Eli Lilly's Top GLP-1 Drugs Now Account for Nearly 40% of Its Revenue, and That's Likely to Go Higher in Future Quarters

For a top drugmaker like Eli Lilly (NYSE:LLY), developing new drugs is key to ensuring that its business continues to grow. Patents don't last forever, so continuing to innovate is the only surefire way to be successful and remain a top company in the healthcare industry.

In the past couple of years, the company has obtained approvals for multiple new products, including Mounjaro for diabetes, Zepbound for weight loss, and Kisunla for Alzheimer's. These products could be cornerstones of the company's business for years to come. And they are reasons that investors are bullish on the company's prospects today.

They're also ways for Lilly to soar higher in value, even though the stock may look expensive now, trading at more than 100 times its trailing earnings. The future growth opportunities are simply that alluring.

It's specifically the glucagon-like peptide-1 (GLP-1) assets that are driving a lot of the hype these days. And they already account for a significant chunk of the company's sales.

Mounjaro and Zepbound combined for more than $4 billion in sales last quarter

Two products which are likely going to be the top two moneymakers for Eli Lilly for the foreseeable future are Mounjaro and Zepbound. They contain the same active ingredient, tirzepatide, and are essentially the same drug, though Mounjaro is approved for diabetes and Zepbound for weight loss. In a clinical trial, tirzepatide has shown that it can help people lose an average of 26.6% of their body weight over a period of 84 weeks, and that's why it has become such a promising asset for the company.

For the period ending June 30, Eli Lilly's sales grew by 36% to $11.3 billion. Mounjaro generated $3.1 billion in revenue while Zepbound brought in $1.2 billion. Together, revenue from these GLP-1 products accounted for 38% of Eli Lilly's top line. To put into perspective just how quickly these drugs have been growing, consider that in the prior-year period their combined sales were less than $1 billion (Zepbound wasn't approved until just November 2023, while regulators gave Mounjaro the green light in May 2022). Their share of the top line last year was less than 12%.

These products will become even bigger

At 38% of sales, these products are already significant parts of Eli Lilly's business. But there's no reason to expect that they won't get even bigger. The anti-obesity market should be massive -- worth potentially $100 billion -- and Eli Lilly should be a key player.

Revenue from Mounjaro and Zepbound could top more than $50 billion, according to analyst estimates. And even that could be a low figure. Ultimately, it'll depend on how many indications tirzepatide can accumulate.

Right now it's approved for diabetes care and weight loss, but there could be opportunities beyond those. Studies have shown that tirzepatide can reduce the risk of heart failure and help with sleep apnea. And there are many obesity-related conditions and illnesses which the drug can potentially treat, which why it can be difficult to peg just how much revenue it may generate for Eli Lilly.

Should investors worry about a lack of diversification?

In all likelihood, revenue from tirzepatide-related drugs will climb higher, and their percentage of total revenue will exceed 50%. That could be worrisome, because it would make the business less diverse, relying so heavily on one core drug. But this also isn't just any kind of drug; it's a game changer in the healthcare industry. Tirzepatide has the potential to be the best-selling drug ever.

If any company has that kind of an asset in its portfolio, it shouldn't be a surprise if it takes the lion's share of the top line -- it would be difficult to develop other drugs with similar types of revenue opportunities. While there will always be the need to innovate and come up with new drugs, this is an excellent example of how developing just one highly successful drug can drastically transform a company's growth prospects.

Is Eli Lilly stock still a buy?

Year to date, shares of Eli Lilly are up over 50%. And in just three years, the stock has risen by more than 230% in value.

But even though Lilly has become a scorching-hot stock of late, there's still a case to be made for it being a good buy right now. It's trading at a price/earnings-to-growth (PEG) ratio of around 1.4. That multiple could come down as analysts raise their expectations for future growth -- which could happen as tirzepatide obtains approval for more indications. And the lower that PEG ratio gets, the better a buy Eli Lilly becomes.

I don't think the stock is anywhere near hitting a peak: Its revenue and profits could soar for years to come. And while its valuation may look expensive right now, that may not be the case in a few years if tirzepatide is generating a lot more in revenue. Eli Lilly remains one of the best stocks you can buy in the healthcare industry today, and I don't expect that to change anytime soon.

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David Jagielski 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.