Eli Lilly: capacity is the constraint, not demand
Demand for the weight-loss drugs exceeds what the company can make, and it has been that way for two years. Every new plant that comes online converts waiting patients into revenue. The multiple is high; the earnings growth behind it is higher.
Sample research report used to test the layout. Delete before launch.
Thesis
Supply-constrained growth is the best kind: the revenue is already waiting. Each capacity addition is a known step up in sales, and the company has published the schedule.
Catalysts
- New manufacturing sites starting production on the announced dates.
- The oral version of the drug, which removes the injection barrier for many patients.
Risks
- Pricing pressure from insurers and governments as volumes grow.
- Competition from a second and third entrant with comparable results.
What would prove me wrong
A competitor’s oral drug showing better results in a head-to-head trial. Then demand shifts, and the capacity story becomes a cost story.
Position
Full position. This is a long-horizon holding.