Is Eli Lilly Stock A Buy After Snagging Approval For A New Eczema Drug?
As we step into October, Eli Lilly’s stock (NYSE: LLY) has been tracking sideways following its recent approval from the Food and Drug Administration (FDA) for Ebglyss, a new treatment for moderate-to-severe eczema. This monthly injectable drug is designed for patients aged 12 and older who struggle with eczema inadequately managed by topical therapies. The company reported that over 80% of patients receiving Ebglyss maintained their eczema control over a three-year span, providing a promising outlook for this new product in their portfolio.
Strong Performance Amid Mixed Sentiment
After peaking with an intraday record high on August 22, Lilly’s stock has exhibited a lack of momentum, drifting downward in subsequent weeks. Nevertheless, another highlight comes from its weight-loss drug, tirzepatide, significantly lowering the risk of progression to type 2 diabetes by 94% in patients with prediabetes and obesity, showcasing its potential impact on public health. Comparatively, participants in the trial lost an average of 22.9% of their body weight versus a mere 2.1% for those on a placebo.
Earlier this month, Lilly made headlines with its announcement regarding a lower-cost variant of tirzepatide branded as Zepbound. This version offers consumers a more affordable alternative at least 50% below the price of existing obesity treatments, a strategic move that may increase accessibility and drive sales growth.
A Promising Financial Outlook
In a surprising second-quarter earnings report, Eli Lilly delivered an adjusted $3.92 per share on $11.3 billion in sales—an impressive 86% increase against forecasts of $2.74 per share. This sales figure was a notable 36% increase Year-over-Year (YoY), surpassing the expected $9.97 billion. Positive contributions came from both Mounjaro and Zepbound; however, other diabetes treatments like Trulicity and Jardiance failed to meet market expectations, with sales declining 31% and falling below projections, respectively.
Looking ahead, analysts predict earnings of $4.49 per share and sales of $12.22 billion for the third quarter—indicative of an upward trajectory of nearly 1,000% YoY for earnings and about 29% growth for sales. Following this report, Lilly increased its 2024 sales forecast by $3 billion, projecting total sales to be between $45.4 billion and $46.6 billion.
Stock Performance and Market Position
From a technical analysis perspective, the Eli Lilly stock is converging around its 50-day and 200-day moving averages, boasting a Relative Strength Rating of 90 out of a possible 99 according to Investor’s Business Daily (IBD) metrics. This positions it within the top 10% of stocks based on a 12-month performance metric. Moreover, it holds an impressive Composite Rating of 98, which reflects both fundamental and technical performance.
Competitive Landscape and Future Innovations
Nonetheless, the rural landscape for weight-loss drugs is becoming increasingly competitive. Lilly’s stock took a hit in July as competitors like Pfizer and Viking Therapeutics announced additional clinical trials for their obesity drugs. Criticism surrounding pricing from prominent political figures like President Joe Biden and Senator Bernie Sanders has also placed downward pressure on the stock.
Lilly is not resting on its laurels, as it actively develops a next-generation weekly injection called retatrutide. By targeting three hormonal pathways for weight loss—compared to tirzepatide’s two—this drug could significantly enhance patient outcomes and market share. Furthermore, Lilly’s oral formulation of orforglipron is anticipated to be a frontrunner in the oral weight-loss medication space.
Recent Approvals and Strategic Moves
In a notable achievement, Lilly’s Alzheimer’s treatment, donanemab, received FDA approval in July and will be marketed under the name Kisunla. This drug addresses cognitive decline by targeting the build-up of beta-amyloid protein and has shown better efficacy in patients with tau protein accumulation. In trials, Kisunla demonstrated a 22% to 29% reduction in cognitive decline over 18 months, particularly outpacing competitors like Biogen and Eisai’s Leqembi in specific patient demographics.
Investment Outlook: Should You Buy or Sell?
Currently, the consensus on Eli Lilly stock remains neutral—not a clear buy nor a sell. While the share price briefly reclaimed its 50-day moving average—a typically bullish sign—it has yet to establish a solid base for further gains. With strong metrics around second-quarter sales and earnings, all eyes will be on how competitive landscapes evolve for both weight-loss drugs and treatments for Alzheimer’s disease.
In conclusion, Eli Lilly’s commitment to innovation and its robust product pipeline create significant growth potential in the near future. Investors are encouraged to keep an eye on the ongoing developmental progress of its drugs and broader market conditions. As always, due diligence remains paramount.
