Eli Lilly’s stock continues to look better and better. Here’s the latest reason why.

These are heady days for Eli Lilly (LLY 1.82%). New drugs are launched, manufacturing investments are paying off, and additional clinical trials point to the possibility of higher revenues in the future. It seems like there’s a new reason to be even more bullish on stocks every week.

Last week was no exception to the trend. Here’s why.

The size of its addressable market can grow again

Lilly’s drugs Zepbound and Mounjaro are approved today to treat obesity and type 2 diabetes, respectively. Both therapies have the same active ingredient, which is called tirzepatide. In the second quarter alone, Zepbound brought in $1.2 billion in sales, while Mounjaro brought in nearly $3.1 billion, making the pair fit the definition of blockbuster drugs.

Due to the company’s ongoing research and development (R&D) activities to investigate additional applications for tirzepatide, there is a very good chance that it will continue to obtain additional indications approved by the regulatory authorities. This would significantly expand the addressable market and generate even more revenue.

On that note, Eli Lilly has conducted a phase 3 clinical trial investigating tirzepatide in preventing the development of type 2 diabetes, rather than just treating it. Based on the top results, Lilly may soon be able to market the drug for yet another indication.

In the study of 1,032 pre-diabetic adults who were overweight or who met the clinical definition of obesity, once-weekly tirzepatide treatment for 176 weeks led to a 94% lower risk of developing diabetes . Study participants who received the highest dose tested also lost an average of 22.9% of their body weight over the same period. Lower doses resulted in less weight loss, but did not appear to affect the degree of reduction in the risk of progression to diabetes.

There is a lot of important information to unpack here.

First, while third parties haven’t had a chance to analyze Lilly’s data because it hasn’t yet been published in full in a scientific journal, the announcement suggests an incredibly effective method for preventing type 2 diabetes in people who would be in normally considered high. -risk. The implication is that the addressable market for tirzepatide may soon be expanded to include many or even all overweight individuals, since overweight is a major risk factor for developing type 2 diabetes.

According to the National Center for Health Statistics at the Centers for Disease Control and Prevention (CDC), an estimated 73.6 percent of American adults age 20 and older meet the criteria to be either overweight or obese. That’s a much larger portion of the population than the 41.9% of adults they estimate are obese.

The study’s second important finding actually occurred later, during a 17-week follow-up period. During that time, participants began to regain the weight they had lost, and some went on to develop type 2 diabetes. Therefore, to continue to prevent diabetes, patients should probably take tirzepatide continuously . For shareholders there is no better conclusion, as it involves a consistent stream of income from each new patient.

The opportunities don’t end there

The full results of the study will be submitted for publication in a scientific journal and also presented at the ObesityWeek conference in early November. It wouldn’t be too surprising if Lilly’s share price goes up a bit when the full account is published or presented.

But even though the study appears to support a maximalist vision for the addressable market for tirzepatide, there’s no guarantee that regulators will ultimately agree. Nor is it certain that people who consider themselves relatively healthy (except for being overweight) would seek treatment or be referred for treatment by doctors to prevent type 2 diabetes.

Still, it’s hard to deny that Eli Lilly’s stock continues to get sweeter as it puts more and more work into understanding the full capabilities of its own drug. There is no chance that this will be the last clue he will research and then try to market. And if his efforts so far are anything to go by, there’s a very good chance he’ll succeed in this attempt, and probably others as well.

So should you buy Eli Lilly stock based on this new finding? If you’ve been on the fence before, take this as a sign that the answer is yes.