Can Eli Lilly Stock Double in 5 Years? Here's What It Would Take.
Eli Lilly (NYSE: LLY) has a market capitalization of around $700 billion after soaring 130% over the past 12 months. Investors have become bullish on the company's long-term prospects, particularly with regulators recently approving Zepbound, a weight-loss drug from Eli Lilly that has shown in clinical trials it can help people lose close to 27% of their body weight.
Many investors, however, may be worried they have missed the boat on Eli Lilly and that it has become too late to buy the stock given its high valuation. But not only is there still time to invest and earn a good return, I can see a path for the stock to still double in value and soar beyond a $1 trillion valuation, perhaps even within the next five years.
Here's what would likely need to happen for the stock to achieve such gains.
Lilly needs to remain dominant in the anti-obesity market
Eli Lilly has an incredibly effective glucagon-like peptide 1 (GLP-1) drug for weight loss in Zepbound, which is marketed as Mounjaro for diabetes. And while the excitement is high that the drug could generate a massive amount of money -- well over $50 billion in annual sales -- execution is going to be key.
The company is going to need to work on building out capacity to ensure that it can meet demand. In November, Eli Lilly announced it was going to invest $2.5 billion into the construction of a site in Germany that will help with the manufacturing of its injectable treatments (Zepbound and Mounjaro are both injectables). Over the years and as it continues to roll out these drugs, however, Eli Lilly is probably going to require even more investment into production to ensure it can stay on top of demand.
Assuming that it can avoid shortages, which have been a problem with GLP-1s in the past, it can generate significant revenue growth and remain a dominant player in the anti-obesity market.
It needs approval of an effective weight-loss pill
Right now, consumers appear to be OK with taking injectables but what it may ultimately come down to is which company has the best weightloss pill. Pills are easier to take and can reach a broader group of patients (e.g., people who don't like needles).
Orforglipron is an oral weight-loss drug Eli Lilly is currently developing. It's in phase 3 trials and thus far the results have been encouraging, with people losing close to 15% of their body weight after taking the pill every day for 36 weeks. If Eli Lilly gets an approved weight-loss pill to market that also proves to be safe and highly effective (compared to the competition), that could easily be the catalyst the stock needs to hit the $1 trillion mark in a hurry.
Approval of its Alzheimer's treatment would help as well
Eli Lilly's stock recently had a bit of a setback after regulators didn't approve its early Alzheimer's drug, donanemab, and instead said they need more time to further review its clinical trial data. It caught the company by surprise, as it did investors, leading to a slip in the stock's price.
The odds still look good that it will be approved given that donanemab has achieved similar if not better results than Leqembi, an Alzheimer's treatment from Biogen that obtained approval last year. It could be a few months before investors learn about the Food and Drug Administration's decision, but there don't appear to be any red flags to suggest that donanemab won't obtain approval.
Approval of donanemab could unlock another big growth opportunity for Eli Lilly, which could mean billions more in revenue; some analysts believe it can hit $6 billion by 2026.
Is Eli Lilly stock a buy?
Eli Lilly's stock has been sliding due to the news around donanemab recently. But that's fine if you're a long-term investor. This is a stock that looks unstoppable, and buying it on any kind of weakness right now could help your returns in the long run. The company has been doing all the right things to get bigger and if in five years Eli Lilly is still has one of the top anti-obesity drugs in the market and donanemab is generating billions in revenue, I'm confident the healthcare stock will have doubled in value by then.
Should you invest $1,000 in Eli Lilly right now?
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Biogen. The Motley Fool has a disclosure policy.
Can Eli Lilly Stock Double in 5 Years? Here's What It Would Take. was originally published by The Motley Fool
