A successful Alzheimer's drug will help Eli Lilly join the $1 trillion club

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Eli Lilly became the most valuable health-care company in the world on the back of its blockbuster diabetes and obesity drugs. To join the $1 trillion market capitalization club, it will need help from the bench — including an Alzheimer's drug that moved one step closer to market this week. A key advisory panel for the Food and Drug Administration on Monday recommended donanemab, Eli Lilly's treatment for the memory-robbing disease, paving the way for full approval later this year. Donanemab would join Leqembi — co-developed by Biogen and Japanese drugmaker Eisai — as the only two Alzheimer's treatments actively on the U.S. market. Other drugs for people with Alzheimer's only treat the symptoms, not the underlying mechanisms driving the disease. Analysts expect sales of donanemab to total $331 million in 2025 before growing to $705 million in 2026, according to FactSet. Small potatoes, considering the combined revenue from type-2 diabetes therapy Mounjaro and weight-loss treatment Zepbound are projected to be $26.2 billion in 2025 and $33.6 billion in 2026. However, analysts say donanemab helps Eli Lilly diversify beyond the hot GLP-1 class of drugs, helping to offset the risk of more competition in the weight-loss category. For now, Eli Lilly and rival Novo Nordisk, which makes Ozempic for diabetes and Wegovy for obesity, have a duopoly in the GLP-1 market. But the potential for new entrants, even if the bar to entry is high, is always something to watch. To be sure, the market for GLP-1s hasn't dimmed. The billions of dollars in Eli Lilly is investing in manufacturing capacity support the idea that the long-term opportunity is immense. Demand for type-2 diabetes therapy Mounjaro and weight-loss treatment Zepbound has outstripped supply . And recent sales data and other GLP-1 developments have lent further support to Jim Cramer's prediction that the active ingredient behind both Mounjaro and Zepbound, known as tirzepatide, could become the best-selling drug of all time. Buzz around GLP-1s drugs has been the primary fuel for Eli Lilly's blistering stock run, up 59% last year and another 48% so far in 2024 to bring its market capitalization to $817.5 billion. LLY .SPX 5Y mountain Eli Lilly's five-year stock performance compared with the S & P 500. With 951.8 million shares outstanding, Eli Lilly would need to trade slightly above $1,050 a share to reach the vaunted $1 trillion market cap — a milestone anticipated late last year by legendary investor Ken Langone; Morgan Stanley analysts also discussed the possibility in a February note to clients. That implies more than 21% upside from the stock's record close of $865 a share Monday. The new Alzheimer's drug could provide another boost. "Investor focus on donanemab has been greatly diminished since the launch of Zepbound and data that support durable, mega-blockbuster opportunities for LLY in obesity/ cardiometabolic diseases," Cantor Fitzgerald analysts wrote in a note to clients Monday, referencing the benefits to heart health GLP-1s have demonstrated in other trials. "But, a growth opportunity that diversifies sales away from obesity/cardiometabolic diseases is good for LLY." Surprise FDA vote Donanemab slowed cognitive and functional decline by 35% in an early Alzheimer's patient group compared with a placebo group, according to an 18-month trial conducted by Eli Lilly. Meanwhile, Leqembi slowed progression by 28% in its own 18-month study. Leqembi is generally seen as having a better safety profile, though both drugs carry risks around brain swelling and bleeding. Both drugs attempt to slow the progression of Alzheimer's in similar ways by reducing abnormal clumps of the protein amyloid beta that build up on the brain. These amyloid clumps have long been associated with the disease, although their precise role remains up for debate. Leqembi received full FDA clearance in July 2023. Leqembi had a slow launch due in part to health-care system bottlenecks, but Biogen offered encouraging commentary about an acceleration in sales alongside earnings in April. Adding Eli Lilly to the market could help address some of the obstacles that limited Leqembi's sales early on. That includes patients obtaining the MRIs needed to monitor their response to the drugs — part of our thesis in GE Healthcare . The imaging equipment manufacturer also makes a diagnostic agent called Vizamyl, which helps measure amyloid plaque levels. Eli Lilly, which has spent billions in search of a successful Alzheimer's treatment , had hoped for donanemab to be approved by now. But in early March, the FDA surprisingly called the meeting of the advisory panel as it sought clarity on the drug's safety and the impact that its unique trial design had on efficacy. Ultimately, the 11-member FDA advisory panel voted unanimously in favor of donanemab on both of the questions it was tasked to weigh in on. Do the available data show that donanemab is effective for the treatment of Alzheimer's disease in the population enrolled in the clinical trials with mild cognitive impairment and mild dementia? Do the benefits outweigh the risks of donanemab in the treatment of Alzheimer's disease in the population enrolled in the clinical trials with mild cognitive impairment and mild dementia? The 11-0 vote tally came as a surprise to some, with Cantor Fitzgerald analysts describing the results as "better than we anticipated" based on their reading of briefing documents for Monday's meeting released last week. (Jim Cramer's Charitable Trust is long LLY. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED. A sign with the company logo sits outside of the headquarters campus of Eli Lilly and Company on March 17, 2024 in Indianapolis, Indiana. Scott Olson | Getty Images