1 Unstoppable Growth Stock Heading For $2 Trillion By 2030

The $1 trillion market cap group is small and a pharmaceutical giant Eli Lilly (LLY -3.47%) it is not yet a member, although it is nearly $820 billion away.

However, the drugmaker’s prospects look so strong that not only should it join the $1 trillion club soon, it could even become a member of the more exclusive $2 trillion club by 2030. Here’s why.

The wind in the tirzepatid tail

What is considered “solid” revenue growth for a corporation? The answer depends on the industry. High-single-digit, low-double-digit percentage growth is pretty good for pharmaceutical companies, especially big, well-established ones. Anything above that is obviously even better.

Let’s look at a chart of Eli Lilly’s quarterly revenue growth over the past year:

LLY (quarterly year-on-year growth) revenue data by YCharts.

Notice that the growth rate never fell below 24%.

Why is Eli Lilly doing so well? In a word: tirzepatide. This is the active ingredient in Mounjaro, a diabetes drug, and Zepbound, which treats obesity. It was first approved in 2022.

In the second quarter, Lilly’s tirzepatide drugs generated slightly more than $4 billion in sales. The vast majority of drugs never make $4 billion annual over the years of patent protection. Clearly, Eli Lilly has something special on its hands, and it’s still in its infancy.

There are at least two indications for which tirzepatide has already passed phase 3 clinical trials but is not yet approved. The first is obstructive sleep apnea in obese patients. The second is the decreased risk of developing type 2 diabetes in overweight or obese patients who are prediabetic. There are several areas where tirzepatide is being tested, including steatohepatitis associated with metabolic dysfunction, an area of ​​high unmet need.

So Eli Lilly’s financial results will continue to be impressive through 2030 — thanks in large part to tirzepatide, which will help boost its stock price and market cap. But that doesn’t tell the whole story.

There is more about Eli Lilly

While tirzepatide will be Eli Lilly’s biggest growth driver, a recent approval should also contribute. The US Food and Drug Administration recently gave the green light to Kisunla’s drug to treat Alzheimer’s disease (AD).

Over the past 20 years, the pharmaceutical industry has mostly failed when trying to develop new AD drugs. Only two other products in this field have been approved since 2003. One of them, biogenicto Aduhelm, was given the green light amid serious questions about its effectiveness. Biogen has since discontinued Aduhelm, in part because it was a commercial failure: Doctors and hospital systems refused to prescribe it.

So Kisunla fills a significant need and should be at least reasonably successful. Expect the drug to top $1 billion a year. Its sales won’t compare to those of tirzepatida, but Kisunla should still contribute significantly to strong revenue growth by the end of the decade.

Eli Lilly’s share price should also be boosted by the clinical progress of new drugs. Lilly’s pipeline is full of interesting products, especially in the high-end area of ​​weight loss drugs. By 2030, two of its anti-obesity candidates, orforglipron and retatrutide, could generate $8.3 billion and $5 billion in revenue, respectively, according to drug industry research firm Evaluate. The drugmaker has an embarrassment of riches.

Don’t mind the rating

Here’s a potential problem: The market may get ahead of itself and already factor all of Eli Lilly’s success into its stock price. Lilly’s price-to-earnings ratio is about 41, more than double the healthcare industry average of 19. If the stock is overvalued, its upside potential will be limited. Still, analysts expect Lilly’s earnings per share to grow by an average of nearly 73% over the next five years; which makes the company’s shares reasonably valued at current levels.

To reach $2 trillion in six years, the company’s market cap would need a compound annual growth rate of at least 14.7%. That’s up to Eli Lilly.