Eli Lilly’s Valuation Under Scrutiny Amid Shifting Competitive Landscape

Eli Lilly's shares continue their upward trajectory, yet the investment thesis is now being tested by a significant shift in the competitive dynamics of the lucrative obesity drug market. Following a recent regulatory decision favoring rival Novo Nordisk, market participants are questioning whether the stock's substantial premium remains justified.

Fundamentally, Eli Lilly operates from a position of strength. The company reported third-quarter earnings per share of $7.02, comfortably surpassing the $6.42 consensus estimate. Revenue climbed to $17.6 billion, demonstrating effective monetization of its portfolio despite ongoing supply constraints. For the full fiscal year 2025, management has reaffirmed its guidance, projecting EPS in the range of $23.00 to $23.70.

The primary driver behind the stock's approximate 40% advance since the start of the year has been exceptional demand for its diabetes and obesity treatments, Mounjaro and Zepbound. Trading around $1,077 per share, Eli Lilly now commands a market capitalization exceeding $1 trillion. This lofty share price has reignited speculation about a potential stock split, with several analysts identifying the company as a likely candidate for such a move in 2026. The rationale centers on improving retail investor accessibility, as prices significantly above $1,000 can be a barrier. No official plans have been announced by management.

Novo Nordisk Gains a Strategic Edge

A key development emerged just before the holidays. On December 23, the U.S. Food and Drug Administration (FDA) approved the first oral GLP-1 weight-loss pill from Novo Nordisk—the tablet version of Wegovy. This decision grants the Danish firm a clear first-mover advantage in the oral obesity therapy segment.

This presents a tangible headwind for Eli Lilly, whose current commercial success is largely built on injectable products. The company's own oral candidate, Orforglipron, remains in development. The immediate availability of a competing tablet-form treatment could temper previous assumptions regarding Lilly's market share and growth rate from 2026 onward.

Should investors sell immediately? Or is it worth buying Eli Lilly?

Despite this news, the equity showed resilience in the shortened session on December 24, edging higher and confirming a robust market response even after its previous strong run.

Divergent Views Among Major Investors

Sentiment among institutional investors appears mixed, reflecting differing time horizons and risk assessments. Data from December 24 revealed that Exchange Traded Concepts LLC reduced its position by 48.1% during the third quarter. Conversely, other firms like Sapient Capital have been adding to their holdings, underscoring a long-term conviction in Eli Lilly's research pipeline.

Adding a note of caution, Wavelength Research downgraded the stock on the same day. The analysts emphasized that Eli Lilly remains one of the most attractive names in the pharmaceutical sector but cited the nearly 40% year-to-date rally and intensified competition from Novo Nordisk as primary reasons for adopting a more conservative stance.

The Crucial Test Ahead in 2026

The year 2026 is shaping up to be a critical proving ground. The central question is whether Eli Lilly can maintain its valuation premium in a more fiercely competitive environment, particularly against potentially more convenient oral alternatives from rivals.

Upcoming clinical data readouts will be pivotal. Progress in the development programs for Orforglipron and the "triple-G" agonist Retatrutide in the coming months is essential. Strong results are needed to counter the narrative that Novo Nordisk has seized a permanent leadership position in the next generation of obesity therapeutics.