Winners keep winning. That certainly seems to be the case over at Eli Lilly (LLY 1.19%). In the past year, the drugmaker has been one of the best performers in its industry -- and it's still going strong.
The company's shares recently jumped following its second-quarter earnings result. All in all, Eli Lilly's stock is up nearly 75% in the trailing-12-month period, bringing its market capitalization to about $500 billion. That's well into mega-cap territory.
Thankfully, Eli Lilly's recent run does not mean it is too late to buy its shares. Here are three reasons why investors can still confidently do so.
1. Mounjaro is knocking it out of the park
In the second quarter, Eli Lilly's revenue soared by an impressive 28% year over year to $8.3 billion. The company did benefit from higher sales of its coronavirus products, but even putting those aside, the biotech's top line jumped by 22% compared to the year-ago period, and that remains well above the kind of revenue growth rate the market expects from pharmaceutical companies of this size.
What's behind Eli Lilly's growth? The company's newest diabetes medicine, Mounjaro. This therapy was approved in May of 2022, generating quite a buzz among analysts who follow Eli Lilly. So far, it hasn't disappointed; quite the contrary. In the second quarter, Mounjaro's sales came in at $979.7 million versus just $16 million in the year-ago period. Mounjaro is already Eli Lilly's third-best-selling medicine barely a year after earning approval.
It shouldn't be long before it takes the No. 1 spot. That's especially the case since it will earn key label expansions that will further catapult its sales. Over the past three months, Mounjaro aced three late-stage studies in helping diabetes patients with weight loss. The medicine will target even more indications, including obstructive sleep apnea.
Mounjaro will be one of Eli Lilly's main growth drivers through the next decade, and the way things are starting out is an excellent sign for investors.
2. The supporting cast is performing well
Eli Lilly's performance in the second quarter wasn't just because of Mounjaro. The company has several other products that meaningfully contribute to its sales growth. Take Verzenio, a medicine approved to treat breast cancer. It isn't exactly a new addition to Eli Lilly's lineup -- it first earned approval from the U.S. Food and Drug Administration (FDA) in 2017.
However, it won important label expansions since then. Just in March, Verzenio got the nod from the FDA as an adjuvant treatment for early breast cancer among patients with a high risk of recurrence. Verzenio's regulatory wins matter. In the second quarter, the medicine's sales soared by 57% year over year to $926.8 million. There are still other key products in Eli Lilly's lineup.
Type 2 diabetes therapy Jardiance reported sales growth of 45% year over year to $668.3 million. Immunosuppressant Taltz ended the period with $703.9 million in revenue, 16% higher than the year-ago period. So, even putting aside Mounjaro, Eli Lilly's lineup looks excellent.
3. More growth drivers are on the way
As if Eli Lilly's rich portfolio wasn't enough, the company's pipeline boasts brand-new medicines that will almost certainly achieve blockbuster status. Let's consider just one of them: Alzheimer's disease (AD) therapy donanemab. In January, the FDA declined to grant accelerated approval to donanemab. Note that Eli Lilly requested accelerated approval without having completed a proper phase 3 clinical trial.
Besides, if donanemab had been granted the green light under the accelerated approval pathway, it would have had a limited commercial opportunity. The U.S. Centers for Medicare and Medicaid Services (CMS) is only prepared to cover AD medicines of the class donanemab belongs to if they have earned traditional (as in, not accelerated) approval for Medicare patients in a setting where additional real-world data can be supported to further confirm their efficacy.
Launching donanemab in January may have helped Eli Lilly in some ways, but ultimately full traditional approval is what matters most. Since January, donanemab has completed a late-stage study in which it proved effective. Eli Lilly completed a regulatory submission for the therapy in the U.S. and Europe. The FDA should reach out with an answer within the next 10 months.
According to the research company Evaluate Pharma, donanemab could generate $1.6 billion in annual sales by 2028. It could be another important addition to Eli Lilly's portfolio, helping it grow its revenue and earnings rapidly.
Buy and forget
It's no wonder that Eli Lilly has outperformed the market over the past year. But with its excellent lineup of medicines spearheaded by Mounjaro and its exciting pipeline, there could be many more market-beating performances for the biotech giant moving forward. That's why investors aren't too late to get in on Eli Lilly. The company's innovative potential makes it an excellent stock to buy and hold for decades.
