Eli Lilly Just Announced Something Big. Here’s What It Means for Investors.

Eli Lilly (NYSE:LLY) has been making the headlines for one particular reason over the last few years. It dominates in an area that has captured the general public's attention: weight loss drugs. Lilly sells injectable GLP-1 drugs Mounjaro and Zepbound, and they've been generating blockbuster revenue -- and the company's recent launch of weight loss pill, Foundayo, opens up yet another valuable opportunity in this billion-dollar market.

But Lilly isn't stopping there. The pharma giant just announced something big. Let's find out what it means for you as an investor.

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Eli Lilly's weight loss drug business

First, we'll start with a quick refresher on Lilly's weight loss drug business so far. The company sells tirzepatide under the brand names Mounjaro and Zepbound for type 2 diabetes and weight loss, respectively. And this spring, Lilly won regulatory approval for Foundayo. All three are part of a class of drugs known as GLP-1. These products interact with hormonal pathways involved in digestion and therefore help control a patient's appetite and blood sugar levels. This, in turn, helps the patient to lose weight.

Demand has been high for these drugs since they are easy to self-administer and have proven to be safe and efficacious. Mounjaro and Zepbound have supercharged Lilly's revenue growth -- in the recent quarter, they brought in more than $14 billion in revenue on the company's $23 billion in total revenue. So the weight loss portfolio clearly is a major growth driver for this pharmaceutical player.

Lilly's main rival in the space is Novo Nordisk, the seller of Ozempic and Wegovy. Novo was the first to launch a GLP-1 and dominated until Lilly gained ground last year. Now, the two are vying for long-term leadership in this market that analysts say will approach $100 billion by the end of the decade. That's why any pipeline progress from these companies is key, and this brings me to Lilly's latest news.

Developing the pipeline

Even though Lilly holds 60% of the U.S. GLP-1 market right now, the company isn't resting on its laurels. Instead, it has a solid pipeline of candidates that could result in the blockbuster weight loss drug of tomorrow.

What's Lilly's big news? In a phase 2 trial, the pharma giant's weight loss combo, EloraTZP, resulted in greater weight loss for patients than tirzepatide alone. This means EloraTZP, set to begin phase 3 trials in the fourth quarter, could top the performance of Lilly's star weight loss drugs.

EloraTZP combines tirzepatide with eloralintide, a selective amylin receptor agonist, and acts on three hormonal pathways -- tirzepatide alone acts on two. Eloralintide works on the feeling of satiety, so it may lower calorie intake. In the study, EloraTZP, given to patients with type 2 diabetes and obesity, resulted in an average of 23.3% weight loss compared to 14.8% weight loss for those on tirzepatide. Eli Lilly is also studying eloralintide on its own for obesity in a phase 3 trial.

Competition ahead

So, what does this mean for investors? Lilly is already the leader in this valuable space that should offer growth well into the future. However, it faces competition from Novo and in the coming years could see an increasing number of rivals. Today, biotech players such as Viking Therapeutics, as well as fellow big pharma companies like Pfizer, are advancing weight loss drug candidates.

Lilly's news shows that it isn't just dabbling in the weight loss space but instead building a solid portfolio that eventually may offer a variety of drugs. Why is it important to offer more than one or two products? Weight loss needs differ from patient to patient, and providing options could be the key to success for patients and for the company down the road. Some patients may need to lose a greater amount of weight, for example, while others need to lose less -- each might be directed to a different Lilly drug.

Of course, Lilly's EloraTZP still must go through phase 3 trials and gain regulatory approval. But, so far, based on the recent data, there's reason to be optimistic about the candidate's future and the future of Lilly's weight loss portfolio. And considering that the need for weight loss drugs isn't going away, Lilly makes a great stock to buy today and hold onto for years to come.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly, Novo Nordisk, and Pfizer. The Motley Fool recommends Viking Therapeutics. The Motley Fool has a disclosure policy.