This Is the Best Pharma Stock to Invest $1,000 in Right Now

Eli Lilly (NYSE: LLY) is already a top pharmaceutical stock, and there are no signs that it's slowing down. With its dramatically successful medicines for type 2 diabetes and weight loss still near the start of their global market penetration, and with an array of follow-on drugs in development right now, the party for shareholders could continue for years and years.

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

Lilly's major investments in manufacturing show it's serious about realizing revenue

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

Take its seemingly endless investments in manufacturing, for example. On Sept. 12, Lilly announced that it was committing an additional $1.8 billion to its budget for constructing new manufacturing facilities in Ireland. That new spending brought the total that the drugmaker had dedicated to building up its manufacturing capabilities in the U.S. and E.U. to more than $20 billion since about four years ago.

Its new and newly expanding facilities in Ireland should help it to meet demand for its highly sought-after medicines, specifically those for weight loss and type 2 diabetes, as well as its recently commercialized therapy for Alzheimer's disease.

Even for a major pharma business, it might seem to be a bit early in these drugs' commercial lives to be throwing billions around on boosting production -- until, that is, you consider the fact that Lilly has been selling its medicines so rapidly that it has been eclipsing its own forecasts.

In Q2, it brought in $11.3 billion in sales, 36% higher than a year prior, and it cranked up its annual revenue guidance for 2024 by $3 billion at the time of its Q2 report. It now anticipates a minimum of $45.4 billion in annual revenue, and it expects to be strongly profitable all the while, with as much as $16.60 in earnings per share.

Driving this growth are 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 U.S., and Lilly also in late August started to sell single-dose vials of it at a significantly lower list price than its prefilled injector pens. These vials are being sold only to patients who pay out-of-pocket for the pricey drug, so this new option should give even more people access to the treatments.

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

Meanwhile, Eli Lilly continues to do research and development work in search of other indications where tirzepatide might be effective. Success in those efforts would expand its addressable market even further, and deliver even more sales growth for the blockbuster drug. There are not many setups in biopharma stocks that get more bullish than this one.

The stock's valuation could get a bit concerning

No investment is free of downsides, and Lilly's stock does have a few issues that discerning investors should be aware of as well. In particular, its valuation, which is already fairly high, could soon rise so far as to be unapproachable. Its price-to-earnings (P/E) ratio is presently 113. That doesn't necessarily imply that the stock will go down, but it could mean that it will face more difficulty rising further.

Of course, any drugmaker also has to keep an eye on the competition, and in the area of weight loss, there are plenty of companies now working to develop their own, potentially more effective medications.

For now, however, it is fairly certain that Eli Lilly's earnings will continue to grow at a rapid clip, which changes the calculation of shareholders for the better. And if its successes keep piling up and attracting the market's attention, value-sensitive investors will probably start to recognize that it's clear to buy Eli Lilly shares.

Should you invest $1,000 in Eli Lilly right now?

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Alex Carchidi 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.