Eli Lilly stock is yo-yoing in December after the company's weight-loss drug, Zepbound, topped Novo Nordisk's rival, 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.
Promisingly, before Thanksgiving, President Joe Biden proposed Medicare and Medicaid pay for the cost of obesity treatments. The proposal would increase usage of Zepbound and Wegovy. Today, Medicare doesn't pay for obesity drugs unless they treat a related condition like diabetes or reduce the risk of heart attacks or strokes.
But the proposal will be left up to President-elect Donald Trump. Trump's incoming Secretary of the Department of Health and Human Services, Robert F. Kennedy Jr., has been skeptical about weight-loss drugs. But Dr. Mehmet Oz, who Trump has tapped to lead Medicare, has praised them, according to NBC News.
Bearishly, Lilly missed third-quarter sales calls for Zepbound and Mounjaro, the diabetes treatment that uses the same chemical backbone. That led the pharma behemoth to cut its full-year guidance.
Lilly is also facing off with compounders, who continue to make knockoff versions of tirzepatide, the key ingredient behind Zepbound and Mounjaro. The Food and Drug Administration is now looking at whether tirzepatide is actually in shortage.
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 climbed 20% to $11.44 billion, but lagged forecasts for $12.09 billion. Lilly noted it sold a schizophrenia and bipolar disorder drug called Zyprexa. Excluding year-earlier sales of Zyprexa, total revenue rose 42%.
But sales of Lilly's flagship product, tirzepatide, missed expectations. Mounjaro brought in $3.11 billion in sales. Sales rocketed 121%, but were short of forecasts for $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 U.S. "were negatively impacted by inventory decreases in the wholesaler channel."
For the fourth quarter, analysts expect $5.48 adjusted earnings per share and $14.02 billion in sales. Earnings would surge 120% as sales increase almost 50%.
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 for $13.42. The company also lowered the high end of its sales outlook and now expects $45.4 billion to $46 billion in sales. That completely missed views for $46.24 billion in sales.
Eli Lilly Stock Analysis
On Dec. 11, Eli Lilly stock had backed off its 200-day and 50-day moving averages. LLY stock is consolidating with a buy point at 972.53, according to MarketSurge.
Shares have a middle-of-the-road Relative Strength Rating of 44 out of a best-possible 99, IBD Digital shows. This puts LLY stock in the bottom half of all stocks when it comes to 12-month performance. Lilly stock also has a strong Composite Rating of 75, a measure of fundamental and technical metrics.
Recent News Around Lilly Stock
The race to develop new weight-loss drugs continues to heat up.
LLY stock fell in July after Pfizer and Viking Therapeutics announced plans to run additional testing for obesity treatments. A weight-loss treatment study from Roche also pressured Lilly shares.
Lilly is also working on a next-generation weekly shot called retatrutide. While tirzepatide loops in two hormonal targets to stoke weight loss, retatrutide targets three. Its 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 drug, donanemab, gained FDA approval in July. It will sell under the brand name Kisunla.
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%.
It rivals Biogen and Eisai's Leqembi.
In the U.K., Kisunla is now approved for patients with one copy of a genetic mutation that makes them more susceptible to developing early-onset Alzheimer's disease or non-carriers. People with two copies of that mutation are more likely to experience brain swelling as a result amyloid removal.
Is LLY Stock A Buy Or A Sell Right Now?
Eli Lilly stock was neither a buy nor a sell on Dec. 11. Shares are now well below their 50-day and 200-day lines, making a definitive move above them — and an early breakout — unlikely.
Notably, Lilly's third-quarter report dragged on LLY stock. Though growth remains strong, sales of its two biggest products lagged expectations.
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.
