Understanding Eli Lilly’s Recent Stock Performance: What Does the Future Hold?
Eli Lilly and Company (LLY) has seen its shares decrease by 13.5% over the past three months. Despite strong demand for its tirzepatide products, Mounjaro and Zepbound, sales have been affected by inventory challenges in the third quarter. This decline occurred after a robust performance in the first half of the year and contributed to the overall drop in the company’s stock price following its third-quarter results.
The drug and biotech industry as a whole has struggled recently, particularly after the announcement of Robert F. Kennedy Jr. as the new head of Health and Human Services, leading some investors to worry about the FDA’s regulatory environment.
Factors such as disappointing sales and profits in the third quarter, alongside reduced guidance and pipeline delays, further impacted the industry’s performance. This has left investors questioning whether to buy, hold, or sell Lilly stock and whether expectations for Mounjaro and Zepbound are realistic.
To navigate these uncertainties, it is essential to assess Lilly’s strengths and weaknesses following the recent price drop.
Mounjaro & Zepbound: Main Revenue Sources for Lilly
Tirzepatide, a dual GIP and GLP-1 receptor agonist, is a critical drug for various cardiometabolic diseases and is gaining traction in the market.
Though relatively new, Mounjaro and Zepbound have quickly become significant revenue contributors for Lilly, generating $11.0 billion in sales during the first three quarters of 2024, making up approximately 45% of the company’s total revenue.
However, sales growth for Zepbound and Mounjaro in 2024 has faced challenges due to supply and distribution dynamics. The second quarter saw increased shipments help fulfill backorders, but a decline in channel inventory during the third quarter negatively impacted sales. Understanding the fluctuations in demand and inventory for these products will be crucial as the market evolves.
LLY’s Strategies to Boost Mounjaro & Zepbound Sales
Eli Lilly is working to balance supply and demand for Mounjaro and Zepbound while preparing for their launches in international markets. The company anticipates that enhanced marketing efforts will help increase sales for both drugs in 2025. The expansion of Mounjaro into new global markets is expected to significantly boost sales in the upcoming quarters. Since 2020, Lilly has invested over $23 billion in manufacturing capacity for Zepbound and Mounjaro in the U.S. and Europe, aiming to meet the robust demand.
Additionally, tirzepatide is under development for various other conditions. In December, the FDA approved Zepbound for treating moderate-to-severe obstructive sleep apnea in adults with obesity. Lilly has also filed for approval of tirzepatide for heart failure with preserved ejection fraction in both the U.S. and EU, while a phase III cardiovascular outcome study is ongoing. Moreover, a phase II study in metabolic dysfunction-associated steatohepatitis met its primary endpoint earlier this year. Successful approval for these indications could further enhance tirzepatide’s sales.
After outperforming rival Novo Nordisk’s (NVO) Wegovy in a weight-loss study, Zepbound demonstrated an average weight loss of 20.2% among obese or overweight adults compared to 13.7% for Wegovy, which could enhance Lilly’s competitive position in the obesity market. Furthermore, Nov Nordisk’s disappointing results from a late-stage study on its next-generation obesity drug, CagriSema, have also played a role in improving investor sentiments for LLY’s stock.
The FDA also recently removed tirzepatide from the drug shortage list, confirming that Lilly’s supply now meets or exceeds demand, providing further reassurance to investors.
Exciting Developments in LLY’s Drug Pipeline
Aside from Mounjaro and Zepbound, Lilly has successfully gained approvals for several other new medications over the past few years, including Omvoh for ulcerative colitis, BTK inhibitor Jaypirca for mantle cell lymphoma and chronic lymphocytic leukemia, and Kisunla (donanemab) for Alzheimer’s disease. These new drugs are expected to contribute positively to Lilly’s revenue growth in upcoming quarters.
Rising Competition in the Obesity Market
The obesity treatment market is rapidly growing and could reach $100 billion by 2030, according to Goldman Sachs. Currently, Eli Lilly and Novo Nordisk are at the forefront of this expanding market.
Lilly is making significant investments in the obesity sector and has 11 new molecules undergoing clinical development. This pipeline includes two late-stage candidates: orforglipron, an oral GLP-1 molecule, and retatrutide, a GGG tri-agonist, along with several mid-stage candidates. Significant phase III data is anticipated in 2025.
Other companies, such as Amgen (AMGN) and Viking Therapeutics (VKTX), are also advancing their GLP-1-based treatments, which could intensify competition in the market against both Mounjaro/Zepbound and NVO’s Ozempic/Wegovy.
Analyzing LLY’s Stock Price and Market Position
Over the past year, Lilly’s stock has jumped 24.9%, while the broader industry has seen a decline of 2.9%. LLY’s performance has surpassed both its sector and the S&P 500, demonstrating strength in a challenging environment.
Comparative Stock Performance of LLY
Image Source: Zacks Investment Research
Currently, Lilly’s stock trades at a premium relative to the industry averages, indicating investor confidence in the company’s future prospects.
LLY Stock Valuation Analysis
Image Source: Zacks Investment Research
Eli Lilly’s Earnings Forecast Takes a Positive Turn
In a promising shift, estimates for Eli Lilly’s 2025 earnings have increased from $23.71 to $24.05 per share in the past two months.
Eli Lilly’s Earnings Estimate Trend
Image Source: Zacks Investment Research
Holding onto LLY Stock Is a Wise Move
Eli Lilly has firmly established itself as a leader in the pharmaceutical industry, boasting a market capitalization exceeding $734 billion. This growth can largely be attributed to the remarkable success of its products, particularly Mounjaro and Zepbound. Over the past five years, Lilly’s stock has soared by 479%, driven by effective new drug launches and a robust pipeline. Revenue has surged due to heightened demand for Mounjaro, Zepbound, and Verzenio, compensating for the downturn in Trulicity sales.
Despite weaker sales figures for Mounjaro and Zepbound in the third quarter, contributing to a bearish outlook, anticipated improvements in production capacity suggest that these challenges may be temporary. Additionally, Lilly is poised to secure approvals for a number of new drugs and expansions of existing medications in the forthcoming years.
Recently, Lilly’s board authorized a significant $15 billion stock buyback initiative and announced a 15% increase in its quarterly dividend. These decisions reflect a strong commitment to shareholder value.
While the stock may seem pricey at present, investors are encouraged to hold onto their shares in this Zacks Rank #3 (Hold) company, as the company still holds promising growth prospects. A complete list of Zacks #1 Rank (Strong Buy) stocks is available here.
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Novo Nordisk A/S (NVO) : View Free Stock Analysis Report
Eli Lilly and Company (LLY) : View Free Stock Analysis Report
Amgen Inc. (AMGN) : View Free Stock Analysis Report
Viking Therapeutics, Inc. (VKTX) : View Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
