are also looking to enter the obesity space by in-licensing obesity candidates from smaller biotechs, which could threaten Novo Nordisk and Eli Lilly’s dominance in the market.

LLY’s Stock Price, Valuation and Estimates

Lilly’s stock has declined 3.2% so far this year, underperforming the industry’s decrease of 2.4%

LLY Stock Underperforms Industry

Image Source: Zacks Investment Research

The stock is trading at a premium to the industry, as seen in the chart below.

LLY Stock Valuation

Image Source: Zacks Investment Research

Estimates for Lilly’s 2025 earnings have declined from $23.49 to $22.20 per share in the past 30 days, while those for 2026 have declined from $31.28 to $30.83 over the same timeframe.

LLY Estimate Movement

Image Source: Zacks Investment Research

Stay Invested in LLY Stock

Lilly is battling several challenges at present. Sales of its key medicine, Trulicity, are declining in the United States due to competitive dynamics, including Mounjaro switches and supply constraints. Prices of most of Lilly’s products are declining in the United States, including Mounjaro and Zepbound, primarily due to changes to estimates for rebates and discounts. Lilly’s U.S. net price has declined every year since 2021. In 2025, Lilly expects a mid-to-high single-digit percentage price decline, including U.S. Part D changes. Potential competition in the GLP-1 diabetes/obesity market is another headwind.

Trump and the Republican government also continue to stress on the control of drug prices with the latest attempt being his “most favored nations’ policy.”

The potential impact of tariffs imposed by the United States and some other countries is a concern. Though Lilly's 2025 earnings guidance absorbs the impact of tariffs already in place, expanding tariffs in other geographies or increases in retaliatory tariffs would hurt the financial outlook.  Though pharmaceuticals have been exempted from tariffs this time around, they could well be Trump’s target in the next round, considering the President’s goal to shift pharmaceutical production back to the United States, mostly from European and Asian countries.

Also, CVS’ deal with NVO, which can hurt Zepbound’s market share, has raised investor concerns about such PBM formulary changes in the obesity space.

However, regarding the deal, Lilly’s CEO, Dave Ricks, said that Lilly was not interested in such one-on-one deals and was more focused on expanding access for Zepbound. He does not expect CVS’ decision to exclude Zepbound in favor of Wegovy to hurt Lilly’s revenues.

Looking at the brighter side, Lilly’s tremendous success with Mounjaro and Zepbound has made it the largest drugmaker with a market cap of more than $700 billion. Lilly’s stock has gone up by almost 400% in the past five years, mainly due to its successful new drug launches, particularly Mounjaro and Zepbound, and its solid pipeline potential.

In 2025, Lilly expects to record revenues in the range of $58.0 billion to $61.0 billion, indicating an impressive 32% year-over-year growth. Lilly’s revenue growth is being driven by higher demand for Mounjaro, Zepbound, Verzenio, and others, which is making up for the decline in sales from Trulicity.

LLY returned $2.5 billion to shareholders in the first quarter via share repurchases and dividends.

Despite an expensive valuation and declining estimates, we suggest investors who own this Zacks Rank #3 (Hold) company retain it as it has solid growth prospects despite some near-term headwinds. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lilly’s stock is trading below its 5-year mean now. The recent dip in price can be used as a buying opportunity for long-term investors.