Why Eli Lilly Stock's Big Jump Last Week Could Be Just the Beginning of Another Huge Run

For a while, it seemed the streak was over for Eli Lilly (NYSE: LLY) . Shares of the big drugmaker skyrocketed nearly 160% between early 2023 and mid-July of this year. However, Lilly's stock plunged almost 19% afterward -- until last week.

On Aug. 8, Lilly reported stellar second-quarter results and the pharma stock quickly soared more than 15%. Here's why Lilly's big jump last week could be just the beginning of another huge run.

Mounjaro and Zepbound are gaining in popularity

Recent optimism around the stock is largely due to robust sales for three products: Mounjaro, Zepbound, and Verzenio. While sales for blockbuster breast cancer drug Verzenio vaulted 44% higher in the reported quarter, investors were even more excited about the results for Mounjaro and Zepbound, used to treat diabetes and promote weight loss.

Mounjaro's sales more than tripled year over year in Q2 to nearly $3.1 billion. Sales for Zepbound, which won U.S. Food and Drug Administration (FDA) approval in November 2023, topped $1.2 billion in the second quarter.

Under the hood, Mounjaro and Zepbound are the same drug -- tirzepatide. Lilly markets Mounjaro in the U.S. as a treatment for type 2 diabetes (T2D) and outside the U.S. for both T2D and obesity. In the U.S., the company uses the Zepbound brand for the obesity indication.

Lilly raised its full-year 2024 revenue guidance by $3 billion, to between $45.4 billion and $46.6 billion. The company unsurprisingly attributed this improved outlook primarily to "the strong performance of Mounjaro and Zepbound."

But Mounjaro and Zepbound are only warming up. Analysts surveyed by FactSet project the two products will generate combined sales of over $50 billion by 2029.

More on the way

The company has more potential rising stars in its lineup and pipeline.

The FDA approved Kisunla last month as a treatment for early stage Alzheimer's disease. Analysts expect the drug to generate peak annual sales in the ballpark of $5 billion.

Lilly also has great expectations for tirzepatide in treating indications other than T2D and obesity. It recently filed for regulatory approvals in the U.S. and EU of the drug in treating obstructive sleep apnea in adults with obesity. The company reported positive results earlier this month for the drug in treating patients with heart failure with preserved ejection fraction and obesity. Lilly is also evaluating tirzepatide in a phase 2 clinical study targeting metabolic-associated steatohepatitis (MASH).

And Mounjaro and Zepbound might not be Lilly's only T2D and obesity drugs in the future. The drugmaker has two promising late-stage candidates that target both indications: orforglipron and retatrutide.

Lilly's main drawback

Sales for Mounjaro and Zepbound will almost certainly continue to climb dramatically. Lilly could have key catalysts from FDA approvals and late-stage clinical results of its pipeline programs. Its stock could very well begin another huge run.

There are a few things that could get in the way, though. Competitors could gain market share at Lilly's expense, and it's possible that the company's experimental drugs could flop in clinical studies.

However, arguably the main drawback for Lilly is its valuation. The company now stands as the world's largest drugmaker, with its market cap topping $840 billion, and its forward price-to-earnings ratio around 65. Massive growth expectations are priced into Lilly's shares. Any hiccup along the way could prevent the stock from rising. But the chances that Lilly is at the beginning of another major uptrend still look pretty good.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .