Shares of Club holding Eli Lilly (LLY) jumped Monday, in what was an otherwise mixed day for the broader U.S. stock market after six straight weeks of losses for the S & P 500. The positive move in Lilly to start the new week comes after the Food and Drug Administration on Friday approved the drugmaker’s new treatment for type 2 diabetes called Mounjaro. The FDA said Mounjaro advances treatment of type 2 diabetes. The drug was shown to be more effective at improving blood sugar levels in patients than other diabetes treatments it was compared to in clinical studies. Bottom line Eli Lilly was widely expected to earn U.S. regulatory approval for the diabetes treatment. Friday’s official clearance is good news for Lilly in the near and long term, helping support our belief in the company’s innovation prospects. Admittedly, the stock magnitude of Monday’s stock move is a bit surprising to us if it were only about the Mounjaro development. There’s big-picture context to consider, as well, that may help explain it. The S & P 500’s Pharmaceuticals, Biotechnology & Life Sciences group is one of the best performing industry indexes Monday. While Eli Lilly was the top gainer within the cohort, other drug stocks were moving higher, too. This may be because the group is not economically sensitive, and we just got some weak economic economic data out of China , partly attributed to Covid lockdowns in cities including China’s biggest, Shanghai. To be clear, many investors and analysts are optimistic about the new type 2 diabetes treatment’s impact on Eli Lilly, and so are we. For example, Cowen analysts wrote in a research note Monday: “Mounjaro exemplifies LLY’s long history of innovation.” We agree, and we’ve touted Lilly’s innovation pipeline since last year . We’ve consistently pointed to it as the reason we’re most bullish on the company’s prospects. Of course, we’re also fans of its consistent top-line growth and its ability to expand margins through becoming a more efficiently run company. But innovation is central to our investment thesis, and Mounjaro is a win in that regard. Business impact Sales estimates for Mounjaro vary across Wall Street. Cowen, which has an overweight rating on LLY shares, expects $250 million in sales in 2023, growing to $4.5 billion in 2027. Morgan Stanley analysts project $12.2 billion of Mounjaro sales in 2030 related to diabetes. They said the FDA’s approval of the diabetes therapy is “another important de-risking event” for the drug and LLY shares, which they also rate overweight. An important thing to know about this drug is that in addition to treating diabetes, it may also become a way to treat obesity. When factoring that in, Morgan Stanley believes the drug could reach total sales of $17.2 billion in 2030. We wrote about the obesity-treatment potential last month after Eli Lilly released highly anticipated trial results that, on average, showed considerable weight loss for participants. “It’s really exciting,” CEO Dave Ricks told CNBC at the time . “Kind of the best-case scenario we could’ve hoped for when we designed this study.” Clinical trials of Mounjaro specifically as a weight-loss treatment are still ongoing, so Eli Lilly isn’t in a position to file for regulatory approval just yet for that purpose. It’s more of a down-the-road event, depending on how the trials progress, but it’s another promising avenue in the coming years. C-suite commentary Ricks was back on CNBC on Monday to talk about Mounjaro as both a diabetes treatment and its other potential therapeutic uses. Here are some highlights. “We all know that obesity drives a lot of other diseases — heart diseases and joint diseases and even sleep apnea. We’re studying this drug in all those things. Hopefully, in a little while out we’ll be able to promote it for obesity, as well. Just one study in so far on that. We’ll start with diabetes … then hopefully expand through time to treat, really, what is a primary driver of bad health outcomes and cost in the United States, which is obesity.” According to Ricks, Mounjaro is the first FDA-approved diabetes drug that targets two hormones that control blood sugar known as GLP-1 and GIP. “Half of the people who took our drug had HbA1c — the measure of glucose control — that is below the diagnosis rate for diabetes, so really incredible control. And that is so necessary because many, many people with diabetes in the United States and around the world don’t control their sugar well, and it does it by also reducing your weight, which is escalating weight can be a bad indicator for future outcomes in diabetes.” Stock outlook Monday’s strong performance for Eli Lilly shares represents a continuation of what we’ve seen over the past 12 months. The stock has gained about 54% over that stretch, trading around $303 on Monday, compared with more than 3% decline for the S & P 500. In the past three months, which have been really rough on Wall Street, LLY was up roughly 28% compared the S & P 500’s decline of 8.3%. We’ve been in and out of Lilly stock through the years, with the most recent initiation in October 2021. The Club owns 450 shares of LLY on average cost basis of $248.04. LLY has a just over a 4.5% weighting in the portfolio. Late last month, we updated LLY to a 1 rating on the stock right now, meaning we’d be buyers here . 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