The Rise of the Trillion Dollar Pharma
It's hardly a surprise when we think of titans like Apple (AAPL) and Microsoft (MSFT) topping the trillion-dollar club. After all, these tech leviathans have their tendrils in the lives of billions worldwide.
But guess what? This playground isn't just for tech heavyweights.
There's another contender in the ring, flexing its muscles from the biotechnology and healthcare sector: Eli Lilly (LLY).
Even as I write, I can almost hear the gears of potential turning. Eli Lilly could soon be donning the badge of the biopharma representative in the trillion-dollar league. What's more, this could happen sooner than you might think—say, before we're toasting to 2030.
Today, Eli Lilly stands proud with a market cap hovering over $410 billion, rubbing shoulders with the crème de la crème of the pharmaceutical world.
To reach the coveted trillion by 2030, it needs to rev up its growth engine by almost 166% in the next six or so years.
Given that its market cap ballooned by 178% since May 2020, we're not betting against the odds here.
Let's dissect this potential behemoth and scrutinize its growth prospects, valuation, and their likely dance over time.
With a trailing 12-month net income of $6.2 billion and a price-to-earnings ratio lingering around 69, Eli Lilly isn't exactly shy.
This valuation is higher than the industry standard but not bloated like some tech stocks.
Credit its remarkable net income growth of around 14% per annum over the last decade to persistent R&D investment, the frequent launch of new sought-after medicines, and strategic label expansions for its already-approved drugs.
Now, the market is giddy with anticipation, pricing in growth that surpasses its own impressive average. This is likely due to Eli Lilly's ambitious ventures into thriving markets with treatments for conditions like diabetes, obesity, and chronic kidney disease.
If Eli Lilly maintains its current PE ratio and boosts its earnings by a mere 13.5% each year between now and 2030, it will rake in a net income of about $15.1 billion, nudging its market cap just above $1 trillion.
A lofty goal? Perhaps, but Eli Lilly isn't one to back away from a challenge.
The question hanging in the air like an eager balloon is whether the company can maintain this steady pace.
Analysts are optimistic, predicting an EPS of $8.76 in 2023 and around $16 in 2025. This promising growth is tied to the launch of new medicines from its four programs awaiting approval decisions and a Phase 3 roster filled with 21 promising programs.
Meanwhile, Eli Lilly is acing its game in another affluent market: obesity treatments.
The company has long been a trailblazer in diabetes and obesity drugs, and its recent approval of Mounjaro, a revolutionary treatment for Type 2 diabetes, adds another feather to its cap.
Mounjaro has made waves, garnering $568.5 million in sales in the first quarter, and is predicted to hit peak annual revenue of $25 billion.
Obesity, a global health concern responsible for at least 2.8 million deaths yearly, opens up another massive market for Eli Lilly.
Branded anti-obesity drugs could hit $44 billion in risk-adjusted sales by 2030, up from a modest $2.5 billion in 2022.
As it stands, Eli Lilly's primary contender in this arena is Novo Nordisk (NVO).
So, can Eli Lilly flex its muscles and reach a market cap of $1 trillion by 2030? Signs point to a resounding yes.
With a steady stream of treatments on the horizon and a projected growth trajectory through the end of the decade, it seems to be business as usual for Eli Lilly.
However, like a precarious game of Jenga, the entire venture hinges on its valuation. As long as investors see sunny days ahead, all's well. But maintaining a P/E ratio of around 70 isn't a walk in the park. A dip in performance or a market crash could bring the whole structure down.
That being said, don't let these concerns hold you back from joining Eli Lilly's growth ride. Come 2030, you'll probably be smiling at your investment, whether or not Eli Lilly cracks that 13-digit milestone.
