Few pharmaceutical giants have performed as well or better than Eli Lilly (LLY -1.00%) in the stock market over the past year. Moreover, the drug manufacturer's shares outperformed the broader market and the Health Care Select Sector SPDR Fund by wide margins.

The Indianapolis-based company's secret wasn't its financial results, as they were relatively mild, or even downright disappointing, for much of this period. So what's been driving Eli Lilly's stock? The company's promising drug pipeline.

The market is forward-looking, and with the drugmaker producing several highly promising programs, investors are increasingly excited regarding Eli Lilly's future. And recently, the company reported another important clinical win that could lead to a major approval. Let's look at this latest development and discuss what it means for Eli Lilly and its shareholders.

Donanemab shows encouraging results

Eli Lilly has been looking to develop a therapy for Alzheimer's disease (AD). It has been a particularly challenging area for the entire pharmaceutical industry. Many have tried -- and mostly failed -- to create an effective treatment for this elusive disease. Eli Lilly itself has had its failures in this area. The company's potential AD therapy, donanemab, failed to earn accelerated approval from the U.S. Food and Drug Administration (FDA) in January.

But that only means that donanemab will have to earn traditional approval, and for that, Eli Lilly will have to show the FDA that the medicine is effective. The drugmaker just took a significant step in that direction with the results from a phase 3 study for donanemab in early AD patients. During the trial, the therapy was able to slow the cognitive decline of patients with early symptomatic AD by 35% compared to a placebo.

It also reduced the risk of progressing to the next stage of the disease by 39%. Note that Biogen's Leqembi -- an AD therapy that earned accelerated approval in January -- decreased cognitive decline by 27% in a phase 3 clinical trial. Eli Lilly's donanemab study did not pit it against Leqembi, so it may not be a perfect comparison. Still, this (less than perfect) comparison sheds a positive light on donanemab regulatory prospects. 

Another piece of an impressive arsenal 

AD affects more than 6 million people, and that's in the U.S. alone, and that number is projected to rise to 13 million by 2050 due to demographic changes, notably an aging population. There is a dire need for new therapeutic options that target this disease, but there haven't been many. Biogen's Aduhelm, which was approved in mid-2021, was the first AD treatment to earn the green light in the U.S. since 2003.

Aduhelm ended up being a flop as there remained questions surrounding its efficacy. Leqembi could be much more successful. Even so, this market has more than enough room to accommodate multiple winners. Eli Lilly will seek approval for donanemab soon, which could happen by next year. Given the large and growing AD market, donanemab could become a key growth driver for Eli Lilly for years to come. But it is only one piece of a larger puzzle for Eli Lilly.

The company's portfolio now also includes Mounjaro, a groundbreaking diabetes therapy it launched last year. Mounjaro's prospects are mouthwatering; the medicine could become one of the best-selling products in the history of the industry. It recently showed positive results in treating obesity in diabetes patients, an indication it could add in the next 12 months. Eli Lilly's mirikizumab is yet another exciting candidate.

While the potential ulcerative colitis therapy failed to earn approval earlier this year, the FDA only mentioned manufacturing issues as the reason for the thumb down. So there is an excellent chance mirikizumab will eventually hit the market. Eli Lilly's first-quarter earnings weren't too impressive, but the company's rich pipeline will eventually allow it to improve its financial results down the line.

Here's what this means for investors

The ability to develop new therapies is critical to the long-term success of drugmakers since older medicines will eventually run out of patent exclusivity and face cheaper biosimilars. Eli Lilly is showing its ability in this area. The company's new portfolio of drugs could lead to sustained revenue and earnings growth for well over a decade: New clinical compounds benefit from 20 years of patent exclusivity in the U.S.; the story is similar in other countries. 

The forward-looking market is taking that into account and bidding up Eli Lilly's shares. That's why the pharma giant has outperformed the broader market in the past year despite relatively mild financial results. And moving forward, Eli Lilly's shares are likely to continue delivering outsized returns as newer programs make clinical and regulatory progress, the company's lineup gets wider, and its financial results continue improving. That's why Eli Lilly stock has a lot of runway left despite being near its 52-week high.