Eli Lilly (LLY) stock stumbled in late July — and undercut its 50-day line — on obesity treatment updates from fast movers Roche (RHHBY) and Viking Therapeutics (VKTX).
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How Novo Nordisk, Wegovy And Ozempic Are Changing The Weight-Loss Game For Patients And Investors
The company remains one of the duopoly leading the obesity treatment market. But Roche said its daily pill helped patients lose 6.1% more body weight over a month than placebo recipients. That day, Eli Lilly stock dropped 3.8%. On July 25, Lilly shares sank another 4.6% after Viking said it’s exploring the possibility of a monthly weight-loss shot.
Both pieces of news impact Lilly’s current and ongoing weight-loss efforts. Zepbound is a weekly shot that mimics hormones called GLP-1 and GIP to improve feelings of satiety and blood sugar levels. But Roche’s and Viking’s drugs use the same mechanism, and could eventually be offered in daily pill form. Lilly is also working on a daily pill that only targets GLP-1.
Further, Zepbound and chief rival Wegovy, from Novo, continue facing shortages. This gives new companies more space to enter the obesity treatment market.
Earlier this month, Eli Lilly stock pulled back after President Joe Biden and Sen. Bernie Sanders knocked the drugmaker and rival Novo Nordisk (NVO) for the high cost of their weight-loss drugs, Zepbound and Wegovy. The next day, a study suggested semaglutide, the chemical backbone behind Novo’s rival drug, Wegovy, could lead to a blindness disorder.
Promisingly, a study published in the Journal of the American Medical Association Internal Medicine website showed patients who received Lilly’s diabetes drug, Mounjaro, lost more body weight than those taking Novo’s rival med, Ozempic. The active ingredient for these drugs is also used in the companies’ obesity treatments.
Lilly also said it would buy Morphic Holding (MORF) for $3.2 billion. The Morphic deal centers on the company’s lead asset, an experimental treatment for ulcerative colitis and Crohn’s disease. Lilly and Morphic expect the deal to close in the third quarter.
So, is Lilly stock a sell right now?
Eli Lilly Stock: Bullish Sales Growth
In the first quarter, Lilly earned an adjusted $2.58 per share on $8.77 billion in sales. Earnings grew 59% and beat forecasts for $2.47. Sales climbed 26%, but lagged calls for $8.94 billion, according to FactSet.
Diabetes drugs Mounjaro and Trulicity were partly to blame for the light sales quarter. Mounjaro, which uses the same chemical backbone as Zepbound, brought in $1.81 billion in sales, but missed forecasts for $2.15 billion. Trulicity had $1.46 billion in first-quarter sales, down 26% and below the $1.63 billion Street forecast.
Further, sales of breast cancer drug Verzenio and diabetes med Jardiance came up short.
But Zepbound sales shined, bringing in $517.4 million, whereas analysts expected just $373 million. Zepbound is the branded name for tirzepatide in weight loss. Leerink Partners analyst David Risinger notes two-thirds of commercially covered patients had access to the weight-loss drug as of April 1, up from a third on Feb. 1.
Bullish first-quarter sales and earnings line up with savvy investing advice, which suggests investors look for companies with recent growth of at least 20% to 25%. The second quarter could also meet that benchmark, with earnings expected to grow almost 30% to $2.74 per share, and sales projected to rise 20.3% to $10 billion.
LLY Stock: What Are Eli Lilly Yearly Earnings?
In 2023, Eli Lilly earned $6.32 a share, minus some items, on $34.12 billion in sales. Profit fell 20.4% but topped expectations for $6.23. Sales jumped 20% and came in above forecasts for $33.65 billion, according to FactSet.
Notably, Mounjaro generated $5.16 billion in sales, jetting higher from $482.5 million in 2022 sales. Revenue from Verzenio and Jardiance came in at a respective $3.86 billion and $2.74 billion. Sales of Verzenio surged 56%, while Jardiance sales rocketed 33%.
After the first-quarter report, Eli Lilly guided to $42.4 billion to $43.6 billion in 2024 sales. Lilly plans to bolster its production of diabetes and weight-loss drugs later this year. The company also calls for adjusted earnings of $13.50 to $14 a share. Both measures topped analysts’ forecasts.
