The great thing about biotech companies is that the medicines they develop are always in need, in good times and bad. But to remain successful, drugmakers have to continue innovating. The most prominent players in the biotech industry are often those with solid pipelines that allow them to earn new approvals regularly.
And in that department, few biotechs can hold a candle to Eli Lilly (LLY -0.65%), which stands as one of the largest companies in the industry. Eli Lilly's ability to develop new and exciting products is one of the key reasons it's one of the best biotechs to invest in right now, but it isn't the only reason. Let's dig in.
Key approvals will continue to roll in
Contrary to the broader market, Eli Lilly has performed exceedingly well over the past 12 months, with the company's shares up by 32% in this period.
A key reason behind this showing was regulatory approval of Eli Lilly's new diabetes treatment, Mounjaro, in May 2022. The company has been a leader in the diabetes care market for decades; it markets plenty of diabetes medicine. But Mounjaro's prospects could blow any of Eli Lilly's other products out of the water, with some analysts predicting mouthwatering peak sales of $25 billion.
Mounjaro is being investigated as a potential obesity treatment, so there are label expansions on the way for the medicine. But Eli Lilly has other exciting candidates in its portfolio as well. Consider donanemab, a potential Alzheimer's disease (AD) treatment. Eli Lilly recently reported interim results from a phase 3 study in which donanemab proved more effective at clearing brain amyloid plaque than Biogen's approved AD medicine, Aduhelm.
Some experts think the accumulation of the beta-amyloid protein in the brain is linked to the cognitive decline associated with AD, although this hypothesis isn't universally accepted yet. But if donanemab conclusively shows superiority to Aduhelm in targeting brain amyloid plaque, it has a good chance of earning the green light. Eli Lilly is looking at other potential approvals.
The company recently submitted lebrikizumab, a potential treatment for atopic dermatitis (eczema), to regulatory authorities in the U.S. and Europe. In total, Eli Lilly could see four brand-new approvals by the end of 2023. And there will be many more in subsequent years.
A robust business and a solid dividend
Eli Lilly's new approvals should help strengthen its lineup and jump-start revenue growth by helping offset declining sales of some products, such as Alimta, which is currently facing generic competition. In the third quarter, the company's revenue increased by an unimpressive 2% year over year to $6.9 billion. Its adjusted earnings per share jumped by 12% year over year to $1.98.
Some of the company's products, including cancer drug Verzenio and diabetes medicine Trulicity -- currently its best-selling product -- are still performing well. Sales of the former soared by 84% year over year to $617.7 million in the third quarter. Trulicity's revenue came in at $1.9 billion, 16% higher than the year-ago period. Mounjaro only generated $187.3 million in revenue in the period after being approved in early 2022, but that number will grow rapidly in the coming quarters.
One more thing to love about Eli Lilly is the company's dividend. The company has doubled its payout in the past five years. That speaks to the company's commitment to rewarding shareholders. Rising dividends can help investors fight inflation and earn greater returns in the long run (for those who opt for dividend reinvestment). Or investors can choose to sock that money away in the bank.
Either way, a company like Eli Lilly that offers necessary products and has a strong track record of sustained dividend increases is especially attractive given the current economic conditions. While the market may throw more curve balls in 2023, investors can trust that Eli Lilly will handle them better than most, thanks to a robust lineup, a valuable pipeline, and an overall strong business. This top biotech stock is definitely a buy in 2023 and beyond.
