Regardless of your investment style, adding a few pharmaceutical stocks to your portfolio is a great idea. These players offer you a certain amount of stability because, no matter what's happening in the general economy, people always need their medicines. This generally translates into steady earnings growth for these companies, and pharma companies often share the rewards with investors by offering dividends too.
But pharma giants aren't only about stability. Certain companies also may offer you a significant amount of growth, and that brings me to the subject of Eli Lilly (LLY 1.81%). Shares of this pharmaceutical powerhouse have soared more than 150% over the past year as investors bet on the company's future in the global weight-loss drug market. At the same time, Lilly's earnings have climbed thanks to its weight-loss drugs and other growth products.
Could Eli Lilly be the best pharmaceutical stock for you? Let's find out.
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Lilly's growth products
It's important to note that Eli Lilly sells a broad selection of products, so it doesn't rely on just one area -- like the weight-loss portfolio -- for earnings growth. This reduces risk because if one specialty area sees a decline, others may compensate. These products address a range of treatment areas from diabetes to immunology and cancer. And in the most recent quarter, many of those Lilly defines as "growth products," like breast cancer treatment Verzenio and rheumatoid arthritis drug Olumiant, saw revenue advance in the double digits.
And Lilly's new products, including diabetes drug Mounjaro and weight-loss drug Zepbound, helped drive revenue gains, bringing in $2.49 billion or about 26% of total quarterly revenue. The fact that new products contribute so much to revenue is positive for a couple of reasons. First, it shows doctors and patients are trying these products, which should lead to further growth down the road. Second, new products generally don't face patent expiration any time soon, offering the company years to grow their revenue.
All of this means Lilly today has a well-diversified portfolio with plenty of new products to boost earnings growth in the years to come. Now, let's talk about the products that have pushed Lilly to the forefront in recent times, and these are the two drugs doctors are prescribing for weight loss: Mounjaro and Zepbound. They are the same molecule -- tirzepatide -- but regulators approved Mounjaro for type 2 diabetes, and doctors began prescribing it off-label for weight management. And then late last year, regulators specifically approved Zepbound for that indication.
Tirzepatide works by acting on glucagon-like peptide-1 (GLP-1) and glucose-dependent insulinotropic polypeptide (GIP), hormones involved in controlling blood sugar levels and appetite. Pharma company Novo Nordisk makes a pair of rival drugs -- Ozempic and Wegovy -- that work in a similar way but act only on GLP-1. Demand has been so strong for both companies' products that they've struggled to keep up.
NYSE: LLY
Key Data Points
A market with $100 billion potential
And some forecasts indicate this momentum is just getting started. The global weight-loss drug market could multiply by 16 to reach $100 billion by 2030, according to Goldman Sachs Research.
Lilly's Zepbound, in just a few weeks on the market, brought in more than $175 million in revenue at the close of the fourth quarter, and Mounjaro's quarterly sales reached $2.2 billion. It's important to remember Mounjaro also is prescribed for diabetes, but together with Zepbound, the trend is clear: The weight-loss portfolio is set to become a huge revenue driver for Lilly well into the future.
A look at Lilly's earnings shows the company has grown revenue and net income over time, and after periods of spending, has consistently benefited from those investments.
LLY Net Income (Annual) data by YCharts.
Meanwhile, Lilly pays a dividend of $5.20, representing a yield of 0.67%. This isn't the highest-yielding pharma stock around, so Lilly may not be the right stock for you if you're looking for a high-yield dividend player.
But if you're looking for a nice combination of safety and growth, Lilly could be the perfect match. The company offers passive income, a solid earnings track record, and a diverse portfolio of products. Plus, Lilly's weight-loss drugs are supercharging this already bright growth picture.
