Eli Lilly stock continued its five-month downfall in mid-January after the company slashed its sales guidance for the fourth quarter.
The company now expects $13.5 billion in sales. That's about $400 million below the low end of its prior guidance and includes $3.5 billion from type 2 diabetes drug Mounjaro and $1.9 billion from anti-obesity medication Zepbound. All three pieces of Lilly's guidance lagged expectations.
Eli Lilly stock fell nearly 7% on Jan. 14. Shares topped out at 972.53 on Aug. 22. Since then, shares have tumbled almost 23%, as of early trades on Jan. 16.
There are still key catalysts approaching, says Leerink Partners analyst David Risinger. Zepbound just won Food and Drug Administration approval to treat obstructive sleep apnea. That will likely expand Medicare coverage for the weight-loss drug. Further, Lilly is working on an obesity-treating pill called orforglipron. Analysts expect it to be the first oral medication in its class to hit the market.
Notably, the FDA also decided in late December that tirzepatide, the chemical backbone behind Zepbound and Mounjaro, is no longer in shortage. This means compounding pharmacies will soon no longer be able to provide knock-off versions of the popular drugs.
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 Novo Nordisk's rival drug, Wegovy. Today, Medicare doesn't pay for obesity drugs unless they treat a related condition 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.
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."
Lilly also just cut its outlook for the fourth quarter, leading analysts to lower their expectations. The Street projects adjusted profit of $5.30 per share and $13.78 billion in sales. Earnings would rocket 113% as sales climb 47%.
In January, Eli Lilly said it expects $45 billion in sales for 2024. That's $4 billion above the midpoint of its first-time guidance for 2024, but down from the company's most recent outlook for $45.4 billion to $46 billion in sales. For 2025, Eli Lilly projects $58 billion to $61 billion in sales, above forecasts.
Eli Lilly Stock Analysis
Eli Lilly stock briefly retook its 50-day moving average on Jan. 10. But that was short-lived and shares fell below that key mark on Jan. 14, when Lilly cut its fourth-quarter and 2024 guidance.
LLY stock is consolidating with a buy point at 972.53, according to MarketSurge. But shares could struggle climbing above their 50-day line.
Shares have a low Relative Strength Rating of 26 out of a best-possible 99, IBD Digital shows. This puts LLY stock just above the bottom quarter of all stocks when it comes to 12-month performance. Lilly stock also has a Composite Rating of 69, a measure of fundamental and technical metrics.
Recent News Around 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 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?
Eli Lilly stock was a sell on Jan. 14 when shares definitively undercut their 50-day line on the guidance cut. The move could make it more difficult for LLY stock to break out of its consolidation with the 50-day moving average providing a ceiling for shares.
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.
