Eli Lilly (NYSE: LLY) has been one of many standout shares within the S&P 500 lately. It’s up 597% in 5 years and a whopping 1,090% over the previous decade. That’s mightily spectacular for a mature pharma agency.

Previously couple of years, the corporate’s upwards trajectory was given a turbo-boost by its blockbuster GLP-1 medication Mounjaro and Zepbound. The latter was permitted late final 12 months particularly for weight reduction, which is a market that’s anticipated to drive large gross sales lengthy into the long run.

Immediately (30 October), nevertheless, the Eli Lilly share price slumped 13% after the corporate’s third-quarter outcomes dissatisfied Wall Avenue. This uncommon stumble leaves me questioning if I ought to decide up some shares whereas they’re down.

What occurred

Heading into the quarter, analysts anticipated $12.1bn in income and adjusted earnings per share (EPS) of $1.47. However the firm reported income of $11.4bn and adjusted EPS of $1.18. So there was an earnings miss and the agency lowered its full-year EPS steering, to $13.02-$13.52 from $16.10-$16.60.

Nonetheless, the quarter didn’t look dangerous to me. Removed from it. Income elevated 20% 12 months on 12 months, pushed by progress from Mounjaro and Zepbound. Excluding $1.42bn in Q3 2023 from the sale of rights for its olanzapine (antipsychotics) portfolio, income surged 42%!

Outdoors of weight-loss medication, there was spectacular 17% income progress in oncology, immunology, and neuroscience. This was a really sturdy quarter, regardless of what the share price drop would possibly recommend.

Increasing markets

Eli Lilly’s market cap is now $748bn, which makes it one of many largest corporations on the earth. But when the likes of Apple, Amazon, and Microsoft have taught us something, it’s that the already large can keep on getting larger, so long as they hold discovering new avenues of progress.

On this regard, I’m bullish on the corporate’s prospects. In keeping with Morgan Stanley, the worldwide marketplace for blockbuster weight problems medication might improve by greater than 15-fold by 2030. This is because of them doubtlessly spreading past weight reduction to deal with a spread of ailments.

For instance, early research means that these GLP-1 medication could have neuroprotective results and will doubtlessly sluggish the development of Alzheimer’s illness. In addition they reportedly scale back alcohol consumption, so might doubtlessly deal with habit.

After all, it’s early days to know any of this for certain. And there may very well be some damaging long-term results with these weight-loss medication that we don’t find out about. That’s a key threat, as is competitors from market chief Novo Nordisk, the maker of Wegovy and Ozempic.

Additionally, as a result of excessive demand and provide shortages, there are a great deal of cheaper knock-offs floating about.

Ought to I rebuy?

I owned Eli Lilly inventory some time again. Nonetheless, I bought after it doubled in a 12 months and the price-to-earnings (P/E) a number of went nicely above 100.

At the moment although, the ahead P/E ratio right here is 37, falling to 24 by 2027. For an organization with such a robust place in a number of large progress markets — it additionally lately bought an Alzheimer’s drug, donanemab, permitted — I don’t suppose that’s outrageous.

Wanting forward, I reckon Eli Lilly appears to be like more likely to change into the primary $1trn drug firm. I’ve put the inventory again on my watchlist, with a watch to reinvesting in some unspecified time in the future.