Is Eli Lilly Stock A Buy Or A Sell After FDA Delays Its Alzheimer’s Drug Decision?

Eli Lilly (LLY) stock dipped just below a profit-taking zone in early March after the Food and Drug Administration delayed its experimental Alzheimer’s treatment, donanemab.




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The agency had been expected to make an approval decision in the first quarter. Now, the FDA says it’s planning to host an advisory committee meeting to discuss Lilly’s Trailblazer-ALZ 2 study. Analysts noted the FDA will likely zero in on brain swelling tied to amyloid-targeting drugs, like donanemab and its rival, Leqembi, from Biogen (BIIB) and Eisai (ESAIY).

Donanemab is tied to a higher rate of brain swelling than Leqembi. Analysts expect donanemab to gain approval. But this will give Biogen and Eisai time to further entrench Leqembi as the preferred Alzheimer’s treatment.

Wall Street is also closely watching Lilly’s efforts in diabetes and obesity treatment. The company makes tirzepatide, which sells as Mounjaro and Zepbound, respectively. Tirzepatide targets two hormones, GLP-1 and GIP, tied to blood sugar levels as well as feelings of satiety and stomach emptying.

Lilly is also working on next-generation drugs, including a daily pill called orforglipron in patients with type 2 diabetes and obesity. And its next-generation drug — which targets three hormones — could stoke even further weight loss. Bank of America Securities analyst Geoff Meacham expects tirzepatide to bring in $62 billion in 2030 and for the next-generation drugs to add $19 billion to that.

New rivals are coming from behind. Viking Therapeutics (VKTX) stock soared 121% on Feb. 27 after the company said patients who took its obesity drug lost 13.1% more weight than placebo recipients over 13 weeks. That beat tirzepatide in the Phase 3 study that led to Zepbound’s approval.

Also, on Feb. 26, Zealand Pharma and Boehringer Ingelheim said 83% of patients who took their rival drug showed improvement in a liver disease known by the shorthand MASH. Just 18.2% of patients who received a placebo hit the same mark. Altimmune (ALT) is working on a similar drug. These are all rivals to tirzepatide, which Lilly is testing in MASH.

Amgen (AMGN) is also working on an obesity drug, which led to durable weight loss over 150 days.  And Novo Nordisk (NVO) remains Lilly’s biggest competitors with semaglutide, which it sells as Ozempic in diabetes treatment and as the weight-loss drug Wegovy.

Meanwhile, Lilly locked up its acquisition of Point Biopharma, an expert in 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.

So, is Eli Lilly stock a buy right now?

Eli Lilly Stock: Bullish Sales Growth

During the fourth quarter, Lilly earned an adjusted $2.49 per share on $9.35 billion in sales. Earnings popped 19% and beat expectations for $2.30 a share. Sales climbed 28% to top forecasts for $8.95 billion, according to FactSet.

Zepbound was on the market for just weeks in the December quarter. But sales climbed rapidly to $175.8 million. That was more than double the $75 million estimate from analysts polled by FactSet. Another forecast suggested Zepbound could come in with $125 million. Sales from Mounjaro grew nearly eightfold to $2.21 billion, handily beating forecasts.

Sales of breast cancer drug Verzenio rocketed 42% to $1.15 billion, but came in below projections for $1.17 billion. Diabetes treatment Jardiance brought in $798.1 million, topping expectations and soaring 30% year over year.

Bullish fourth-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 didn’t quite hit that bar in the most recent quarterly report.

In the first quarter, Eli Lilly stock analysts predict earnings of $2.56 per share, surging 58%, and for sales to grow 29% to $8.96 billion.

LLY Stock: What Are Eli Lilly Yearly Earnings?

In 2023, Eli Lilly earned $6.32 a share, minus some items, on $34.12 billion in sales. Profit fell 20.4% but topped expectations for $6.23. Sales jumped 20% and came in above forecasts for $33.65 billion, according to FactSet.

Notably, Mounjaro generated $5.16 billion in sales, jetting higher from $482.5 million in 2022 sales. Revenue from Verzenio and Jardiance came in at a respective $3.86 billion and $2.74 billion. Sales of Verzenio surged 56%, while Jardiance sales rocketed 33%.

After the fourth-quarter report, Eli Lilly guided to $40.4 billion to $41.6 billion in 2024 sales. But Lilly expects demand for its GLP-1-based drugs will likely “outpace supply” this year. The company also calls for adjusted earnings of $12.20 to $12.70 per share. Both measures topped analysts’ forecasts.

Wall Street expects Mounjaro to bring in $9.87 billion in sales this year, growing more than 91% year over year. Zepbound is projected to generate $1.88 billion in sales. In 2029, analysts expect the two drugs to bring in almost $24 billion and $12.18 billion in sales, respectively.

LLY stock analysts also expect Alzheimer’s drug donanemab to bring in $185 million in 2024 sales and reaching blockbuster status with $1.47 billion in 2026.

Meanwhile, 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

Eli Lilly stock broke out of a flat base with a buy point at 629.97 on Jan. 4, according to MarketSmith.com. Shares have since bounded into and out of a profit-taking zone. On March 15, shares were just below their profit-taking zone.

Shares retook their 50-day line on Jan. 2 and remain above their 200-day moving average.

Eli Lilly stock has a Relative Strength Rating of 95 out of a best-possible 99, IBD Digital shows. This puts shares in the top 5% of all stocks when it comes to 12-month performance. Shares have a Composite Rating of 94, 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.

The FDA just said it plans to hold an advisory committee meeting to discuss the effectiveness and safety of donanemab in the study called Trailblazer-ALZ 2. The decision effectively pushes back the approval decision, which was expected before the end of this month.

Biogen’s Leqembi gained full approval for Alzheimer’s treatment based on its ability to remove amyloid. 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 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 FDA has signed off on its tirzepatide in patients with type 2 diabetes and as a weight-loss drug. Lilly also recently launched a direct-to-consumer website to help bolster sales of both.

In December, Lilly said patients who took Zepbound for eight months lost an average of 20.9% of their body weight. But when a group of patients switch to a placebo, they regained 14% of their weight over a year. Those who stayed on Zepbound lost an additional 5.5% of their weight.

In another analysis of electronic health records, patients who took tirzepatide for a year were three times more likely than recipients of Novo’s semaglutide to lose at least 15% of their body weight. Novo sells semaglutide as diabetes treatments known as Ozempic and Rybelsus, and as a weight-loss drug called Wegovy. Semaglutide recipients were also 2.6 times and 1.8 times more likely to lose at least 10% and 5% of their weight, respectively.

Lilly’s next-generation approach called retatrutide adds in a third target 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. Last 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. Later in the year, 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.

Lilly just acquired Versanis Bio, which has a drug that could improve fat loss while limiting muscle mass loss associated with GLP-1 drugs. Further, Lilly entered into a collaboration with Verve Therapeutics (VERV) to test three potential gene-editing approaches to permanently lowering cholesterol.

Is LLY Stock A Buy Right Now?

Lilly stock isn’t currently a buy. Shares remain above their key moving averages and are no longer in a buy zone. If shares return to that chase zone, they will be considered a buy. But it’s more likely that they will form a buy chart pattern.

Lilly also reported strong sales and earnings growth. Sales were in line with savvy investing advice and both measures 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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