Eli Lilly(NYSE: LLY) has been one of the top-performing healthcare megacap stocks of the past decade. And in more recent years, particularly over the past five, it's easy to point to the biggest factor driving Eli Lilly's run: The company's work in diabetes and, especially, the weight loss market. Eli Lilly is unquestionably one of the two leaders in this fast-growing field, and it appears to be gaining ground on its biggest competitor, Novo Nordisk.
However, a recent move Eli Lilly made reveals an underrated reason why the stock has attractive prospects. Here's what investors should know.
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Looking for the next non-GLP-1 gem
On May 27, Eli Lilly announced it would dish out $1 billion in cash to acquire SiteOne Therapeutics, a privately held biotech. The key asset from this transaction is STC-004, a mid-stage investigational non-opioid oral pain medicine. Though there are treatment options for chronic pain, non-opioid ones could become increasingly popular since opioid-based therapies often carry significant side effects. Meanwhile, this market is brand new.
In January, Vertex Pharmaceuticals earned approval from the U.S. Food and Drug Administration for Journavx, the first non-opioid oral pain inhibitor. Eli Lilly is looking to make waves in this market with the acquisition of SiteOne Therapeutics. The transaction may or may not pan out. Perhaps STC-004 will flop in upcoming clinical trials. But there's something important to highlight about Eli Lilly that this acquisition brings to light.
Beyond the weight management market
This move is hardly out of the ordinary for Eli Lilly. One thing that sets it apart from Novo Nordisk is that, while the latter generates more than 90% of its revenue from its diabetes or obesity medicines, Eli Lilly's lineup of drugs features some major blockbusters outside this area. In the first quarter, the company's revenue grew 45% year over year to $12.73 billion. Eli Lilly's cancer drug Verzenio racked up $1.2 billion in sales, up 10% year over year.
The company's immunosuppressant, Taltz, generated $762 million in revenue, a 26% increase over the year-ago period. Eli Lilly's sales outside of diabetes and obesity products accounted for almost 28% of its top line. That might not exactly be peak diversification, but Eli Lilly fares better than its eternal rival, Novo Nordisk, in this department.
Furthermore, the company's newer products also feature several that fall outside its core area of expertise. These include Kisunla in Alzheimer's disease, Jaypirca in oncology, and Ebglyss, an eczema treatment. The same can be said about Eli Lilly's pipeline. Consider the company's investigational gene therapy for genetic deafness, as well as its several dozen programs in oncology.
To be clear, Eli Lilly's diabetes and weight management medicines should continue occupying the role of main growth drivers. In the first quarter, Mounjaro's revenue soared by 113% year over year to $3.8 billion. Zepbound's sales came in at $2.3 billion, representing a 347% increase compared to the first quarter of 2024. Neither has peaked yet. Considering analyst projections for the GLP-1 market, they will continue growing their sales at an incredible clip at least through the end of the decade. And there is more where that came from, too.
Eli Lilly is developing newer medicines in this area. The company's investigational oral GLP-1 therapy, orforglipron, recently aced a phase 3 study. According to management, the drugmaker has a total of 11 obesity pipeline candidates. So, Eli Lilly's work in this field will remain one of the major keys to its success. Perhaps it is what will get many investors nowadays interested in the stock. However, Eli Lilly is also a diversified pharmaceutical giant with a strong portfolio of medicines and promising candidates in oncology, immunology, and other areas.
So, even with mounting competition in the GLP-1 market, Eli Lilly remains attractive, not just because it is likely to develop better anti-obesity medicines than most of its competitors, but because it is a leader in other markets as well. That's another excellent reason to invest in Eli Lilly and hold on to its shares for a long time.
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Prosper Junior Bakiny has positions in Eli Lilly, Novo Nordisk, and Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Vertex Pharmaceuticals. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
