Eli Lilly: The NVIDIA of Pharma

Eli Lilly is a sensational stock. It’s one of the few pharmaceutical companies that are quite straightforward for investors.

There is a clear link between the disease and the cure, similar to Moderna and COVID-19. Now, it’s even more obvious and less controversial. There are no conspiracy theories surrounding obesity treatment, and people aren’t protesting against these injections. It’s simple. I believe that only 5% of the population goes to the gym and eats healthy food.

The prevalence of obesity among U.S. adults was more than 40% from 2017 to 2020, an increase from 30% in 1999–2000. Meanwhile, severe obesity was 9.2% in the latest study. In 2016, the Mayo Clinic estimated that less than 3% of adults live a healthy lifestyle.

That’s why revolutionary drugs like Ozempic from Novo Nordisk and Zepbound from Eli Lilly have been so successful. You don’t have to exercise; you just need to inject.

Novo Nordisk has become the most valuable company in Europe, and Eli Lilly is on its way to becoming a $1 trillion company. That’s where its latest price targets stand. What’s interesting about Lilly is that it’s not just Zepbound; it has a big product line that’s expanding rapidly. The company is moving at the speed of light to capitalize on its tremendous success. Let’s break it down.

Mounjaro, an obesity treatment drug, has become a blockbuster with $1.8 billion in sales. Sales would have been even more impressive if supply could keep up with demand. Another GLP-1 medication, Zepbound, brought in $517 million. The strong performance of these weight loss drugs prompted a $2.0 billion increase in full-year revenue guidance to a range of $42.4 billion to $43.6 billion.

Moreover, new research published in July showed that Lilly’s obesity drugs are more effective than Novo’s. Patients given Mounjaro recorded more weight loss at their three-month, six-month, and one-year follow-ups. Stock performance reveals a divergence between the companies.

Let's dive into Eli Lilly’s Q1 earnings. Verzenio, a breast cancer medication, generated a remarkable $1 billion in sales, while Trulicity, a diabetes drug, pulled in $1.4 billion. Lilly has firmly established itself as a leader in diabetes treatment. The company’s success is largely due to its incredible adaptability. CEO Dave Ricks, as highlighted in the Wall Street Journal, epitomizes this with his “pedal-to-the-metal” approach, constantly pushing for speed and efficiency.

This strategy is paying off, as obesity treatment drugs like Zepbound are proving to have versatile benefits. For instance, Lilly has sought approval for Zepbound to treat a sleep-related disorder, with a decision expected by year’s end. Additionally, the FDA recently approved Kisunla for Alzheimer’s treatment, potentially another blockbuster with a yearly therapy cost of $12,000. Now Novo Nordisc is trying to catch up, leads $100M round in startup working in this direction.

Lilly isn’t stopping there. The company recently acquired biopharmaceutical firm Morphic for $3.2 billion, gaining an experimental medication for inflammatory bowel disease. This move illustrates Lilly’s commitment to diversifying its portfolio, unlike many competitors who rely on single breakthrough products. Consider Pfizer and BMY as examples.

Investing in a pharmaceutical company comes with significant risks, including regulatory hurdles, fierce competition, and potential litigation. However, Lilly’s strategic approach positions it well to leverage opportunities and mitigate risks. Their “pedal-to-the-metal” philosophy is clearly driving impressive results. That's why I'm sure that $1T valuation is not far away and it has more upside. It's like NVidia among its peers.