Eli Lilly (LLY) stock retook its 50-day moving average in early November after diabetes drug, Mounjaro, helped drive a third-quarter beat.
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Before yearend, analysts expect the Food and Drug Administration to sign off on Mounjaro as a weight-loss drug. If that happens, it will compete against Novo Nordisk‘s (NVO) Wegovy. Both drugs mimic a gut hormone, helping improve markers of diabetes like A1C and feelings of satiety, and slow how fast the stomach empties itself. These drugs are called GLP-1 agonists.
But sales of Mounjaro are already bullish, even without the weight-loss approval. Revenue skyrocketed 652% in the third quarter. Similarly, Novo reported 734% growth for Wegovy. The same drug sells as a diabetes treatment called Ozempic. Ozempic sales also jumped 46%.
Now, analysts are watching if the companies can expand their GLP-1 drugs to a broader population of patients.
Last month, Novo said a weekly shot of Ozempic helped stave off renal impairment and reduced the risk of death due to kidney or cardiovascular disease in patients with type 2 diabetes and chronic kidney disease. Earlier this year, Novo said patients who took Wegovy for five years had a 20% reduced risk of heart attack, stroke or other cardiovascular outcomes.
Lilly is also working on a next-generation diabetes and weight-loss drug called retatrutide.
The company also announced its plan to buy Point Biopharma (PNT) for $1.4 billion. Point is working on radioligand treatments for cancer. The company ties a radioisotope to a molecule capable of finding cancer cells in the body. This allows the drug to deliver targeted radiation directly to the tumor, limiting the impact on healthy tissue.
The news lifted Point stock and shares of Lantheus Holdings (LNTH), Point’s partner on its two leading drugs, but it didn’t stoke Eli Lilly stock.
Meanwhile, the Alzheimer’s treatment space is gaining new legs. Biogen (BIIB) won the first full approval for a drug that modifies a hallmark of the disease. Lilly expects the FDA to make an approval decision on its experimental drug, dubbed donanemab, in the first quarter. Donanemab uses the same mechanism as Biogen and Eisai‘s (ESAIY) Leqembi.
So, is Eli Lilly stock a buy right now?
Eli Lilly Stock: Bullish Earnings Growth
During the third quarter, Lilly earned an adjusted 10 cents per share on $9.5 billion in sales. LLY stock analysts projected a per-share loss of 18 cents due to tax charges. Earnings tumbled 95%. Sales jumped 36%, though, and easily topped projections for $8.97 billion.
Mounjaro generated $1.41 billion, also coming in north of views for $1.28 billion, according to FactSet. Likewise, breast cancer treatment Verzenio beat expectations at $1.04 billion, growing 68%.
But other drugs faced pricing constraints in the U.S., Third Bridge analyst Lee Brown said in a report. Jardiance, a diabetes drug, brought in $700.8 million in sales, up 22%, but below projections. Analysts are watching sales of Jardiance now that it’s also approved to treat patients with chronic kidney disease.
Bullish third-quarter sales lines up with savvy investing advice, which suggests investors look for companies with recent growth of at least 20% to 25%. But earnings aren’t hitting that bar due to the expected tax charges.
In the fourth quarter, Eli Lilly stock analysts predict earnings of $3.05 per share, surging 46%, and for sales to grow 28% to $9.33 billion.
LLY Stock: What Are Eli Lilly Yearly Earnings?
Last year, Eli Lilly earned $7.94 per share, minus some items, on $28.54 billion in sales. Profit dipped almost 3%, but sales inched ahead a fraction. While earnings topped forecasts, sales came in light. But the sales miss was partly due to a tough comparison following strong 2021 sales of Covid treatments.
After the third-quarter report, Lilly retained its sales guidance for $33.4 billion to $33.9 billion, vs. analysts’ forecast for $33.5 billion. But the company cut its earnings guidance by $3.20 per share at the midpoint to $6.50 to $6.70 per share. Analysts project earnings of $9.76 a share.
At the midpoint of those outlooks, the pharmaceutical company’s sales would grow 18%, but earnings would fall 17%.
Sales of its biggest drugs — diabetes medicines Trulicity and Jardiance, autoimmune drug Taltz and cancer treatment Verzenio — are all expected to grow. Mounjaro is projected to bring in $4.47 billion in sales, growing more than 8,250% year over year. Mounjaro sales are expected to nearly double in 2024, generating $7.98 billion. By 2028, Mounjaro sales could approach $22 billion.
