Eli Lilly Is Dominating the GLP-1 Market: Here's What a $5,000 Investment Could Look Like in 5 Years

The first GLP-1 medicine was approved in the U.S. in 2005. It would take over a decade for drugs in this category to become household names. Brands such as Ozempic, Wegovy, and Zepbound are now well-known -- and the maker of the last of these, Eli Lilly (NYSE: LLY), is currently a leader in the GLP-1 market. That's great news for the company, as the GLP-1 space is expected to expand rapidly over the next decade. According to some estimates, it will be worth $190 billion by 2035, more than double its 2025 value. Could Eli Lilly ride this wave and deliver outstanding returns over the medium term? Let's try to figure out what a $5,000 investment in Eli Lilly might be worth in five years.

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The bull case

Eli Lilly's Zepbound mimics the action of the GLP-1 and GIP hormones. Its ability to combine these two mechanisms is a key reason why it has proven more effective for weight loss than Wegovy in head-to-head studies. Eli Lilly's Mounjaro -- which shares Zepbound's active ingredient -- is a diabetes medicine that is performing even better. Mounjaro is currently Eli Lilly's best-selling drug.

The company also recently launched Foundayo, an oral GLP-1 weight-loss therapy. Eli Lilly's pipeline boasts plenty of candidates in this and other areas. Perhaps the most promising is retatrutide, an investigational drug that mimics three separate gut hormones: GLP-1, GIP, and glucagon. Retatrutide has posted fantastic phase 3 clinical trial results so far.

The great thing about Eli Lilly is that it isn't just a weight loss or diabetes play, although its products in these areas are doing most of the heavy lifting right now. Still, the company has other therapies that generate over $1 billion in annual sales, newer ones that should reach that milestone eventually, and attractive pipeline candidates across areas such as immunology, oncology, neuroscience, and more. In fact, Eli Lilly has been diversifying its lineup and has added numerous promising new products.

Here's how things could evolve over the next five years. The company could continue gaining share in the GLP-1 market, even as more companies dip their toes into this space. It could also launch a slew of new medicines in other areas. Eli Lilly has posted strong revenue and earnings growth in recent years, and if it can maintain its lead in the GLP-1 space while making significant progress elsewhere, it might continue to do so. That could lead to above-average returns through 2031. So, how much could $5,000 invested in Eli Lilly be worth in five years? The company has posted a compound annual growth rate (CAGR) of about 40.93% since 2021.

LLY Total Return Level data by YCharts

But it is unlikely to repeat that performance, which was due in large part to its groundbreaking work with Mounjaro and Zepbound. Even with new breakthroughs, the company's top-line growth will eventually slow as new launches erode some of its pricing power. Under a more realistic (but still bullish) scenario, I'd expect more modest returns, with a CAGR of 13% to 20%; the higher end of that range assumes the company performs extremely well in its core therapeutic areas. So, we could be looking at an initial investment of $5,000, worth between $9,212 and $12,442 in five years under a bullish scenario.

Consider the risks

Several things could go wrong for Eli Lilly. For one, the company might lose its lead in the GLP-1 space. That seems somewhat unlikely right now, considering its deep pipeline in this area. But even if it remains the leader, there is a very real possibility that Eli Lilly will lose market share from current levels as more medicines enter the fray, or that this therapeutic area won't live up to expectations. And even with a large portfolio of candidates in other fields, Eli Lilly could also encounter significant clinical setbacks in these other markets. Even with those caveats, Eli Lilly looks well-positioned to outperform broader equities over the next few years, but it's important to keep the risks in mind and invest accordingly. Eli Lilly could be a great addition to a large, well-diversified portfolio, but don't count solely on this stock to deliver you outstanding results.

Prosper Junior Bakiny has positions in Eli Lilly. The Motley Fool has positions in and recommends Eli Lilly. The Motley Fool has a disclosure policy.