Unlike many of its big pharma peers, Eli Lilly (LLY 1.19%) is a growth stock that's likely to maintain a faster-than-average pace of expansion over the next few years. Between its massive portfolio of already-approved medicines and its efforts to compete in three large and quickly growing markets, it has an incredibly attractive combination of limited risk and long-term upside.
Let's take a look at what those three markets are, and what the company is doing that should drive its success -- hopefully bringing shareholders along on its ascent.
1. Alzheimer's disease
Until Biogen launched a pair of drugs to treat Alzheimer's in the last couple of years, no medicines were thought to slow the disease's progression. Now, the market is open for business, and Eli Lilly is likely to be the next player to make a major push to compete. GlobalData, a research business, thinks the market for Alzheimer's therapies could be as large as $13 billion by 2030.
Lilly has four clinical programs for the condition. One, donanemab, is currently under regulatory review for the intended indication of treating the disease in its early but still symptomatic stage. Donanemab is also being investigated in a phase 3 trial for pre-clinical Alzheimer's, which would enable it to capture a larger-than-anticipated market share, assuming it gets approved for early-stage disease.
Its other attempt in phase 3 is a candidate called remternetug, which might offer a backup plan to reach the market if donanemab doesn't make it.
The company expects to hear back from regulators at the Food and Drug Administration (FDA) before the end of 2023 regarding donanemab. If it gets the green light, expect its stock to climb steadily in the near term.
In the longer term, if donanemab is approved, it could also start to steal market share from Biogen's Alzheimer's medicines, especially if clinicians find it to be safer or more effective. Eli Lilly is also likely to continue to invest in research and development (R&D) to keep advancing Alzheimer's candidates through the pipeline for the foreseeable future.
2. Pain
Per Allied Market Research, the global market for analgesics (medicines that treat pain) is slated to reach nearly $51 billion by 2030. It's a market with a lot of nooks, crannies, and complications. Treating the pain from a stubbed toe requires a dramatically different kind of therapy than what's ideal for someone with arthritis, and treating the pain of arthritis can't be done with the same medicines intended for nerve damage or a burn wound. That means there's plenty of room for new entrants to the market, especially when it comes to specialized offerings.
Eli Lilly has two programs for pain in phase 2, and two in phase 1. But at least three of those four programs are special because they use mechanisms of action which aren't represented in any currently approved medicines. What's more, one of the programs might reduce inflammation as well as pain, which could make it especially useful for chronic inflammatory conditions like arthritis.
The other two candidates could potentially address chronic neuropathic pain, which is a symptom that's traditionally challenging to treat effectively although it affects as much as 10% of the population. So if Eli Lilly can bring any of those candidates to commercialization, it won't face any shortage of clinical interest in writing prescriptions.
3. Obesity
As the smash-hit success of Novo Nordisk's weight loss drug Wegovy shows, the market for obesity treatments is live, and hotter than ever. By the end of the decade, such medicines could be worth around $30 billion in annual sales, per analysts at Cowen. And Eli Lilly has a handful of candidates that'll ensure it gets a big slice of the market.
Its successful diabetes drug Mounjaro is currently under regulatory review for an expansion of its indications to include obesity. In Q2 alone, Mounjaro brought in nearly $980 million. Nabbing the expanded indication should make that figure soar over the next couple of years and beyond.
Aside from that, Eli Lilly has three phase 3 programs for obesity, and three in phase 1. In a nutshell, it could soon threaten Novo Nordisk's dominant position in the market. Given that obesity is estimated by the Centers for Disease Control (CDC) to cost the U.S. healthcare system around $173 billion per year, the company probably won't have much of a problem finding traction in the market, even in the face of serious competition.
