Investors looking for a stock that has crushed the market this year need look no further than pharmaceutical giant Eli Lilly (LLY +0.25%). The drugmaker has been on a tear on the back of excellent financial results and solid clinical progress. However, Eli Lilly has, so far, failed to accomplish some of the goals it set out for itself for 2023. Some of the treatments it aimed to launch have encountered regulatory obstacles.
Thankfully, these issues haven't slowed Eli Lilly, and the company is working to resolve them. Case in point: It recently earned approval for a medicine that was initially rejected by the Food and Drug Administration (FDA).
Targeting an increasingly crowded market
Eli Lilly is best known for its diabetes and obesity treatments, but the company's immunology segment is nothing to sneeze at. On Oct. 26, Eli Lilly announced that it had received approval of Omvoh, a treatment for ulcerative colitis. The disease causes inflammation in patients' digestive tracts and colons. Earlier this year, the FDA initially declined to approve Omvoh due to manufacturing issues, but Eli Lilly was able to resolve them.
Now that Omvoh is on the market, it will go up against the products of several top drugmakers. AbbVie is one of the leaders in this indication, with two of its blockbuster immunology medicines -- Rinvoq and Humira -- targeting it. Johnson & Johnson's Stelara is another, while Pfizer just earned the green light for its own product, Velsipity, and another one it markets, Xeljanz, is also approved in this indication.
However, only 48% of ulcerative colitis patients are in remission each year, which means there is still a significant unmet need in this area. Here is the good news for Eli Lilly's Omvoh. The biologic drug has a novel mechanism of action that, in clinical trials, led patients to achieve remission who had previously tried other biologic treatments unsuccessfully. In other words, the medicine should be reasonably successful. According to some analysts, Omvoh could generate $1.2 billion in annual sales by 2029.
So Eli Lilly could have yet another blockbuster product on its hands.
NYSE: LLY
Key Data Points
Focusing on the bigger picture
Eli Lilly has been on a tear precisely because of its ability to develop and market products like Omvoh. Still, this medicine should be a relatively small contributor to the company's top line. There are much bigger arrows in Eli Lilly's quiver. Chief among them is Mounjaro, a diabetes and (soon-to-be) weight-loss medicine that is already hitting annual sales in excess of $1 billion after being approved about 18 months ago.
Eli Lilly is also awaiting approval for donanemab, a potential Alzheimer's disease therapy with excellent prospects. That's just the tip of the iceberg. Omvoh's approval only helps confirm what investors already knew about Eli Lilly: The company's deep pipeline should continue to deliver. That's one of the best reasons to buy the stock, even beyond Eli Lilly's excellent revenue growth.
In the next five years, analysts predict the company's top line will grow at an average annualized rate of 26.8% -- something not typically seen in large pharmaceutical companies. But that's only possible because of Eli Lilly's innovative potential. That's why investors haven't missed the boat yet, even after Eli Lilly's excellent share price performance this year. It's not too late to add the stock to your portfolio.
