Eli Lilly Reverses Its Recent Upswing On Broader Market Woes. Is It A Sell?
Eli Lilly (LLY) stock has dropped swiftly alongside the broader market despite promising news recently for its alopecia and eczema treatments.
In one final-phase study, Lilly's Olumiant helped patients with alopecia regrow a significant amount of hair over the course of 36 weeks. The results showed 80% or more scalp coverage in 42.4% of patients who received the drug. In another study, half of patients who used Eli Lilly's Ebglyss had eczema-free skin after three years. An additional 83% of patients had almost clear skin.
↑ X The Weight-Loss Drug Market Is Hot. Which Medical Stock Will Win The Battle For Supremacy?But Lilly stock has dropped significantly, latching a handle onto a cup base.
The company recently announced plans to invest $27 billion to expand its U.S. manufacturing footprint. That brings Lilly's total spending on manufacturing expansion to $50 billion since 2020. The news follows threats from President Donald Trump that he would impose tariffs on Big Pharma companies that don't re-shore their manufacturing operations.
It also follows the Food and Drug Administration's decision to remove tirzepatide from its shortage list. This means compounding pharmacies have had to stop making knockoff versions of the diabetes and weight-loss drug. It also means Lilly will have to keep up with demand for the drugs it sells under the brand names Mounjaro and Zepbound.
So, is Lilly stock a buy or a sell right now?
Eli Lilly Stock: Sales Narrowly Lag
In the fourth quarter, Eli Lilly earned an adjusted $5.32 per share, soaring 114% and beating calls for $5.02 a share. Sales jumped 45% to $13.53 billion, just below expectations for $13.55 billion, according to FactSet. Despite coming up short, Mounjaro sales rocketed 124%, while Zepbound put up a triple-digit gain after launching in the year-earlier period.
Sales of a similar drug, Trulicity, missed expectations and tumbled 26% to $1.25 billion. Trulicity treats type 2 diabetes and, like the tirzepatide-based products, mimics the GLP-1 hormone to improve feelings of satiety and blood sugar markers.
For the year, Lilly expects $58 billion to $61 billion in sales and adjusted earnings of $22.50 to $24 per share. The midpoints of Eli Lilly's outlook topped analysts' forecast. The Street projected $58.77 billion in sales and $22.76 earnings per share.
Eli Lilly Stock Analysis
Eli Lilly stock is now below its 50-day moving average and 200-day line.
Shares are forming a cup-with-handle base with a buy point at 953.63, according to MarketSurge. But shares would struggle to retake their key moving averages.
Shares have a middling Relative Strength Rating of 49 out of a best-possible 99, IBD Digital shows. This puts LLY stock in the bottom half of all stocks when it comes to 12-month performance. The RS Rating was a higher 85 just a week ago.
Lilly stock also has a strong Composite Rating of 87, a measure of fundamental and technical metrics.
Recent News Around Lilly Stock
The race to develop new weight-loss drugs continues to heat up.
In a recent study, Lilly's Zepbound topped Novo's Wegovy in the first-ever head-to-head study.
Participants with obesity and one other medical condition — but not diabetes — lost up to 20.2% of their body weight over 72 weeks. In comparison, Wegovy recipients lost 13.7% of their body weight. That translated to about 50 pounds and 33 pounds, respectively.
LLY stock fell in July after Pfizer (PFE) and Viking Therapeutics (VKTX) announced plans to run additional testing for obesity treatments. A weight-loss treatment study from Roche (RHHBY) also pressured Lilly shares.
Lilly is also working on a next-generation weekly shot called retatrutide. While tirzepatide loops in two hormonal targets to stoke weight loss, retatrutide targets three. Its oral weight-loss drug, dubbed orforglipron, is also expected to be the first weight-loss pill to hit the market.
In other news, Lilly's Alzheimer's drug, donanemab, gained FDA approval in July. It will sell under the brand name Kisunla.
Kisunla works by removing a built-up protein called beta amyloid. In testing, Kisunla worked better in patients whose amyloid included a protein called tau. Across all patients, donanemab slowed cognitive decline by 22% to 29% over 18 months. In patients with intermediate levels of tau, donanemab slowed the decline by 35% to 36%.
It rivals Biogen (BIIB) and Eisai's (ESAIY) Leqembi.
In the U.K., Kisunla is now approved for patients with one copy of a genetic mutation that makes them more susceptible to developing early-onset Alzheimer's disease or non-carriers. People with two copies of that mutation are more likely to experience brain swelling as a result amyloid removal.
Is LLY Stock A Buy Or A Sell?
Eli Lilly stock was a sell, definitively, when shares dropped below their 200-day line on March 10 and their 50-day moving average the following day. But, keep in mind, the move is in line with a broader market selloff.
Notably, the company is benefitting from its deep investments in the obesity space, having recently won FDA approval for Zepbound as a sleep apnea treatment. Growth remains strong, in double- and triple-digit ranges for its sales and adjusted profit.
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 @AGatlin_IBD.
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