Is Eli Lilly Stock A Buy As It Bolsters Access To Weight-Loss Drugs? (2024)

Eli Lilly stock is trending higher in the New Year, helped by its takeover of Point Biopharma and after launching a direct-to-consumer website for migraine, diabetes and weight-loss drugs.

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The direct-to-consumer website will hook patients up with independent doctors and support, and facilitate shipping specific medicines to patients' houses. But, on the same day, Eli Lilly (LLY) condemned the use of diabetes and weight-loss drugs, like Mounjaro and Zepbound, for cosmetic weight loss.

Lilly says it doesn't "promote or encourage" the use of its medications beyond their approved uses. Zepbound treats obesity while Mounjaro is a type 2 diabetes treatment. Both mimic gut hormones to improve feelings of satiety and markers of blood glucose, and slow how fast the stomach empties itself.

The obesity market is expected to be a big business for Eli Lilly. In 2024, analysts call for Zepbound to bring in $3.79 billion in sales, growing to $11.01 billion in 2028. But shares seesawed last month after Lilly said patients who stopped taking Zepbound after a eight months regained some of the lost weight over a year. Eli Lilly stock toppled 2.3% on the news of the test results on Dec. 11.

Meanwhile, Lilly locked up its acquisition of Point Biopharma, an expert in radioligand treatments for cancer. The company ties a radioisotope to a molecule capable of finding cancer cells in the body. This allows the drug to deliver targeted radiation directly to the tumor, limiting the impact on healthy tissue.

The Alzheimer's treatment space is also gaining new legs. Biogen (BIIB) won the first full approval for a drug that modifies a hallmark of the disease. Lilly expects the FDA to make an approval decision on its experimental drug, dubbed donanemab, in the current quarter. Donanemab uses the same mechanism as Biogen and Eisai's (ESAIY) Leqembi.

So, is Eli Lilly stock a buy right now?

Eli Lilly Stock: Bullish Earnings Growth

During the third quarter, Lilly earned an adjusted 10 cents per share on $9.5 billion in sales. LLY stock analysts projected a per-share loss of 18 cents due to tax charges. Earnings tumbled 95%. Sales jumped 36%, though, and easily topped projections for $8.97 billion.

Mounjaro generated $1.41 billion, also coming in north of views for $1.28 billion, according to FactSet. Likewise, breast cancer treatment Verzenio beat expectations at $1.04 billion, growing 68%.

But other drugs faced pricing constraints in the U.S., Third Bridge analyst Lee Brown said in a report. Jardiance, a diabetes drug, brought in $700.8 million in sales, up 22%, but below projections. Analysts are watching sales of Jardiance now that it's also approved to treat patients with chronic kidney disease.

Bullish third-quarter sales lines up with savvy investing advice, which suggests investors look for companies with recent growth of at least 20% to 25%. But earnings aren't hitting that bar due to the expected tax charges.

In the fourth quarter, Eli Lilly stock analysts predict earnings of $2.44 per share, surging 17%, and for sales to grow 23% to $8.95 billion.

LLY Stock: What Are Eli Lilly Yearly Earnings?

In 2022, Eli Lilly earned $7.94 per share, minus some items, on $28.54 billion in sales. Profit dipped almost 3%, but sales inched ahead a fraction. While earnings topped forecasts, sales came in light. But the sales miss was partly due to a tough comparison following strong 2021 sales of Covid treatments.

After the third-quarter report, Lilly retained its 2023 sales guidance for $33.4 billion to $33.9 billion. But the company cut its earnings guidance by $3.20 per share at the midpoint to $6.50 to $6.70 per share. Analysts project earnings of $6.49 a share and $33.66 billion in sales.

At the midpoint of Lilly's outlook, the pharmaceutical company's sales would grow 18%, but earnings would fall 17%.

Sales of its biggest drugs — diabetes medicines Trulicity and Jardiance, autoimmune drug Taltz and cancer treatment Verzenio — are all expected to grow.

Mounjaro is projected to bring in $4.68 billion in 2023 sales, growing almost 869% year over year. Mounjaro sales are expected to nearly double in 2024, generating $8.58 billion. By 2028, Mounjaro sales could approach $22 billion. Zepbound is expected to bring in $75 million in 2023 sales, growing to $3.79 billion in 2024.

