Eli Lilly can continue to grow for years without changing its strategy.
Eli Lilly (LLY -3.47%) is already a top pharmaceutical stock and shows no signs of slowing down. The dramatic success of type 2 diabetes and weight loss treatments is only beginning to penetrate the global market, and with numerous follow-on drugs currently in development, the shareholder party could last for years. .
This is just one of several arguments for why it’s worth investing $1,000 in Eli Lilly today. An investment of that size won’t make you rich, but its value could easily double over the next few years. Let’s take a look at some of the drivers of this company’s success and see why it’s likely to continue to be successful.
Lilly’s major investments in manufacturing show it’s serious about delivering returns
One of the main reasons to invest in Eli Lilly stock now is because the company is acting very aggressively to capture demand for its recently commercialized drugs, and management believes it will It is almost impossible to avoid the conclusion that huge sales are expected.
For example, consider seemingly endless investments in manufacturing. On September 12, Lilly announced an additional $1.8 billion to build a new manufacturing facility in Ireland. The new spending brings the total amount the company has spent building manufacturing capacity in the U.S. and EU since about four years ago to more than $20 billion.
The company’s new and newly expanded facilities in Ireland will help meet demand for its highly popular medicines, particularly weight loss and type 2 diabetes treatments, as well as its recently commercialized Alzheimer’s disease treatment. It would be helpful.
Even for big drug companies, spending billions of dollars to expand production may seem a little premature in the commercial life of these drugs — after all, Lilly is selling them so quickly. Until you consider the fact that. It exceeded my expectations.
The company brought in $11.3 billion in revenue in the second quarter, up 36% year-over-year, and raised its 2024 annual revenue forecast by $3 billion at the time of its second quarter report. The company currently expects annual sales of at least $45.4 billion and earnings per share of up to $16.60, which it says is expected to be consistently high.
Driving this growth are Zepbound and Mounjaro, which contain the same active ingredient (tirzepatide) but are approved for different indications: obesity and type 2 diabetes, respectively. Until recently, Zepbound was in short supply in the United States, and in late August, Lilly began selling single-dose vials at a significantly lower list price than prefilled injector pens. These vials are only sold to patients who paid out-of-pocket for the expensive drug, so this new option should make treatment more accessible to even more people.
In other words, despite the drug’s rapid growth and billions of dollars spent improving manufacturing production, when tirzepatide was freely available to every eligible consumer in the market; We haven’t had a chance to see how much revenue it will bring in yet.
Meanwhile, Eli Lilly continues its research and development work looking for other indications where tirzepatide may be effective. If these efforts are successful, the target market will further expand and sales of this blockbuster drug will further increase. There aren’t many biopharmaceutical stocks with such a bullish setup.
Stock valuation may be a bit of a concern
No investment is without its downsides, and Lilly’s stock has some issues that even discerning investors should be aware of. In particular, valuations that are already quite high can quickly rise to unapproachable levels. The company’s price-to-earnings ratio (P/E) is currently 113 times. This doesn’t necessarily mean the stock price will go down, but it may make it more difficult for the stock price to rise further.
Of course, any pharmaceutical company has to keep an eye on the competition, and in the field of weight loss there are many companies working on developing their own potentially more effective drugs.
But for now, it’s almost certain that Eli Lilly’s profits will continue to grow rapidly, which should change shareholder calculus for the better. And as the company’s successes add up and the market takes notice, perhaps value-conscious investors will start to realize that Eli Lilly’s stock is an obvious buy.
