On April 1, Eli Lilly (NYSE: LLY) and its shareholders received the news they were eagerly awaiting: the approval of the company’s GLP-1 pill, Foundayo. While the company isn’t the first out of the gate with a GLP-1 pill, it’s still a massive growth opportunity for the business nonetheless. The company’s injectable treatment, Zepbound, has already been generating billions in revenue, and Foundayo may help it reach even more patients.
Could this be the catalyst the healthcare stock, which is down 13% this year, needs to get going?
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Pills are easier and more convenient options for patients than injectables. Plus, many people simply don’t want to use needles and thus, have been waiting for GLP-1 pills to take instead. Now, with Foundayo approved, this could open up the opportunity for Eli Lilly to sell to a wider range of customers, improving upon its already strong growth rate.
Last year, the company’s revenue rose by 45% to $65.2 billion. The bulk of that growth was from Zepbound, which generated $13.5 billion and rose by 175% from a year ago. Mounjaro, which is a GLP-1 drug approved for diabetes, doubled its revenue to just under $23 billion. GLP-1 drugs have been growth beasts for Eli Lilly, and the hope is that a pill will lead to even better numbers.
Shares of Eli Lilly got a boost on news of Foundayo’s approval, but they haven’t exactly been soaring. One problem could be a high valuation, as the stock trades at more than 40 times trailing earnings, a steep multiple as the S&P 500 average is just 24. While the premium may be justifiable given the company’s impressive growth, Eli Lilly simply hasn’t been the hot buy it’s been of late amid investor concerns about high stock prices. But over the past five years, it’s still up more than 415% — the stock may simply be taking a breather.
With a bright future ahead, I believe this can be an excellent stock to own. The company has promising growth opportunities in the GLP-1 space, plus it also has a rich and diverse pipeline that includes dozens of late-stage trials. Regardless of how it does in the short term, Eli Lilly is one of the better healthcare stocks you can buy and hold for the long haul.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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