Eli Lilly (LLY 1.19%) is the largest healthcare company in the world by market capitalization. With dividends reinvested, the company's stock is up an eye-popping 1,530% over the past 10 years.
But over the last year, in particular, Lilly's stock has enjoyed an unprecedented run, fueled by interest in the weight-loss market. Following is a deep dive into Lilly's position in diabetes and obesity and a look at whether the company has enough catalysts outside these markets to keep up its momentum.
The weight-loss market could be here to stay
The weight-loss market is currently being disrupted by a class of medications called glucagon-like peptide-1 (GLP-1). Popular GLP-1 treatments include Ozempic, Wegovy, and Rybelsus -- all of which are produced by Lilly's Danish rival, Novo Nordisk.
For now, Novo Nordisk has a substantial lead over Lilly in the GLP-1 market. However, industry research suggests that the market for diabetes and obesity will continue growing exponentially over the coming decades -- a trend that should bode well for Lilly.
Currently, Lilly is producing diabetes treatment Mounjaro and obesity medication Zepbound. 2023 marked Mounjaro's first full year of commercial production since receiving approval from the Food and Drug Administration (FDA) in the spring of 2022.
Last year, Mounjaro was Lilly's second-highest revenue generator -- producing $5.2 billion in sales. It's important to note that Zepbound didn't receive FDA approval until November, so the drug only accounted for a nominal portion of fourth-quarter revenue.
Nevertheless, the long-term picture for Mounjaro and Zepbound looks encouraging. According to one study, some healthcare experts are forecasting 1 billion diabetics worldwide by 2050. Moreover, research published by J.P. Morgan shows that by 2030, there could be 30 million people just in the U.S. using a GLP-1.
Admittedly, it's hard to know if these forecasts are accurate. But the broader theme is that demand for both diabetes and obesity medications is expected to grow exponentially from current levels. Should the addressable market continue to expand, the combination of Mounjaro and Zepbound could be a lucrative growth driver for Lilly for years to come.
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Don't overlook Lilly's pipeline
It's easy to become enamored by the potential for Lilly's place within diabetes and obesity care. However, if you're unfamiliar with Lilly, you may be encouraged to learn that the company is home to a number of world-changing medications in areas such as plaque psoriasis, psoriatic arthritis, cancer, and more.
Some of Lilly's other top performers last year were its cancer drug Verzenio and plaque psoriasis treatment Taltz. In early 2023, Verzenio received an expanded-indication grant from the FDA. This is important because it allows Lilly to market Verzenio to a larger base of patients. While Verzenio grew by an impressive 56% year over year in 2023, I wouldn't sleep on its long-term potential.
Lilly also appears to be on the cusp of disrupting Alzheimer's disease treatments. The company's Alzheimer's drug, donanemab, is currently going through clinical trials with the FDA. However, according to management, donanemab could be approved in early 2024.
This would be an absolute game changer for Lilly. Not only could it provide entry into yet another multibillion-dollar market, but it would further cement Lilly's lead among other pharmaceutical giants and add yet another layer to the company's prolific portfolio.
Did you miss the boat on Lilly stock?
If you just look at Lilly's stock chart over the last year, you'll probably think you've missed out. However, there are several reasons to believe that Lilly's best days are ahead.
For starters, the general consensus is that drugs surrounding the weight-loss market will only get bigger throughout the decade -- and perhaps even longer. Should this be the case, Mounjaro and Zepbound could both end up as blockbuster drugs and eclipse peak sales well into the tens of billions.
On top of this, while I am personally bullish on Lilly's potential in Alzheimer's disease, investors need to be realistic about the growth profile. Even if the company receives FDA approval for donanemab this year, management has made it clear that it will have little impact on growth in 2024.
This is a good thing. This signals that management is playing the long game with donanemab and sees it as a potential growth engine for years. It's not concerned about commercialization efforts right out of the gate.
Given the above, it's hard to imagine Lilly struggling to generate sustained, robust growth for the next several years. The company is operating across a variety of billion-dollar healthcare markets, and many of its top medications are yet to scratch the surface of their potential.
For this reason, I'm doubling down on my view that Eli Lilly can handily become a $1 trillion enterprise by 2030. I see the stock as a terrific buy right now despite all of its recent momentum.
