Two drugs account for almost two thirds of Eli Lilly‘s (NYSE: LLY) top line, generating about $12.8 billion in revenue in the first quarter of 2026. The two drugs, Mounjaro and Zepbound, are also growing strongly, with sales increasing 125% and 80% year over year, respectively, in the first quarter. So why should investors care that Eli Lilly just spent $3.8 billion to buy three vaccine-focused companies?
The market becomes myopic sometimes
To make the story of Mounjaro and Zepbound even more interesting, those two drugs are GLP-1 weight loss drugs. This is a hot new category in the pharmaceutical sector where Eli Lilly is currently the category leader. Essentially, the stock is looking more and more like a one-tick pony, and investors are happy about it, pointing out that the price-to-earnings ratio is high at 39x. The average pharmaceutical stock has a P/E of around 24 times.
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The $3.8 billion Eli Lilly is spending to buy Curevo, LimmaTech Biologics AG and Vaccine Company will quickly build its presence in the infectious disease space. Which, for now, will be inconsequential for your business. In the near term, investors will be keeping an eye on Mounjaro, Zepbound and the company’s newly launched GLP-1 pill, Foundayo. But the big news that investors may be overlooking is important.
Eli Lilly knows the drug business well enough to prepare for the future.
The company’s GLP-1 portfolio is an important story, but it has an end date. This is how the pharmaceutical industry works, since medicines have patent protection for a limited time. Eli Lilly knows that the windfall it is benefiting from now won’t last forever. Even if investors don’t think a decade ahead, Eli Lilly does.
That’s why it’s so important to build an infectious disease business today. While it seems like a sideline compared to GLP-1 drugs, it’s basically Eli Lilly leveraging current success to build a stronger business for the long term. While there’s no way to know if any of the three vaccine-focused companies it’s buying will become a big winner, it’s 100% certain that GLP-1’s current success will fade, at some point. Putting another iron in the fire with this investment in vaccines is simply good financial management.
Eli Lilly is expensive and focused on remaining an industry leader
While value investors won’t like Eli Lilly, growth-oriented investors will likely be attracted to it. The GLP-1 story is the main reason to buy, including the new types of GLP-1 drugs the company has in the pipeline that may be even more effective than its current offerings. However, management’s clear intention to build on GLP-1’s success to create a more diverse business is probably just as important, if not more so. It’s decisions like this that lead to sustained, long-term success in the pharmaceutical industry.