Wall Street expects Mounjaro to bring in $11.29 billion in sales this year, growing more than 119% year over year. Zepbound is projected to generate $5.06 billion in sales. In 2029, analysts expect the two drugs to bring in $29.95 billion and $20.33 billion in sales, respectively.
LLY stock analysts also expect Alzheimer’s drug donanemab to bring in $24 million in 2024 sales and reaching blockbuster status with $1.01 billion in 2026.
Meanwhile, sales from blockbuster insulins Humalog and Humulin are expected to fall now that Lilly has announced price cuts. Sales of generics-facing Alimta, a cancer drug, are also forecast to drop.
Eli Lilly Stock Analysis
Eli Lilly stock broke out of a double-bottom base, topping a buy point at 793.67 after putting out positive test results for a Crohn’s disease treatment, according to MarketSurge. But shares undercut their 50-day moving average on July 25. Shares remain above their 200-day line.
Eli Lilly stock has a Relative Strength Rating of 93 out of a best-possible 99, IBD Digital shows. This puts shares in the top 7% of all stocks when it comes to 12-month performance. Shares have a nearly perfect Composite Rating of 95, a measure of fundamental and technical metrics.
Alzheimer’s Treatment News Impacts LLY Stock
Eli Lilly’s Alzheimer’s drug, donanemab, gained Food and Drug Administration approval on July 2. It will sell under the brand name Kisunla.
This followed a unanimous vote from a panel of experts in support of the Alzheimer’s treatment. The panel voted the benefits of the treatment outweigh the risks for the types of patients Lilly enrolled in its studies. The panelists also voted unanimously that the clinical studies support the effectiveness of donanemab in early Alzheimer’s treatment.
Kisunla works by removing a built-up protein called beta amyloid. In testing, Kisunla worked better in patients whose amyloid included a protein called tau. Across all patients, donanemab slowed cognitive decline by 22% to 29% over 18 months. In patients with intermediate levels of tau, donanemab slowed the decline by 35% to 36%.
Unlike Biogen (BIIB) and Eisai‘s (ESAIY) Leqembi, which is a chronic treatment, patients will only receive Kisunla while their brains still contain amyloid. About half of patients in Lilly’s study finished treatment with Kisunla in under a year.
Patients taking certain medications or with two copies of a gene called APOE4 are more likely to have ARIA with amyloid-removing drugs. But the advisors mostly said patients, families and physicians should have the opportunity to weigh the risks vs. the potential benefits of the treatment.
Eli Lilly Stock Investors Watch Weight-Loss Drugs
The race to develop better weight-loss drugs continues to heat up.
Eli Lilly stock fell in July after Pfizer and Viking announced their plans to run additional testing of weight-loss drugs. Roche’s test results also pressured Eli Lilly shares. Other big names AstraZeneca (AZN), Amgen (AMGN) and Structure Therapeutics (GPCR) are also in this space.
Lilly is also working on a next-generation weight-loss drug called retatrutide. Its tirzepatide-based drug, Mounjaro and Zepbound, work on two hormones. Retatrutide loops in a third.
Meanwhile, Lilly is hoping to expand the uses for tirzepatide.
Shares rose after Eli Lilly said patients who received tirzepatide for a year had 27.4 fewer sleep apnea events per hour, compared to a 4.8-event reduction for the placebo group. The results were even better for patients who took tirzepatide while using a continuous positive airway pressure, or CPAP, machine.
Further, more than half of patients who took tirzepatide for a year showed improvements in MASH symptoms, vs. just 13.2% of placebo recipients. And 51% to 55% of patients across three doses had fibrosis improvement. But that compared to a high 30% of placebo recipients. MASH, or metabolic dysfunction associated steatohepatitis, causes scar tissue to build up on the liver.
Lilly is going up against a myriad of companies working on weight-loss drugs, including Amgen (AMGN), Viking, Structure, Novo and Pfizer.
Is LLY Stock A Sell Right Now?
Eli Lily stock is actually a sell by at least one measure — shares undercut their 50-day line.
Lilly also reported strong first-quarter sales and earnings growth. But that sales growth lagged Street expectations, though earnings easily beat.
It will be key to watch how the markets for weight-loss drugs and Alzheimer’s treatments unfold.
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Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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