The spotlight has been on Eli Lilly (LLY +2.38%) in recent years as the pharma player constructed a very valuable portfolio: one focused on diabetes and weight loss drugs. Lilly sells Mounjaro and Zepbound, available in injectable format, and each product has delivered double- and triple-digit percentage growth, with revenue at blockbuster levels.
Mounjaro is approved for type 2 diabetes, and Zepbound is approved specifically for weight loss, but doctors have prescribed either for patients aiming to shed pounds. They're the commercial names for tirzepatide and are part of the now well-known GLP-1 class of drugs.
Lilly is the leader in the U.S. obesity drug market, with 60% share, and has the pipeline and strategy that may keep it in the top spot. This is fantastic news for investors. But my prediction is the following area will be Lilly's next billion-dollar growth driver -- and it's not weight loss drugs.
Image source: Getty Images.
Mounjaro and Zepbound drive growth
So, first, let's take a quick look at Lilly's situation today. As mentioned, Mounjaro and Zepbound are driving growth, together bringing in $11 billion in the latest quarter. And they helped Lilly increase revenue by 43% in that period, to a total of more than $19 billion.
Demand for these drugs is high, and analysts predict the market will reach nearly $100 billion by the end of the decade. And Lilly just this week won regulatory approval for Foundayo (orforglipron), its GLP-1 pill for weight loss -- this product could significantly add to growth.
Lilly isn't only a weight loss drug company, though; it also develops and sells drugs across a broad range of treatment areas -- from oncology to neuroscience and autoimmune diseases. The company has more than 30 phase 3 pipeline studies ongoing and dozens of candidates in earlier-stage development.
And this brings me to the subject of my prediction: Lilly's next billion-dollar growth driver. The pharma giant is seeking to address what may be the biggest problem in its industry, and that's the time it takes to discover and develop the next blockbuster product. To do this, Lilly is making major moves in the area of artificial intelligence (AI), including deals with AI chip giant Nvidia and, most recently, a fresh $2 billion partnership with Insilico Medicine, a specialist in AI for drug discovery.
NYSE: LLY
Key Data Points
Speeding up drug discovery
Lilly's relationship with Insilico began in 2023 with a licensing agreement. Now, as part of the latest deal, Lilly will use Insilico technology to speed up its processes and possibly bring oral drugs for certain treatment areas to market. There's reason to be optimistic about the potential of Insilico's technology -- Insilico itself has already developed 28 candidates using its systems, the company's chief told CNBC.
As mentioned, Nvidia is also working with Nvidia: Last year, the two announced the building of a supercomputer and AI factory to power drug discovery, and just recently, they announced the creation of an AI lab, built on Nvidia's upcoming Vera Rubin architecture and using Nvidia's BioNeMo platform. These efforts also aim to tackle the drug development problem as well as address production bottlenecks.
Lilly signed 16 deals last year involving AI, according to GlobalData, further supporting the idea that the pharma giant is going all in on this technology.
Today's obstacle for pharma
Now, why do I think this could be Lilly's next big growth driver? As mentioned above, the major challenge pharma companies face is time. It takes years of research to discover a potential drug candidate, and then years to take that candidate through the clinical trials process.
AI can supercharge processes from start to finish: It has the ability to quickly sift through data and identify proteins or genes involved in disease. AI can design chemical structures that might be most favorable, and it may predict the toxicity of a potential candidate. The technology may also be a game changer in the design and planning of clinical trials and help companies gain manufacturing efficiency.
Importantly, all of this could speed up the entire drug discovery and development process and result in higher-quality drugs. So, while weight loss drugs may bring in billions for Lilly today, this one area isn't the only potential growth engine for the pharma giant. Lilly's steps in AI could offer a boost to its entire pipeline, resulting in many blockbuster drugs across indications, including weight loss, down the road. That's why my prediction is that AI could be Eli Lilly's next billion-dollar growth driver.
