Eli Lilly (LLY -0.55%) can't stop grabbing headlines. The pharmaceutical company has made quite a bit of noise over the past few years thanks to notable clinical and regulatory progress. Investors have rewarded the drugmaker accordingly -- Eli Lilly's shares have vastly outperformed the broader market in recent years.
But the company is still hungry. Eli Lilly continues to make key breakthroughs, the latest of which could lead to another blockbuster product, to no one's surprise. Let's look at what the big pharma specialist cooked up and what it means for investors.
Moving toward a showdown with its biggest rival
Eli Lilly has long been a leader in the insulin market. It has historically battled Novo Nordisk and Sanofi in this arena. Together, these three pharmaceutical giants dominate the insulin industry. It's critical for all three players to continue to innovate to stay ahead of the curb -- and that's precisely what Eli Lilly is doing. The drugmaker has been developing a once-weekly insulin product called efsitora alfa.
Eli Lilly just reported positive phase 3 results for this investigational therapy. Efsitora alfa was pitted against daily insulin in treating type 2 diabetes patients. Eli Lilly's next-gen insulin therapy showed non-inferiority to once-daily insulin, nailing its primary endpoint. It also showed a safety profile consistent with daily insulin. This product, if approved, would be a better option for eligible patients.
However, Eli Lilly is trailing its longtime rival Novo Nordisk here. The Denmark-based pharmaceutical competitor is currently awaiting regulatory approval for its own once-weekly insulin option, Awiqli.
There are too many reasons to buy
Even with competition from Novo Nordisk, Eli Lilly's efsitora alfa could meaningfully contribute to Eli Lilly's top line in the future. According to some estimates, 31% of diabetes patients use insulin therapy, either by itself or with oral medication. That includes type 1 diabetes patients, who comprise between 5% and 10% of this population. All those with type 1 diabetes need insulin, which is not the case for those with type 2.
Still, considering the second type accounts for at least 90% of the total, Eli Lilly's addressable market with efsitora alfa will be large. That's especially the case given that the prevalence of diabetes is projected to continue increasing. That said, efsitora alfa is by no means the best reason to buy Eli Lilly's stock. It's more like icing on the cake. The drugmaker's entire lineup looks incredibly strong, as does its pipeline. In the first quarter, Eli Lilly's revenue increased by 26% year over year to $8.8 billion.
While not the most famous names in Eli Lilly's portfolio, medicines such as cancer drug Verzenio and immunosuppressant Taltz made an impact. Verzenio's revenue jumped by 40% year over year to $1.1 billion, while Taltz's sales rose 15% to $604.1 million. Of course, Eli Lilly's most important growth drivers for a while will be Zepbound in diabetes and Mounjaro in obesity; the active ingredient in both therapies is tirzepatide, a clinical compound that could become the best-selling product in the history of the industry.
Mounjaro was approved just two years ago, while Zepbound got the nod in November. Translation: Sales will keep growing for years before Eli Lilly has to worry about patent cliffs. Eli Lilly's top line should rise much faster than the average for biotech giants in the next five years (26% is unusual for a drugmaker of this size). The bottom-line growth should also be impressive. Analysts think Eli Lilly's earnings per share will increase at an average of just under 57% in the next half-decade.
Here's the bottom line: While efsitora alfa looks promising, it will be a relatively small part of Eli Lilly's giant growth machine. In other words, the pharmaceutical giant will deliver market-beating returns with or without it.
