Are stock splits back in style? About two years ago, a number of high-profile corporations made such moves after their shares rose to unwieldy levels. Now, Chipotle, one of the leading fast-casual restaurant chains, is on the verge of conducting a 50-for-1 stock split. It was arguably about time -- Chipotle currently trades for close to $3,000 per share.
In that spirit, other major corporations whose shares have soared in recent years could also benefit from stock splits. Let's consider two examples: Eli Lilly (LLY 1.19%) and Regeneron Pharmaceuticals (REGN -0.84%).
1. Eli Lilly
Eli Lilly has conducted several stock splits in its long and storied history, but the last time it did so was in 1997. A lot has changed at the company since then. In recent years, Eli Lilly's shares have crushed the stock market. It is now the largest healthcare company by market capitalization. Its share price is getting up there -- the stock is currently at just under $771. There are excellent reasons to think the drugmaker will continue to beat the market and could hit $1,000 soon, so a stock split could be in the cards soon.
Eli Lilly's most significant growth driver will almost certainly be tirzepatide, which it markets as Mounjaro to treat type 2 diabetes and Zepbound as a weight loss treatment. Tirzepatide is gaining considerable traction. Last year, it generated just over $5 billion in sales despite it being its first full year on the market. Still, Eli Lilly has encountered some headwinds. Most recently, the Food and Drug Administration delayed its decision on whether or not to approve the company's potential Alzheimer's disease therapy, donanemab.
The agency has convened a panel of experts to weigh the data from the clinical trial Eli Lilly conducted to support donanemab's application. The worst-case scenario for the company is that it won't earn approval, but even if that happens, Eli Lilly will be just fine, at least over the middle term. (There certainly could be a sell-off of the stock in the immediate aftermath of a negative decision.) The company's lineup extends far beyond tirzepatide, and it also boasts an incredibly rich pipeline that will lead to a number of new drug approvals and label expansions.
So, the future remains bright for Eli Lilly regardless of what happens with donanemab. Whether or not management decides to conduct a stock split, Eli Lilly is an excellent company to invest in for the long term.
2. Regeneron
Regeneron has never conducted a stock split, but it might be starting to think about one with its share price in the neighborhood of $960. Regeneron should also continue to deliver excellent returns, just as it has in recent years. The company's two most important products -- wet age-related macular degeneration therapy Eylea, and eczema treatment Dupixent -- still have plenty of growth potential.
Regeneron shares the rights to Eylea with Bayer, and it co-markets Dupixent with Sanofi. It earned approval for a high-dose formulation of Eylea last year that should attract a reasonable number of patients (thanks to it offering fewer doses) while extending the medicine's patent life. The new version of Eylea is the counter to Vabysmo, a competing treatment developed by Roche Holding and first approved in 2022.
Meanwhile, Dupixent could soon earn a label expansion in treating chronic obstructive pulmonary disease, an important indication that should add over $1 billion annually to the drug's sales. Further, Regeneron has multiple programs in late-stage clinical trials. Though the company's financial results have been somewhat inconsistent in recent years, that has been due to the uneven contributions of its COVID-19 antibody therapy. The declining demand for this product won't negatively affect Regeneron's results for much longer.
Investors should expect strong top- and bottom-line growth for the company for the foreseeable future, along with excellent stock price gains. Will Regeneron finally conduct its first stock split as its shares become less affordable to the average investor? Only time will tell. Regardless, the stock looks highly attractive.
