Why Eli Lilly's (LLY) Tasty Q2 Earnings Left a Bitter Aftertaste

Business Insider

4 days ago

Eli Lilly & Co. (LLY) delivered a blockbuster earnings report— $15.56 billion in revenue, up 38% year over year —yet the stock cratered nearly 15%, erasing roughly $100 billion in market value within hours. Since then, market bears have consolidated their positions, leaving LLY stock almost 19% lower by Friday's close.
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The company's appeal has been anchored in its commanding position in the global obesity market, driven by treatments like Zepbound, an injectable GLP-1. A key pillar of that story was orforglipron, a once-daily pill expected to match the efficacy of leading injectables. But alongside earnings, Lilly unveiled pivotal Phase 3 results showing orforglipron cut weight by 12.4% on average—below lofty expectations—and the market reacted harshly.
While sentiment around orforglipron has cooled, the sell-off appears overdone. Given Eli Lilly's robust obesity franchise and deep pipeline, the company's long-term growth story remains compelling, making LLY attractive at current levels for patient investors. I remain confidently Bullish on LLY, despite the market beating the stock has taken in recent days.
The High-Stakes Obesity Market
For some background, the global obesity market is expected to eclipse a staggering $100 billion in the next few years. Eli Lilly, with its popular Zepbound, is a clear leader in this space, alongside Novo Nordisk (NVO), a Danish pharmaceutical company, and its GLP-1 injectable Wegovy.
While Eli Lilly and Novo Nordisk act as a duopoly in the obesity market, this isn't expected to last. Innovation happens fast in medicine, and both Zepbound and Wegovy will soon face competition. Fortunately for Eli Lilly, the billions of dollars it generates from treatments like Zepbound and its diabetes medication Mounjaro can be funneled back to R&D efforts, procuring a flywheel of innovative drugs.
Orforglipron Versus the Competition
Orforglipron is an investigational oral GLP-1 being studied in late-stage trials. Orals would significantly broaden the obesity market, appealing to patients averse to needles and interested in maintenance, 'step down' weight loss therapy. Before Phase 3 data, some analysts expected orforglipron could generate over $15 billion in peak annual revenue.
So, expectations were high. Naturally, in the oral obesity market, the two main competitors are Eli Lilly and Novo Nordisk, with their oral GLP-1, high-dose semaglutide. In its pivotal OASIS 4 trial, oral semaglutide demonstrated an average weight loss of between 13.6% to 15%, which is superior to orforglipron's 12.4%.
Regarding safety, the GLP-1 class continues to feature gastrointestinal side effects like nausea and vomiting, which can lead to treatment discontinuations and compliance issues in a real-world setting. Novo Nordisk has already submitted all the paperwork required to achieve FDA approval for oral semaglutide, positioning it to be the first oral GLP-1 treatment.
Eli Lilly's Ace in the Deck
I believe the market is missing some important nuances here. First, the gap between 13.6% and 15% weight loss is likely clinically insignificant. Cross-trial comparisons are fraught with pitfalls—differences in patient populations, study designs, and treatment protocols can skew perceptions. Until orforglipron and its rivals are tested head-to-head (as Wegovy and Zepbound were in SURMOUNT-5), declaring one clearly superior is premature.
More importantly, orforglipron holds two decisive advantages: convenience and manufacturing. As a non-peptide small molecule, it imposes no food or water restrictions—unlike oral semaglutide. The simpler chemistry also makes it far cheaper and easier to mass-produce than complex peptides. In a weight-loss market plagued by supply shortages, this could be a game-changer for Eli Lilly.
Let's also bring some perspective to the drama. Orforglipron's potential, combined with Zepbound and Lilly's aggressive access strategy, is enormous. High list prices for injectables—often over $1,000 per month—remain a barrier, with many insurers refusing coverage. That leaves a vast patient population unable to pay out-of-pocket. By leveraging orforglipron's low manufacturing costs and LillyDirect's direct-to-consumer reach, Lilly can offer lower cash prices and dramatically expand access—turning a perceived setback into a long-term competitive edge.
LLY Risks and its Bearish Case Evaluated
On the other hand, there's a legitimate bearish case for LLY that even bullish investors should acknowledge. The stock had been priced for near-perfection—its P/E ratio sits more than 100% above the sector median, signaling sky-high growth expectations—and the orforglipron results didn't quite deliver that perfection.
Novo Nordisk's modest numerical lead in weight-loss efficacy, combined with its first-mover advantage, could give it the upper hand in the oral obesity market. From this perspective, LLY's sharp drop may reflect not just a knee-jerk reaction, but growing skepticism among institutional players that retail investors are now starting to echo, as TipRanks data shows.
Despite its headline-grabbing exploits, the smart institutional money doesn't seem to like LLY.
According to TipRanks' hedge funds tracker, LLY is currently seen with low confidence by hedge fund managers on Wall Street.
According to 13F filings from 487 hedge funds submitted to the U.S. SEC throughout 2025, as LLY has reached a peak of $960 per share, hedge fund managers have reduced their stakes from around 32 million shares in May 2023 to around 25 million today. The current Confidence Signal, based on 60 leading hedge funds this quarter, is Very Negative.
To get its stock back on track, Eli Lilly must convince investors of its ability to maintain a stronghold in the obesity market with innovations beyond Zepbound.
Is Eli Lilly a Buy, Sell, or Hold?
On Wall Street, LLY sports a consensus Strong Buy rating based on 17 Buy, four Hold, and zero Sell ratings in the past three months. LLY's average stock price target of $961.83 implies an upside potential of 53% over the next twelve months.
Despite some firms adjusting expectations following orforglipron data, Wall Street has remained largely positive on LLY. For instance, Chris Schott from J.P. Morgan believes LLY's recent plunge is a 'compelling' entry point, noting that orforglipron's '1-2 percentage points lower weight loss,' compared to oral semaglutide, is unlikely to meaningfully impact its commercial potential.
Eli Lilly Transitions from Perfection to Resilience
The Eli Lilly story has moved from one of flawless execution to one of strategic resilience. While the orforglipron results fell short of the lofty expectations embedded in its stock price, they still reinforce the strength of Lilly's broader portfolio—and come with notable competitive edges in convenience, manufacturing scalability, and potential for disruptive pricing.
Near-term volatility is likely as the market recalibrates, but the core drivers of Lilly's long-term growth remain firmly in place, keeping the bullish case intact.