Eli Lilly (LLY) scored a big win for its weight loss drug in December when the Food and Drug Administration approved Zepbound for patients with obstructive sleep apnea.
But Lilly stock is still struggling.
↑
X
The Weight Loss Drug Market is Hot. Which Medical Stock Will Win the Battle for Dominance?
Zepbound is now the first and only medication approved to treat moderate-to-severe sleep apnea, a space historically dominated by continuous positive airway pressure, or CPAP devices. Sleep apnea occurs when a person's airway closes during sleep. This causes temporary disturbances in breathing.
Patients who took Zepbound lost an average of 20% of their body weight and had at least 25 fewer breathing interruptions every hour while they slept.
Notably, the FDA also determined in late December that tirzepatide, the chemical backbone behind Zepbound and the diabetes drug Mounjaro, no longer in short supply. This means that compounding pharmacies will soon be unable to provide knock-off versions of the popular drugs.
Promisingly, before Thanksgiving, President Joe Biden proposed that Medicare and Medicaid cover the cost of obesity treatments. The proposal would increase the use of Zepbound and Novo Nordisk's (Non-governmental organizations) competitor drug, Wegovy. Today, Medicare does not pay for obesity drugs unless they treat an associated condition such as diabetes or reduce the risk of heart attacks or strokes.
But the proposal will be left to President-elect Donald Trump. Trump's new Secretary of the Department of Health and Human Services, Robert F. Kennedy Jr., has been skeptical about weight loss drugs. But Dr. Mehmet Oz, whom Trump has tapped to lead Medicare, has praised them, according to NBC News.
Sorry, Lilly missed third quarter sales calls for Zepbound and Mounjaro. That led the pharmaceutical giant to slash its full-year guidance.
So, is Lilly stock a buy or a sell right now?
Eli Lilly Stock: Sales, Earnings Lag
In the third quarter, Eli Lilly earned an adjusted $1.18 per share, widely missing expectations for $1.45, according to FactSet. Sales increased 20% to $11.44 billion, but lagged forecasts of $12.09 billion. Lilly noted that it sells a schizophrenia and bipolar disorder drug called Zyprexa. Excluding sales of Zyprexa a year earlier, total revenue increased 42%.
But sales of Lilly's flagship product, tirzepatide, fell short of expectations. Mounjaro brought in $3.11 billion in sales. Sales increased 121%, but fell short of forecasts of $3.77 billion. Zepbound, the weight loss drug, generated $1.26 billion in sales, missing the Street's call for $1.73 billion.
The company said third-quarter sales in the United States “were negatively impacted by inventory reductions in the wholesaler channel.”
For the fourth quarter, analysts expect adjusted earnings of $5.46 per share and $13.96 billion in sales. Earnings would increase by 119% as sales increase by more than 49%.
After the third quarter report, Eli Lilly cut its earnings target to $13.02 to $13.52 per share. The midpoint of that guidance missed analysts' estimate of $13.42. The company also lowered the high end of its sales forecast and now expects $45.4 billion to $46 billion in sales. That missed a total of $46.24 billion in sales.
Eli Lilly Stock Analysis
Eli Lilly's stock is undercut 50 day moving average in October and his 200 day line in November. LLY stock is consolidate with a point of purchase at 972.53, according to Market Surge. But shares could struggle to climb above those key lines.
Proportions are average Relative Strength Scale of 32 out of 99 best possible, Digital IBD shows. This puts LLY stock in the bottom third of all stocks in terms of 12 month performance. Lilly stock also has a Composite Scale of 71, a measure of fundamental and technical metrics.
Latest News About Lilly Stock
The race to develop new weight loss drugs continues to heat up.
In a recent study, Lilly's Zepbound topped Novo's Wegovy in the first ever head-to-head study.
Participants with obesity and one other medical condition – but not diabetes – lost up to 20.2% of their body weight over 72 weeks. In comparison, Wegovy recipients lost 13.7% of their body weight. That translated to about 50 pounds and 33 pounds, respectively.
LLY stock then fell in July Pfizer (PFE) a Norse therapeutics (VKTX) announced plans to conduct additional trials for obesity treatments. Weight loss treatment study by Roche (RHHBY) also put pressure on Lilly sharing.
Lilly is also working on a next-generation weekly shot called retatrutide. While tirzepatide loops in two hormonal targets to prevent weight loss, retatrutide targets three. His oral weight loss drug, dubbed orforglipron, is also expected to be the first weight loss pill to hit the market.
In other news, Lilly's Alzheimer's drugdonanemab, won FDA approval in July. It will sell under the Kisunla brand name.
Kisunla works by removing a built-up protein called beta amyloid. In testing, Kisunla worked better in patients whose amyloid contained 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%.
He competes Biogen (BIB) a Wanted's (ESAIY) of this group.
In the UK, Kisunla is now approved for patients with one copy of a genetic mutation that makes them more susceptible to developing early Alzheimer's disease or those who are not carriers. People with two copies of that mutation are more likely to experience swelling of the brain as a result of amyloid removal.
Is LLY Stock Currently Buying or Selling?
Eli Lilly stock was neither a buy nor a sell on Jan. 8. Shares are below their 50-day and 200-day lines, meaning a definitive move above them — and an early breakout — is unlikely.
Notably, Lilly's third quarter report dragged down LLY stock. Although growth remains strong, sales of its two biggest products were below expectations.
It will be key to watch how the markets for weight loss drugs and Alzheimer's treatments develop.
To find the best stocks to buy and watch, look out IBD Stock Lists. Be sure to keep tabs on it too stocks to buy or sell.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
YOU MAY ALSO LIKE:
Is Moderna Stock a Buy After Unexpectedly Raising Its 2023 Sales Forecast?
Is Pfizer Stock a Buy or a Sell With Covid-Era Growth in the Rearview?
Watch the IBD Investment Strategies Show for Actionable Market Insights
Get Timely Buy and Sell Alerts With the IBD Leaderboard
The Best Growth Stocks to Buy and Watch: See Updates to IBD Stock Lists