Eli Lilly brings you weight management blockbuster products with Amazon. Is it time to buy pharmaceutical stocks?

It cannot be overstated how successful expanding new diabetes drugs into the weight management space has been for the companies that market them.In one notable example, the market capitalization is novo nordisk (NYSE:NVO)a previously relatively unknown pharmaceutical company that until recently primarily sold diabetes drugs, has recently surpassed its market capitalization. tesla.

Eli Lilly‘s (NYSE:LLY) The latest weight-control drug, Zepbound, is already outpacing Novo Nordisk’s Wegoby.And with new sales partners Amazon (NASDAQ:AMZN) Zepbound’s sales could accelerate further.

Could this partnership with Amazon Pharmacy make Eli Lilly a smarter stock buy?

Zepbound goes places

In 2022, Eli Lilly launched tirzepatide as a type 2 diabetes treatment under the brand name Mounjaro. Tilzepatide acts on the same GLP-1 receptor as Novo Nordisk’s semaglutide (Wegovy/Ozempic), its main rival on the market, and also acts on the GIP receptor. In 2023, tirzepatide was approved to be sold for weight loss purposes under the brand name Zepbound.

You don’t have to be an endocrinologist to understand that tirzepatide’s dual action is an advantage. Semaglutide has held the market lead over tirzepatide for five years, but sales of Lilly’s drug are rapidly catching up.

Data sources: Food and Drug Administration, Novo Nordisk, Eli Lilly.

Zepbound’s efficacy profile is excellent, and Wall Street analysts are bullish on the drug. In a study of approximately 1,961 obese or overweight patients, after 68 weeks of treatment with Wegovy, participants achieved a placebo-adjusted average weight loss of 12.4%. In a similar study of 2,539 patients, patients who took Zepbound lost an average of 17.8% after adjusting for placebo.

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Zepbound was released in November, but it’s already expected to be a blockbuster for Lily. Wall Street analysts who closely follow the pharmaceutical industry believe that total sales of tirzepatide could exceed $50 billion annually at their peak. BMO Capital’s Evan Seigerman was particularly bullish, predicting peak annual sales of $69 billion.

Eli Lilly is thinking outside the box when it comes to marketing medicines to treat conditions that affect millions of Americans. In January, the company launched LillyDirect to simplify the management of obesity, diabetes and migraines. This tool gives patients access to independent telemedicine providers, ensuring patients have consistent access to her Zepbound and other treatments.

Recently, LillyDirect’s efforts received a significant boost in profile after partnering with Amazon Pharmacy. Currently, Prime members can receive free 2-day shipping on weight management treatments from our fulfillment service.

It’s not just about weight management

Eli Lilly doesn’t just develop drugs for diabetes and weight management. Mounjaro is one of his six Lilly products that generated more than $1 billion in revenue last year.

Lilly’s success in oncology treatment has been remarkable in recent years. For example, Verzenio is his 2017-launched targeted breast cancer treatment. Annual sales of this blockbuster product increased by 56% last year to reach $3.9 billion. Overall, Lilly’s sales will increase by 20% in 2023, and if Zepbound’s launch is successful, sales could continue to increase by more than 20% annually for the next few years.

Would you like to buy now?

I wasn’t the first investor to realize Lilly’s growth potential. The stock has increased about 134% over the past year and currently trades at about 63 times the midpoint of management’s 2024 earnings estimates. Eli Lilly’s dividend yield has risen to a dismal 0.7%, even though the company has more than doubled its quarterly dividend since 2017.

The patents protecting Mounjaro and Zepbound’s market exclusivity will not expire until 2036 at the earliest. This gives Lilly a considerable chance to grow to a high valuation.

As a result, an investment in Eli Lilly could potentially deliver better returns than the market over the long term. Still, investors need to be aware that they could lose a lot of money if unforeseen problems prevent Zepbound from becoming the best-selling drug of all time.

Dividend-paying pharmaceutical stocks are often good investments for many investors, but that’s not the case here. Given its high valuation, buying Eli Lilly stock now is only suitable for risk-tolerant investors.

Should I invest $1,000 in Eli Lilly right now?

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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Cory Renauer has a position at his Amazon. The Motley Fool has positions in and recommends Amazon and Tesla. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.

Eli Lilly brings you weight management blockbuster products with Amazon.Is it time to buy pharmaceutical stocks? Originally published by The Motley Fool