(Reuters) -Eli Lilly hit $1 trillion in market value on Friday, making it the first drugmaker to enter the exclusive club dominated by tech giants and underscoring its rise as a weight-loss powerhouse.
A more than 35% rally in the company's stock this year has largely been driven by the explosive growth of the weight-loss drug market.
Once seen as a niche category, obesity treatments are now one of the most lucrative segments in healthcare, with steadily rising demand.
Novo Nordisk had the early lead
in the space, but Lilly's drugs - Mounjaro and Zepbound - have surged in popularity and helped eclipse its rival in prescriptions.
The company's shares were up 1.3% at a record high of $1,057.7.
Lilly now trades at one of the richest valuations in big pharma, at about 50 times its anticipated earnings over the next 12 months, according to LSEG data, reflecting investors' belief that demand for obesity drugs will remain strong.
Shares have also far outpaced the broader U.S. equity market. Since the launch of Zepbound in late 2023, Lilly has gained more than 75%, compared with an over 50% rise in the S&P 500 over the same period.
In the latest reported quarter, Lilly posted combined revenue of more than $10.09 billion from its obesity and diabetes portfolio, accounting for more than half of its total revenue of $17.6 billion.
"They are doing so many things outside of obesity, but to suggest anything is driving share price beyond obesity at this point, I don't know if that would be a factual statement," said Kevin Gade, chief operating officer at Lilly shareholder Bahl and Gaynor, ahead of the milestone.
Wall Street estimates the weight-loss drug market to be worth $150 billion by 2030, with Lilly and Novo together controlling the majority of projected global sales.
Investors are now focused on Lilly's oral obesity drug, orforglipron, which is expected to be approved early next year.
In a note last week, Citi analysts said the latest generation of GLP-1 drugs have already been a "sales phenomenon", and orforglipron is poised to benefit from the "inroads made by its injectable predecessors."
Lilly's recent deal with the White House to cut prices for its weight-loss drugs, as well as planned investments to expand drug production augurs well for its growth.
Lilly is starting to resemble the "Magnificent Seven" again, said James Shin, director of Biopharma Equity Research at Deutsche Bank, referring to the tech heavyweights including Nvidia and Microsoft that have powered much of the market's returns this year.
At one point, investors viewed it as part of that elite group but after some disappointing headlines and earnings, it slipped out of favor.
Now, however, it seems poised to rejoin that circle, possibly even as an alternative for investors, especially given recent concerns and weakness in some AI stocks, he added.
Still, analysts and investors are watching if Lilly can sustain its current growth as prices of Mounjaro and Zepbound come under pressure, and whether its scale-up plans, along with its diversified pipeline and dealmaking will offset margin pressure.
(Reporting by Christy Santhosh and Mrinalika Roy in Bengaluru; Editing by Sriraj Kalluvila, Devika Syamnath and Leroy Leo)
