You may not expect a pharmaceutical stock to mimic the behavior of the latest hot growth stock and soar in the triple digits over 12 months. But Eli Lilly (NYSE: LLY) did it, climbing nearly 117% over the past year. This wasn't just a random happening, but instead evidence investors are very excited about what's to come for this pharma giant.
Lilly's portfolio is generating double-digit revenue growth, into the billions of dollars. And the products leading this are two that doctors have been prescribing for weight loss: Mounjaro and the recently approved Zepbound. While Mounjaro is approved uniquely for type 2 diabetes but used "off label" for weight loss, regulators recently gave Zepbound the nod specifically for chronic weight management.
The new product already has taken off, according to Lilly's recent earnings report, with more than $175 million in sales in its first few weeks on the market. Considering Mounjaro's track record in the weight loss community, the high-growth forecasts for the market, and explosive demand for weight loss drugs so far, could Lilly's Zepbound eventually become the world's best-selling drug? Let's find out.
What makes a best-selling drug
First, it's important to consider what makes a top seller. The drug must please doctors and patients with its performance -- or if it's a new drug it should be accompanied by strong clinical trial data -- and the product should address a large and growing market.
Zepbound checks off all of the above boxes. Mounjaro and Zepbound are actually the same molecule, tirzepatide. This molecule works by interacting with hormones that control blood sugar levels, and as a result, those who take the drug feel full longer and generally find their appetites reduced.
Lilly's drugs compete with Novo Nordisk's Ozempic and Wegovy, approved for type 2 diabetes and weight loss, respectively. As in the case of Lilly's drugs, doctors have prescribed both for weight loss. These drugs are composed of a different molecule -- semaglutide -- but they work in a way that's similar to the Lilly drugs.
The main difference is that semaglutide acts on the glucagon-like peptide-1 (GLP-1) hormone, while tirzepatide acts on GLP-1 and on the glucose-dependent insulinotropic polypeptide (GIP) hormone.
Novo Nordisk's products reached the market first, offering the Danish pharmaceutical company a certain advantage -- but new data show strength in the performance of the Lilly drugs. Real-world cases compiled by Truveta Research show that patients taking tirzepatide were three times more likely to reach 15% weight loss than those on semaglutide. Truveta used a balanced cohort of 18,000 patients to draw the most accurate conclusions possible.
I would expect both companies to generate blockbuster revenue from their drugs, but if data continue to show higher efficacy for the Lilly drugs, this pharma player could have an edge.
Potentially a $100 billion market
As for demand and market size, the situation looks positive, too. Demand has been so high that Lilly and Novo Nordisk haven't been able to keep up with it, and there have been shortages of their drugs. (Both companies have pledged to increase their capacity to address this growing need.) And the global anti-obesity drug market may increase by more than 16 times to $100 billion by 2030, Goldman Sachs Research forecasts.
Now, to see if Lilly's Zepbound could become the world's top seller, let's look at a current example: AbbVie's Humira, the world's best-selling drug in 2022 when it brought in sales of more than $21 billion. The immunology drug now is shifting to falling sales as it's lost exclusivity, but its past serves as an appropriate comparison. That's because immunology covers a wide range of conditions, from rheumatoid arthritis to plaque psoriasis and Crohn's disease, meaning need for these types of drugs is broad -- as is the need for weight loss products.
Market size data and forecasts support this idea. The immunology market in 2022 was valued at $102 billion, according to Fortune Business Insights, about the same size that Goldman predicts for the weight loss drug market in a few years, as I mentioned above.
Is Zepbound best-seller material?
So, let's get back to our question: Could Zepbound become the world's best-selling drug? I wouldn't expect it to happen overnight. But if Lilly can keep up with demand from a manufacturing standpoint and data continue to show top performance of the drug in the real world, Zepbound could indeed find itself as the world's top seller down the road. And the really good news is, even if Zepbound falls short, it still should deliver multibillion-dollar revenue year after year.
On top of this, Lilly also sells a portfolio of other products across treatment areas, and many bring in billion-dollar revenue. All of this means that even after Lilly's show-stopping performance over the past year, the shares still look reasonably priced at 59 times forward earnings estimates -- that's as analysts predict 52% annual growth for the company over the coming five years. So, Lilly shares may have plenty of room to run, making them a buy today, whether Zepbound becomes the world's top seller or not.
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