This is the best pharma stock to invest $1,000 in right now

Eli Lilly (LLY -3.47%) it’s already a top pharma stock and shows no signs of slowing down. With its blockbuster drugs for type 2 diabetes and weight loss still near the beginning of their global market penetration, and a number of follow-on drugs in development right now, the party for shareholders could go on for years and years.

That’s just one of several reasons why it’s worth investing $1,000 in Eli Lilly today. While an investment of this size won’t make you rich, it could easily multiply in value over the next few years. Let’s go through a handful of factors that drive this company’s success and see why it is likely to continue to be successful.

Lilly’s major investment in manufacturing shows it is serious about generating revenue

One of the key reasons to invest in Eli Lilly stock today is that it is acting so aggressively to capture demand for its recently marketed drugs, and it’s almost impossible to avoid the conclusion that management anticipates massive sales in the coming years.

Take, for example, the seemingly endless investment in manufacturing. On September 12, Lilly announced that it was committing an additional $1.8 billion to its budget to build new manufacturing plants in Ireland. This new spending brought to more than $20 billion the total that the drugmaker has devoted to strengthening its manufacturing capabilities in the US and the EU since about four years ago.

Its new facilities recently expanding in Ireland should help it meet demand for its highly sought-after drugs, particularly those for weight loss and type 2 diabetes, as well as its recently marketed therapy for Alzheimer’s disease.

Even for a major pharma business, it might seem a little early in the commercial life of these drugs to throw billions into ramping up production — until, that is, you consider the fact that Lilly sold its drugs so quickly so that he eclipsed his own forecasts.

In the second quarter, it brought in $11.3 billion in sales, up 36% from a year earlier, and raised its annual revenue guidance for 2024 by $3 billion at the time of its second quarter report quarter. It now anticipates annual revenue of at least $45.4 billion and expects to be strongly profitable throughout, with earnings per share of up to $16.60.

The reason for this increase is Zepbound and Mounjaro, which have the same active ingredient (tirzepatide) but are approved for different indications — obesity and type 2 diabetes, respectively. Until recently, there was a shortage of Zepbound in the US, and Lilly , also in late August, began selling single-dose vials of it at a significantly lower list price than its prefilled injector pens. These vials are only sold to patients who pay out of pocket for the expensive drug, so this new option should give even more people access to the treatments.

In other words, despite the rapid growth of the drug and the billions spent to increase production output, there has not yet been an opportunity to see how much revenue tirzepatide can bring in when all eligible consumers in the market can buy it freely.

In the meantime, Eli Lilly continues to conduct research and development activities looking for other indications in which tirzepatide might be effective. The success of these efforts would further expand the addressable market and provide even more sales growth for the blockbuster drug. There aren’t many setups in biopharma stocks that get more bullish than this one.

Valuation of stocks could get a little worrisome

No investment is without its downsides, and Lilly’s stock has some issues that even discerning investors should be aware of. In particular, its valuation, which is already quite high, could soon rise to the point of being unaffordable. Its price-to-earnings (P/E) ratio is currently 113. This doesn’t necessarily mean the stock will go down, but it could mean it will have more trouble going up.

Of course, any drug manufacturer has to keep competition in mind, and in the weight loss field, there are plenty of companies now working to develop their own, potentially more effective drugs.

For now, though, it’s pretty certain that Eli Lilly’s earnings will continue to grow rapidly, which changes shareholders’ calculus for the better. And if its successes continue to accumulate and attract the attention of the market, value investors will likely begin to recognize that it is clear to buy Eli Lilly stock.