Eli Lilly's Oral GLP-1 Breakthrough Could Change Everything

Eli Lilly and Company (NYSE: LLY) has been one of the best-performing stocks outside of the AI-enhanced Magnificent 7 stocks over the past 12 months. The company is the leader in the GLP-1 market, which is transforming the management of type 2 diabetes and the obesity market.

LLY stock is up 10% in the last month on news that the U.S. Food & Drug Administration (FDA) indicated it may fast-track the company’s oral GLP-1 candidate. 

Many users either don’t like or don’t want to deal with constant needle injections. This development could redefine access and cost dynamics in the space—and significantly expand the GLP-1 market.

Oral GLP-1: A Game-Changer for Patients and Payers

Since the GLP-1 market emerged, patients and investors have wondered about the feasibility of an oral solution. Lilly is not the only company testing an oral GLP-1 solution, but it seems to be the furthest along, as evidenced by the recent news that the FDA may fast-track the drug under a newly launched one- to two-month review process.

Though not guaranteed, many analysts believe there are two reasons why it’s likely to happen. 

The first reason is the cost and accessibility. When used specifically for weight loss (as opposed to treating type 2 diabetes), GLP-1 drugs are rarely covered by insurance right now. This presents a significant cost burden for injectable weight loss drugs. If oral delivery can lower costs, insurers may be more open to coverage. 

The second reason is Lilly’s strategic $27 billion investment in U.S. manufacturing. In the past, the Trump administration has criticized the biopharmaceutical market for its small U.S. manufacturing footprint. Lilly is changing that with a $5 billion commitment to build a manufacturing plant in Virginia to increase domestic production of both its oncology drugs and the oral GLP-1 candidate. This is the first of four new facilities that Lilly plans to build in the United States. 

The move addresses bipartisan concerns over pharmaceutical supply chain vulnerabilities, especially those raised during the Trump administration. Onshoring also reduces tariff risks and may appeal to regulators as a sign of national alignment.

Why LLY Stock Is Better as a Long-Term Hold

LLY stock has risen nearly 400% in the last five years. However, many traders have called the stock "dead money" over the last year and a half. They have reasons to stay away.

For starters, there is increasing competition in the GLP-1 market. Novo Nordisk remains Lilly’s primary rival, but Lilly still holds an edge in drug development speed and manufacturing scale.

In addition, the uncertainty around insurance coverage for obesity treatments may weigh on near-term earnings, but the long-term story remains intact.

However, there are also plenty of reasons to hold the stock as a long-term investment. 

Beyond GLP-1s, Lilly’s oncology and antibody-drug conjugate pipelines offer further growth. This long-term catalyst can get lost in the justifiable enthusiasm over the company’s GLP-1 drugs. And the focus on U.S. manufacturing is a strategic moat that diversifies its revenue base and reduces political and logistical risk. 

From a fundamental perspective, LLY stock trades at just 32x forward earnings. That’s expensive compared to other large-cap pharmacy companies, but it’s a good value compared to Lilly’s historic average and its dominance in GLP-1 drugs.

Plus, the company offers a dividend with an attractive payout of $6 per share annually. While not an impressive yield at around 0.79%, the dividend has increased for 11 consecutive years and has a sustainable payout ratio of around 39%.

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The article "Eli Lilly’s Oral GLP-1 Breakthrough Could Change Everything" first appeared on MarketBeat.