Eli Lilly (LLY 3.59%) is the top healthcare stock in the world, with a valuation of around $550 billion. Its recently approved weight-loss treatment Zepbound has unlocked a new and exciting growth opportunity for the business. What should investors expect from Eli Lilly over the next five years, and is the stock still worth investing in despite its high valuation?
Eli Lilly will be a big player in the weight-loss market
There's little doubt that Eli Lilly will go after the highly coveted weight-loss market. Market research analysts at Grand View Research see a tremendous opportunity there, projecting the market for global weight management to be worth nearly $300 billion by 2030. That's up from approximately $154 billion today. It's currently growing at a compounded annual growth rate of 9.9%.
NYSE: LLY
Key Data Points
Eli Lilly already has an approved weight-loss treatment in Zepbound. In clinical trials, it has helped people lose as much as 26.6% of their body weight after 84 weeks. The company is also working on a once-daily weight-loss pill, orforglipron, which is currently in phase 3 trials. In phase 2, the pill showed that it could help people lose close to 15% of their body weight after 36 weeks.
In August, Eli Lilly acquired Versanis for $1.9 billion. Versanis also has a weight-loss drug in its portfolio, bimagrumab. While Eli Lilly's weight-loss treatments are glucagon-like peptide-1 agonists that help people feel full faster, bimagrumab works by binding to cells to reduce fat mass, without trying to reduce appetite.
It's a relatively modestly sized acquisition for Eli Lilly, but it diversifies the company's efforts in the weight-loss market. It's a clear sign that it's a significant area of focus for the business, and rightfully so given the potential for a top weight-loss drug to not just help people lose weight, but also help with other obesity-related illnesses as well.
Its annual sales could top $50 billion
In 2022, Eli Lilly generated $28.5 billion in annual revenue. But with Zepbound obtaining approval for weight loss and analysts being bullish on this potentially being a drug that can generate tens of billions in revenue at its peak, it's possible for Eli Lilly's annual sales to grow to $50 billion or higher in five years. Plus, it's not just Zepbound -- the company has other growth catalysts in its portfolio.
The company has a treatment for early-stage Alzheimer's, donanemab, which if approved could generate billions in additional revenue for the business. Earlier this year, Eli Lilly also obtained approval for blood cancer therapy, Jaypirca. In October, regulators also approved Omvoh, a treatment for moderate-to-severe active ulcerative colitis.
Given all the growth opportunities that Eli Lilly possesses, it's not unreasonable to expect the business to be on the cusp of some terrific revenue growth over the next five years. And with the business generally producing strong profit margins of at least 20%, it's highly likely that its bottom line will also rise considerably during that stretch.
Could Eli Lilly hit a $1 trillion market cap?
Eli Lilly's valuation today sits at around $550 billion. Year to date, its shares are up around 60%. But there's the potential for the business to be much more valuable in five years. If Eli Lilly generates the growth it's capable of and there are no serious hiccups along the way, there's an outside chance that it could become the first healthcare company to be worth $1 trillion. At this point, it appears to be a question of when that will happen, rather than if.
For investors, that means now could still be a great time to invest in the healthcare company. While Eli Lilly has achieved impressive returns this year, there's still a lot more room for the business to become much more valuable in the future.
