Biotech giant Eli Lilly (LLY 1.19%) is firing on all cylinders. The company has scorched the broader market over the past year thanks to its rapidly growing revenue and important clinical and regulatory progress. However, the No. 1 reason Eli Lilly has been performing so well is tirzepatide, its clinical compound known as Mounjaro in the diabetes market, and Zepbound in the anti-obesity space.

Eli Lilly recently reported more positive news regarding this medicine. Let's find out what it was and what investors should make of it.

Another massive market ahead

Sales projections for tirzepatide are incredible. Some analysts expect the medicine to hit peak annual revenue of $25 billion; Humira's yearly record was just $21.2 billion, and that's the best-selling therapy in the history of the pharmaceutical industry. But to reach its full potential, tirzepatide will have to earn plenty of new indications.

It's currently being developed to treat metabolic dysfunction-associated steatohepatitis (MASH). This disease is caused by an excessive buildup of fat in the liver rather than alcohol use, hence its other name, nonalcoholic steatohepatitis. MASH can cause severe problems, including cirrhosis (severe, permanent scarring) and liver cancer.

MASH is a growing worldwide problem that's associated with diabetes and obesity. That's why the market for drugs that treat the disease is also predicted to balloon in the coming years, with the first approval of a MASH medicine by the U.S. Food and Drug Administration potentially coming this year.

That won't be tirzepatide, but the medicine recently delivered encouraging results, which Eli Lilly reported in its fourth-quarter earnings release. In a phase 2 study, 74% of MASH patients on the 15mg dose of tirzepatide achieved an absence of MASH at week 52, with no worsening of fibrosis (scarring). Only about 13% of those in the placebo group achieved similar results.

The sky's the limit

Tirzepatide still has a long way to go before it can earn approval as a MASH treatment. The most challenging test will be confirming these recent results in a phase 3 study. However, it's worth keeping an eye on how things evolve with the medicine, considering it's supposed to be Eli Lilly's most significant growth driver for a while. And so far, tirzepatide has been beyond impressive in the clinic and on the market.

Last year, Mounjaro -- tirzepatide's brand name in the diabetes market -- racked up $5.2 billion in sales. Remember that it was first approved in May of 2022. The fact that it has already crossed the $5 billion mark is highly impressive, especially compared to the $482.5 million in revenue it provided in 2022. Mounjaro was responsible for much of Eli Lilly's top-line growth last year.

The company's total revenue came in at $34.1 billion, 20% higher than the previous fiscal year. Investors can expect Lilly's top-line growth to be even stronger this year -- and 20% is already impressive for a biotech giant.

First, the drugmaker's Zepbound, tirzepatide's brand name in the obesity market, only earned approval late last year. While it's likely that Mounjaro was being prescribed off-label to treat obesity, with formal FDA approval for this indication in the bag, sales should be even stronger.

Second, Eli Lilly suffered from a decline in coronavirus-related sales last year. COVID-19 revenue of about $2 billion in 2022 dropped to nothing in 2023. With this segment no longer negatively impacting its sales growth this year, things will be even better.

That said, investors shouldn't focus too much on what will transpire in the next 12 months. That's why tirzepatide phase 2 results in MASH and similar clinical progress are so important: Everything points to tirzepatide living up to the hype over the long run. Meanwhile, Eli Lilly will also earn approval for other important medicines, including donanemab in treating Alzheimer's disease -- that regulatory nod should drop this year.

Thanks to its incredible innovative potential -- demonstrated by tirzepatide and several other medicines -- and its ability to deliver consistently strong financial results, Eli Lilly remains an excellent biotech stock to buy.