Eli Lilly stock catapulted 15% in one day after topping second-quarter expectations amid fresh enthusiasm for weight-loss drugs. LLY stock blew through a buy zone and is trading at a record high.
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Lilly is on deck to rival Novo Nordisk (NVO), the current leader in obesity treatment with Wegovy and Saxenda. This year, Eli Lilly (LLY) hopes the Food and Drug Administration will sign off on its diabetes treatment, Mounjaro, for weight loss. Mounjaro is already making waves in diabetes treatment. Sales of the drug skyrocketed by a quadruple-digit percentage in the June quarter.
The market for weight-loss drugs is massive and growing. By 2031, it will top $37.1 billion across the U.S., France, Germany, Italy, Spain, the UK and Japan — the so-called seven major markets — according to GlobalData. And the drugs’ benefits may be bigger than thought. Novo just said patients without diabetes who took Wegovy for five years had a 20% lower risk of cardiovascular events than placebo recipients.
Analysts say the Novo study could help make the case for broader insurance coverage of weight-loss drugs.
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, before the end of the year. Donanemab uses the same mechanism as Biogen and Eisai‘s (ESAIY) Leqembi.
Lilly also just wrapped its acquisitions of Versanis Bio, Sigilon Therapeutics and Dice Therapeutics.
In late August, Lilly said its drug, Retevmo, outperformed standard treatments in patients with a form of thyroid cancer. Retevmo led to a statistically significant improvement in progression-free survival. That’s how long a patient lives before worsening.
So, is Eli Lilly stock a buy right now?
Eli Lilly Stock: Bullish Earnings Growth
During the second quarter, Lilly’s adjusted earnings soared almost 69% to $2.11 per share. LLY stock analysts predicted a lower $1.98 per share. Sales came in at $8.31 billion, growing 28% and topping projections for $7.58 billion, according to FactSet.
Lilly credited Mounjaro, cancer treatment Verzenio, diabetes drug Jardiance and autoimmune medicine Taltz for the strong second-quarter growth. Revenue from all four drugs also topped forecasts. Mounjaro generated $979.7 million in sales, topping expectations by more than $200 million. Verzenio sales soared 57% to $926.8 million, while Jardiance and Taltz sales jumped a respective 45% and 16%.
The bullish second-quarter report lines up with savvy investing advice, which suggests investors look for companies with recent sales and earnings growth of at least 20% to 25%.
Growth is expected to moderate somewhat in the third quarter. Eli Lilly stock analysts predict adjusted earnings of $2.88 per share on $8.83 billion in sales. Earnings would rocket 45.5% as sales pop 27%.
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.
This year, Eli Lilly stock analysts expect stronger growth. After the company’s second-quarter beat and raise, the Street projects adjusted earnings of $9.70 per share and $33.27 billion in sales.
The pharmaceutical company raised its outlook for the year. Now, Lilly expects to earn $9.70 to $9.90 per share and report $33.4 billion to $33.9 billion in sales. At the midpoints of those ranges, Lilly’s earnings would surge more than 23% and sales would increase almost 18% for the year.
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 $4.16 billion in sales, growing more than 7,600% year over year. Mounjaro sales are expected to nearly double in 2024, generating $7.38 billion. By 2028, Mounjaro sales could approach $21 billion.
LLY stock analysts also expect Alzheimer’s drug donanemab to bring in $15 million this year before increasing to $883 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 2027 before pulling back somewhat in 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 this year.
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 also helped prod LLY stock.
According to MarketSmith.com, Lilly shares topped 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. But Lilly shares fell below a profit-taking zone on Sept. 21.
Shares continue trading north of their 50-day and 200-day moving averages.
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 98, 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% to 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% to 36% slower cognitive decline compared with a placebo.
Experts noted 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
Mounjaro belongs to a class of drugs that mimic the GLP-1 hormone. The gut hormone controls feelings of satiety, slows how fast the stomach empties and improves markers associated with diabetes, like A1C. Mounjaro also interacts with another hormone called GIP.
So far, Mounjaro is only approved for diabetes treatment. By the end of the year, Lilly expects the FDA to make a decision on its approval as an obesity treatment.
In June, Lilly said patients lost up to 15.7% of their body weight over 72 weeks. Eli Lilly tested the drug in overweight patients or those with obesity who also have type 2 diabetes. The results have been even stronger in patients without diabetes. Last year, Lilly said patients lost up to 22.5% of their weight in a final-phase study.
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.
But Novo Nordisk said in August 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.
Eli Lilly is also testing a next-generation drug called retatrutide. It loops in a third mechanism called GIPR to improve weight loss. Over 24 weeks, patients who received retatrutide lost up to 17.5% of their body weight. Over 48 weeks, patients lost up to 24.2% of their body weight.
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. If they return to the 5% buy zone they could be actionable again, but that’s unlikely considering they’re now just below a profit-taking zone. They could also form a new chart pattern.
Lilly just reported strong sales and earnings growth, in line with savvy investing advice and well above LLY stock analyst forecasts. That growth is expected to continue in the third quarter.
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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