For the last couple of years, the pharmaceutical sector has become infatuated with glucagon-like peptide 1 (GLP-1) agonists used to treat diabetes and help with chronic weight management. While Novo Nordisk's Ozempic is the most mainstream GLP-1 medication, Eli Lilly (LLY 1.67%) has two blockbuster weight loss drugs of its own: Mounjaro and Zepbound.
Mounjaro and Zepbound are by far Lilly's fastest-growing businesses, and the company's momentum in the GLP-1 realm seems to be the only thing Wall Street analysts are talking about these days. While weight loss is an enormous opportunity, Lilly has a broad portfolio of medications treating many different pockets of the healthcare landscape.
Beyond Mounjaro and Zepbound, I'd encourage investors to take a serious look at Lilly's oncology business. Below, I'll explore how the company is quietly making significant strides in treating cancer and make the case for why this could be Lilly's next big opportunity.
How big is the cancer market?
According to data compiled by Coherent Market Insights, the global oncology drug market is expected to be worth $533 billion by 2031 -- more than double its estimated value today.
When it comes to treating cancer, I wouldn't be surprised if names such as Pfizer, Bristol-Myers Squibb, or Merck come to mind first. But believe it or not, Lilly has a flourishing oncology operation in its portfolio. In my eyes, this area of the company is being completely overshadowed by Mounjaro and Zepbound.
Image source: Getty Images.
How is Lilly treating cancer?
Through the third quarter of 2024, Lilly generated total revenue of $31.5 billion -- an increase of 27% year over year. Roughly $15 billion of this total stems from just three drugs -- Mounjaro, Zepbound, and Trulicity. All of these are medications in Lilly's weight loss portfolio.
However, another star performer throughout 2024 was Verzenio -- Lilly's main oncology treatment. For the nine months ended Sept. 30, sales from Verzenio topped $3.7 billion and grew 38% year over year. The subtle idea I'd like to point out here is that Verzenio alone is growing at a much more accelerated rate than Lilly's business as a whole.
One of the primary drivers for Verzenio's performance is an expanded indication the drug was granted from the Food and Drug Administration (FDA) back in March 2023. While this is all great news for Verzenio, Lilly isn't stopping its ambitions in oncology care with just one treatment.
Right now, the company has seven clinical trials underway exploring new molecules and applications in the cancer market. To further bolster its pursuit of becoming a leading player in the oncology market, Lilly also recently announced that it is acquiring a clinical stage drug known as STX-478 from Scorpion Therapeutics for up to $2.5 billion.
Lilly's long-term potential doesn't hinge on GLP-1 treatments
Since the company reported third-quarter earnings in late October, shares of Lilly have dropped by about 13%.
The primary reason the stock has been sliding is due to some inconsistent growth trends between Mounjaro and Zepbound over the last quarter. But as I pointed out in this piece, even with some turbulence between supply and demand, Mounjaro and Zepbound are still on pace for a record performance in Q4 -- despite falling short of Wall Street's aggressive targets.
It's for this very reason that I encourage investors to look beyond weight loss when it comes to an investment in Eli Lilly. The company is well diversified and is witnessing notable success in areas outside of the GLP-1 realm.
Verzenio's performance in 2024 underscores how expanded indications for medications can accelerate their performance and help contribute to the overall picture in a meaningful way. To me, oncology represents a hugely important new area for Lilly, and one that is ripe for disruption given the size of the addressable market.
I think the company's clinical pipeline and recent acquisition from Scorpion really drive home the point that Lilly's management is thinking much farther into the future, well beyond where the GLP-1 business can go.
