Does Eli Lilly's New $5 Billion Drug Manufacturing Facility Make It a Long-Term Buy?

Key Points

• The facility will be located in Virginia.

• It is one of four state-of-the-art factories planned by the pharmaceutical giant.

• 10 stocks we like better than Eli Lilly ›

Eli Lilly (NYSE: LLY) is a pharmaceutical manufacturer, not a construction business. And yet construction has been a focal point of late, given that it's planning a set of new factories. It's devoting $5 billion or so to the first one, a big investment even for such a large company.

Let's take a brief look at this venture and see what effect it might have on Eli Lilly investors.

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Breaking ground in Virginia

In mid-September, Eli Lilly formally announced the building project, which will rise just west of Richmond, Virginia. The factory will be used to produce products such as antibody-drug conjugates (a type of targeted medication that is delivered directly to cells affected by a particular disease).

Image source: Getty Images.

Such medicines can treat diseased cells and avoid healthy ones. This particularly comes in handy when dealing with afflictions like cancer.

Eli Lilly said that it'll harness cutting-edge technology such as automated systems and artificial intelligence (AI) in the Virginia plant. It's slated for completion within five years.

This build-out is part of Eli Lilly's pledge, made in February, to boost its domestic drug production with four new factories throughout the U.S. The Virginia facility is the first of this quartet. The company hasn't yet provided any details on the three others, including what exactly they'll produce and where they are to be located.

Sparse details

Eli Lilly also didn't offer any estimates on how the new factories will affect its fundamentals and running. It wrote of tightening its supply chain, which -- if managed well -- can reduce costs and boost the bottom line.

What we know so far of the overall project, then, isn't sufficient to determine if this will be a net plus or minus for the company's operations and finances. I'm inclined to say it will be a positive, as this veteran medicine maker has long experience in building and running factories. Plus, it surely wouldn't commit billions of dollars to such a project if it didn't have clear financial goals in mind. Long-term investors should take note and give this stock a closer look.

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Eric Volkman 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.