6. Eli Lilly and Company (NYSE:LLY)
3Y CAGR: 58.38%
Eli Lilly (NYSE:LLY) is a well-known pharmaceutical company out of Indianapolis. The stock has had annualized 3-year gains of 58% and YTD gains of 55%. Eli Lilly’s performance is riding on the success of GLP-1 weight loss and Alzheimer’s treatments. It is especially true for its GLP-1 drugs, which have led to massive gains, with more to come.
Markets and Markets forecasts that GLP-1 drug market could be worth $471.1 billion by 2032, growing at a very high CAGR of 33.2% from 2024 to 2032. In this space, Eli Lilly and Novo Nordisk are two of the biggest players. Barron’s analysis suggests that there could be an annual sales opportunity of $100 billion – $150 billion for GLP-1 drugs in the US and smaller rivals are scrambling to catch their piece of the pie, based on their tracking of 50 GLP-1 drugs in development. However, the fund believes Eli Lilly and Novo Nordisk could remain a duopoly in this market for at-least until 2027 or 2028.
Eli Lilly is already cementing its dominance with the next generation of GLP-1 drug in phase 3 trials that has been shown to be even more effective and further generations are in development. In addition, the daily oral GLP-1 that the company has developed is more economical and easier to manufacture and offers the convenience that comes with oral pills. This is likely to lead Eli Lilly to have deeper access in the GLP-1 market.
This is what PGIM Jennison Health Sciences Fund had to say about LLY in their Q2, 2024 investor letter:
“Eli Lilly and Company (NYSE:LLY) is a diversified biopharmaceutical company with core franchises in Diabetes, Obesity, Immunology, Neurodegeneration, and Oncology. The company is one of the two global leaders in diabetes with blockbuster products in Trulicity and recently launched Mounjaro (tirzepatide) to serve this large underserved market. To date, the Mounjaro launch is the strongest for any diabetes drug ever launched, which we attribute to off label usage in the obesity indication as well as on label use in diabetes. We believe the tirzepatide (the generic name for Mounjaro) franchise is also uniquely positioned to grow substantially from here thanks to its recent approval for obesity. To that note, in late 2023, Eli Lilly received approval for tirzepatide in obesity and is commercializing it for obesity under a new brand name, Zepbound. While still early in the launch, uptake has been extremely strong, exceeding that of both Wegovy and Mounjaro at the same timepoint in their launches. While Alzheimer’s Disease has been a tough market for drug developers, Eli Lilly has breakthrough designation from the food and drug administration (FDA) for donanemab and recently presented Phase III pivotal trial data that positions donanemab as the most efficacious drug in the class. In June, the FDA advisory committee voted unanimously in favor of donanemab as an effective treatment where the benefits outweigh the risks, praising the therapy as innovative. Donanemab was then approved under the brand name Kisunla in early July. Eli Lilly also has exciting franchises in dermatology, immunology, and oncology that are starting to add meaningfully to growth. With a proven history of strong commercial execution and one of the highest research and development (R&D) success rates in the industry, we see opportunity for continued success. With a lack of meaningful patent expirations for the rest of the decade. Eli Lilly is uniquely positioned amongst its larger-cap peers. Recent positive performance has been driven by the continued strong growth of Mounjaro and Zepbound, which led to a big guidance raise on the 1Q call, an unusual action for Eli Lilly this early in the year, which speaks to their confidence in the strong trends they are seeing.”
