Eli Lilly stock is Wednesday's IBD Stock Of The Day. Shares are forming a flat base as competition mounts for Lilly's weight-loss drug, Zepbound.
This week, Viking Therapeutics said its experimental pill helped patients lose up to 5.3% of their body weight. That was 3.3% better than the weight loss reported by the placebo group. Viking's drug uses the same mechanism as Lilly's Zepbound. Both block hormones called GLP-1 and GIP to slow how fast the stomach empties itself and improve feelings of satiety.
But UBS analyst Trung Huynh says Viking's test results are unlikely to faze leaders Eli Lilly and Novo Nordisk. Both sell approved weight-loss injections and are working on pills.
"Although the data look promising, we note the early Phase 1 study is in a small population," he said in a report. "A Phase 2 trial in obesity is planned for the second half of 2024. Nevertheless, we acknowledge increasingly viable competition in the GLP-1 space for the Lilly/Novo duopoly, but we ultimately believe near- and mid-term impacts are limited."
Eli Lilly stock is clearing a few weeks of resistance, offering savvy investors an early entry above the 21-day line. Shares are squaring off with a buy point at 800.78 out of an emerging flat base.
Lofty Expectations
Despite the mounting competition for weight-loss drugs, expectations remain high for Zepbound and Wegovy. Analysts surveyed by FactSet expect the duo to bring in a combined $12.48 billion in sales this year, growing to $37.72 billion in 2029.
But experts say there's still room to improve for weight-loss drugs. The next big shift will be daily pills, which could help needle-phobic patients. Further, injectable drugs must be stored at specific temperatures, which can limit the markets where they're available.
Viking's drug, dubbed VK2735, looks competitive with Novo's oral semaglutide — the chemical name for Wegovy — and the company's next-generation pill, amycretin, Huynh said.
Semaglutide targets only GLP-1, while amycretin loops in GLP-1 and a second hormone called amylin. After 28 days, the former led to 4% weight loss compared with 1.7% for the placebo group. Amycretin recipients lost up to 13% of their body weight over 12 weeks.
Lilly is also working on a pill called orforglipron. But, like semaglutide, it only targets GLP-1. The "prevailing thesis" is targeting GLP-1 and GIP will lead to stronger weight loss, Huynh said. But he kept his buy rating on Eli Lilly stock.
"We look to larger trials with longer follow-ups to discern how weight loss trends over time," he said.
Eli Lilly Stock Ratings
Notably, Eli Lilly stock has remained above its 50-day moving average this year, according to MarketSurge.com.
Shares also have a strong Relative Strength Rating of 95. This means Eli Lilly stock ranks in the leading 5% of all stocks when it comes to 12-month performance. Shares also have a promising Composite Rating of 93 on a 1-99 scale of technical and fundamental measures.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
