One of the most innovative healthcare companies in the world is Eli Lilly (NYSE: LLY). The pharmaceutical leader has a deep portfolio of blockbuster drugs that are used to treat conditions including diabetes, obesity, cancer, and plaque psoriasis.
During the past year, Lilly shares have soared 130%. The momentum comes on the heels of new treatments Mounjaro and Zepbound, both of which are disrupting the red-hot weight loss market.
With the shares surging, investors might wonder if now is a good time to take some profits. Let's dig into Lilly's prospects to answer that question.
Lilly is now the world's most valuable healthcare company
With a market cap of about $725 billion, Eli Lilly is the world's most valuable healthcare company and ninth largest overall.
The company's expertise across a variety of different healthcare needs is playing a big role propelling its stock. In 2023, the company's revenue rose by 20% year over year to $34.1 billion. Even more impressive is that it has six different drugs doing at least $1 billion in annual sales.
The best part about the trends above is that Lilly's journey could just be starting.
Image source: Getty Images.
The ride could just be getting started
Many investors might be familiar with Lilly due to its Ozempic competitor, Mounjaro. Demand for Mounjaro is skyrocketing as sales for the diabetes treatment increased nearly 10-fold in 2023, reaching $5.2 billion.
While this is encouraging, better days could be ahead for Mounjaro. The diabetes medication was approved by the Food and Drug Administration (FDA) in May 2022. Considering it's less than two years old, coupled with a rising population of diabetic patients, Mounjaro looks set up for even more gains.
In addition to Mounjaro, its sibling treatment, Zepbound, only gained FDA approval in last November. It is marketed for obesity and will go head-to-head with Novo Nordisk's Wegovy. Considering that demand for Wegovy is surging, I see this as a good indication that Zepbound will turn into a meaningful contributor for Lilly.
One thing investors might be surprised to learn is that Lilly's fastest growing treatment in 2023 had nothing to do with weight loss. Sales of the company's cancer drug, Verzenio, increased by 56% year over year to $3.8 billion. This growth came on the heels of an expanded indication from the FDA last March. Given 2023 was the first year that Verzenio was eligible for a broader base of patients, I'm optimistic more growth is in its future.
Lastly, Lilly could be on the verge of addressing yet another need: Alzheimer's. The company has been testing donanemab. While it has not yet completed sufficient FDA protocols, hints from management suggest that approval could come later this year.
Should you sell Eli Lilly stock?
Knowing when to sell a stock is hard. In fact, there's seldom a right time to do so. But generally speaking, trimming a position -- or exiting one entirely -- purely because the price has changed isn't reason enough.
If you're looking to take some profits to recoup your initial investment, I would do so only if you need the money or if you have already identified another high-conviction opportunity to reinvest in. Otherwise, letting your winners ride and keeping the long-term picture in focus is likely the more prudent strategy.
The company's consistent innovative breakthroughs are thanks to hefty investments in research and development. This is what has allowed Lilly to gain a meaningful presence in so many different markets. But with many of its treatments still in the early stages of growth, the company seems far from tapping its long-term potential.
Will Eli Lilly's stock eventually cool down? Yes, nothing goes straight up forever. But with so many catalysts on the horizon, it would be shortsighted to sell now.
