Many big pharma companies have outperformed the market since the beginning of the year. One of them is Eli Lilly (LLY -1.34%), a drugmaker known in part for its lineup of diabetes medicines. Zooming out, Eli Lilly has also performed better than most of its peers in the past year -- and that's because the company has a lot going its way.
Investors focused on the long game can hardly go wrong with this healthcare giant. Let's look closer at Eli Lilly's business and why it is an excellent stock to buy in May and beyond.
Strong financial results
One simple reason Eli Lilly has been performing well is that it has generally delivered solid quarterly results. The latest was no different. Eli Lilly's first-quarter earnings did not disappoint. The company's total revenue for the period came in at $7.8 billion, 15% higher than the year-ago period. This performance is excellent for a pharma giant of this size. In fairness, Eli Lilly did benefit some from its COVID-19 therapies, and it is unclear how much longer that will continue.
But Eli Lilly's revenue still would have grown by a respectable 10% without sales of its coronavirus antibodies and its cancer treatment Alimta, which lost patent exclusivity in some key international markets. Some critical products during the quarter were diabetes medicines Trulicity and Jardiance, immunosuppressant Taltz, and cancer medicine Verzenio. During the first quarter, sales of Trulicity increased by 20% year over year to $1.7 billion, while revenue from Jardiance grew by 34% year over year to $419.4 million.
Taltz's sales jumped by 21% year over year to $488.1 million. Verzenio's sales clocked in at $469.4 million, 74% higher than the year-ago period. On the bottom line, the company's earnings per share increased by 41% year over year to $2.10. Overall, it was yet another robust quarter for Eli Lilly.
A bright future
It is essential for companies in the pharmaceutical industry to replace those older drugs once they lose patent exclusivity and their sales start declining. Eli Lilly's Alimta is a great example. The cancer drug started facing generic competition in some key international markets, leading to a 38% year-over-year drop in revenue to $343.9 million in the first quarter.
Thankfully, Eli Lilly's pipeline is as exciting as its lineup, and the company boasts several promising candidates. One of them is tirzepatide, an investigational type 2 diabetes therapy. In a pair of phase 3 studies, tirzepatide reduced A1C levels (a measure of the patient's blood sugar) by 2.37% at the highest dose while also reducing body weight by 13.9%. The company submitted tirzepatide for regulatory review in treating type 2 diabetes in the U.S. and Europe late last year.
Tirzepatide is also being investigated as a treatment for obesity, and Eli Lilly recently reported positive results from a phase 3 clinical trial for the potential therapy in this indication. According to the company, patients taking the highest dose of tirzepatide lost an average of 22.5% of their body weight at 72 weeks of treatment. Those in the placebo group lost an average of 2.4% of their body weight.
This medicine will likely earn approval in these (and other) indications and become a blockbuster product for Eli Lilly. Another promising product Eli Lilly is working on is Basal Insulin-Fc (BIF), a potential, once-weekly insulin product for type 2 diabetes. A once-a-week option for patients who typically need to take insulin daily would likely achieve massive success on the market. BIF is undergoing a late-stage study.
Another exciting program Eli Lilly has is a potential ulcerative colitis therapy called mirikizumab, which is also in a phase 3 clinical trial. Then there is potential Alzheimer's disease therapy, donanemab. However, that particular candidate may run into some regulatory issues. Overall, Eli Lilly boasts dozens of programs, including many in phase 3 studies. In the next three years, the company should have a fresh batch of newer products capable of driving top-line growth rates for many years to come.
That's on top of its current lineup of drugs, many of which should still perform well for several years before losing patent exclusivity. In short, Eli Lilly's overall prospects are very exciting. That's why this top pharma stock is an excellent option for long-term investors.