LLY stock analysts also expect Alzheimer’s drug donanemab to bring in $11 million this year before increasing to $692 million in 2024 and reaching blockbuster status with $1.2 billion the following year.
Meanwhile, migraine medicine Emgality is making slow gains. Annual sales are expected to increase through 2028. And sales from blockbuster insulins Humalog and Humulin are expected to fall now that Lilly has announced price cuts. Sales of generics-facing Alimta, a cancer drug, are also forecast to drop.
Eli Lilly Stock Analysis
Shares broke out Aug. 8 when the stock shot up 67.52, or 15%, to 521.60. That move came after Eli Lilly beat second-quarter expectations and boosted its outlook for the year. The news from Novo Nordisk’s study of Wegovy in patients with heart disease also helped prod LLY stock.
According to MarketSmith.com, Lilly shares moved above a buy point at 469.87 out of a flat base. Lilly stock is now well above the 5% buy zone, which runs from 469.87 to 493.36, and is back in the profit-taking zone. LLY stock has topped out at 629.97.
Shares continue trading north of their 200-day moving average and just retook their 50-day line.
Eli Lilly stock has a Relative Strength Rating of 97 out of a best-possible 99, IBD Digital shows. This puts shares in the top 3% of all stocks when it comes to 12-month performance. Shares have a nearly perfect Composite Rating of 96, a measure of fundamental and technical metrics.
Alzheimer’s Treatment News Bolsters LLY Stock
Eli Lilly is angling for FDA approval of donanemab, a potential Alzheimer’s treatment that removes built-up plaque in the brain known as beta amyloid. Beta amyloid is a hallmark of the disease, though experts don’t necessarily agree that it’s the cause.
Biogen’s Leqembi gained full approval for Alzheimer’s treatment based on its ability to remove amyloid. Now, analysts expect Lilly’s donanemab to follow suit. In mid-July, Lilly said patients who received its drug for 18 months had a 22%-29% slower decline in cognition than placebo recipients.
The results were even stronger in patients with medium to low levels of a protein called tau in their brains. Donanemab led to a 35%-36% slower cognitive decline compared with a placebo.
Experts noted that donanemab does a better job of clearing away beta amyloid than Biogen’s Leqembi. But that could lead to higher levels of a side effect called amyloid-related imaging abnormalities, or ARIA. This is generally asymptomatic swelling in the brain.
Eli Lilly Stock Investors Watch Weight-Loss Drugs
Investors are waiting for more from Lilly’s efforts in obesity treatment. The company already sells a new GLP-1 treatment, Mounjaro, for patients with type 2 diabetes. Drugs in this class mimic a gut hormone to improve feelings of satiety, slow how fast the stomach empties itself and improve blood glucose.
Mounjaro also loops in another hormone called GIP. Its next-generation approach called retatrutide adds in a third called the glucagon receptor. In theory, this could lead to improved weight loss. Over 24 weeks, overweight patients or those with obesity who received retatrutide lost up to 17.5% of their weight. At 48 weeks, patients lost up to 24.2% of their body weight.
Mounjaro had already set a high bar. In June, Lilly said patients lost up to 15% of their body weight over 72 weeks. Lilly tested the drug in patients with type 2 diabetes and obesity. In patients without diabetes, the drug generated even stronger weight loss, up to 22.5% of their body weight.
Lilly is also testing Mounjaro’s ability to improve morbidity and mortality in patients with obesity or those who are overweight. The results of that study are expected in late 2027.
In August, Novo Nordisk said its obesity drug Wegovy cut the risk of cardiovascular events — like heart attack or stroke — in a five-year study. This could help make the case for insurance coverage of weight-loss drugs for patients who have or are at risk of cardiovascular disease.
The pharmaceutical company just acquired Versanis Bio, which has a drug that could improve fat loss while limiting muscle mass loss associated with GLP-1 drugs.
Is LLY Stock A Buy Right Now?
But Eli Lilly stock isn’t a buy right now. According to technical analysis, shares surged through a buy zone out of a flat base. Shares are back in a profit-taking zone and unlikely to fall back into the chase zone.
Lilly just reported strong sales and earnings growth, in line with savvy investing advice and well above LLY stock analyst forecasts.
It will be key to watch how the markets for weight-loss drugs and Alzheimer’s treatments unfold.
To find the best stocks to buy and watch, check out IBD Stock Lists. Make sure to also keep tabs on stocks to buy or sell.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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