LLY stock analysts also expect Alzheimer's drug donanemab to bring in $643 million in 2024 and reaching blockbuster status with $1.15 billion the following year.

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 flat base with a buy point at 629.97 on Jan. 4, according to MarketSmith.com. But shares couldn't hold onto that gain at the close. Shares closed in the buy zone on Jan. 24, but fell below their entry again on Jan. 25. The chase zone runs from 629.97 to 661.47.

Shares retook their 50-day line on Jan. 2 and remain above their 200-day moving average.

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 Composite Rating of 85, a measure of fundamental and technical metrics.

Alzheimer's Treatment News Bolsters LLY Stock

Eli Lilly is angling for FDA approval of donanemab, a potential Alzheimer's treatment that removes built-up plaque in the brain known as beta amyloid. Beta amyloid is a hallmark of the disease, though experts don't necessarily agree that it's the cause.

Biogen's Leqembi gained full approval for Alzheimer's treatment based on its ability to remove amyloid. Now, analysts expect Lilly's donanemab to follow suit. In mid-July, Lilly said patients who received its drug for 18 months had a 22%-29% slower decline in cognition than placebo recipients.

The results were even stronger in patients with medium levels of a protein called tau in their brains. Donanemab led to a 35%-36% slower cognitive decline compared with a placebo.

Experts noted that donanemab does a better job of clearing away beta amyloid than Biogen's Leqembi. But that could lead to higher levels of a side effect called amyloid-related imaging abnormalities, or ARIA. This is generally asymptomatic swelling in the brain.

Eli Lilly Stock Investors Watch Weight-Loss Drugs

Investors are waiting for more from Lilly's efforts in obesity treatment. The FDA has signed off on its tirzepatide in patients with type 2 diabetes and as a weight-loss drug.

In December, Lilly said patients who took Zepbound for eight months lost an average of 20.9% of their body weight. But when a group of patients switch to a placebo, they regained 14% of their weight over a year. Those who stayed on Zepbound lost an additional 5.5% of their weight.

In another analysis of electronic health records, patients who took tirzepatide for a year were three times more likely than recipients of Novo's semaglutide to lose at least 15% of their body weight. Novo sells semaglutide as diabetes treatments known as Ozempic and Rybelsus, and as a weight-loss drug called Wegovy. Semaglutide recipients were also 2.6 times and 1.8 times more likely to lose at least 10% and 5% of their weight, respectively.

Lilly's next-generation approach called retatrutide adds in a third target called the glucagon receptor. In theory, this could lead to improved weight loss. Over 24 weeks, overweight patients or those with obesity who received retatrutide lost up to 17.5% of their weight. At 48 weeks, patients lost up to 24.2% of their body weight.

Mounjaro had already set a high bar. In June, Lilly said patients lost up to 15% of their body weight over 72 weeks. Lilly tested the drug in patients with type 2 diabetes and obesity. In patients without diabetes, the drug generated even stronger weight loss, up to 22.5% of their body weight.

Lilly is also testing Mounjaro's ability to improve morbidity and mortality in patients with obesity or those who are overweight. The results of that study are expected in late 2027.

In August, Novo Nordisk said its obesity drug Wegovy cut the risk of cardiovascular events — like heart attack or stroke — in a five-year study. This could help make the case for insurance coverage of weight-loss drugs for patients who have or are at risk of cardiovascular disease. Later in the year, Novo said a weekly shot of Ozempic helped stave off renal impairment and reduced the risk of death due to kidney or cardiovascular disease in patients with type 2 diabetes and chronic kidney disease.

Lilly just acquired Versanis Bio, which has a drug that could improve fat loss while limiting muscle mass loss associated with GLP-1 drugs. Further, Lilly entered into a collaboration with Verve Therapeutics (VERV) to test three potential gene-editing approaches to permanently lowering cholesterol.

Is LLY Stock A Buy Right Now?

Lilly stock isn't currently a buy. Shares are now below their buy point, though remain above their key moving averages. If shares return to that zone, they will be considered a buy.

Lilly also reported strong sales and earnings growth, in line with savvy investing advice and well above LLY stock analyst forecasts.

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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