Eli Lilly stock took a beating in late October after the drugmaker reported a rare sales miss for its diabetes and weight-loss drugs, Mounjaro and Zepbound.
This led Lilly to cut its earnings outlook for the year and lower the higher side of its revenue guidance.
Also, recently, U.K. authorities approved its Alzheimer's drug, Kisunla, but declined to offer insurance cover for it. The National Institute for Health and Care Excellence, the region's drug-price watchdog, said the cost-effectiveness profile doesn't support reimbursing the costs associated with Kisunla through the National Health Service.
In other news, Lilly recently gained U.S. approval for a new eczema drug called Ebglyss. And, in a new study, weight-loss drug tirzepatide lowered patients' risk of developing type 2 diabetes by 94%. The test was in people with prediabetes and obesity. Patients also lost an average 22.9% of their body weight over the three-year study vs. just 2.1% weight loss for placebo recipients.
The company also announced on Aug. 27 a lower-cost version of the same drug for weight loss. Single-dose vials of Zepbound, the branded name for tirzepatide as a weight-loss treatment, will be available at least 50% below the list price of all other similar treatments for obesity.
So, is Lilly stock a buy or a sell right now?
Eli Lilly Stock: Sales, Earnings Lag
In the third quarter, Eli Lilly earned an adjusted $1.18 per share, widely missing expectations for $1.45, according to FactSet. Sales climbed 20% to $11.44 billion, but lagged forecasts for $12.09 billion. Lilly noted it sold a schizophrenia and bipolar disorder drug called Zyprexa. Excluding year-earlier sales of Zyprexa, total revenue rose 42%.
But sales of Lilly's flagship product, tirzepatide, missed expectations. Mounjaro, the diabetes drug that uses the tirzepatide molecule, brought in $3.11 billion in sales. Mounjaro sales rocketed 121%, but were short of forecasts for $3.77 billion. Zepbound, the weight-loss drug, brought in $1.26 billion, missing the Street's call for $1.73 billion.
The company said third-quarter sales in the U.S. "were negatively impacted by inventory decreases in the wholesaler channel."
For the fourth quarter, analysts expect $5.47 adjusted earnings per share and nearly $14 billion in sales. Earnings would surge 120% as sales increase almost 50%.
After the third-quarter report, Eli Lilly cut its earnings target to $13.02 to $13.52 per share. The midpoint of that guidance missed analysts' estimate for $13.42. The company also lowered the high end of its sales outlook and now expects $45.4 billion to $46 billion in sales. That completely missed views for $46.24 billion in sales.
Eli Lilly Stock Analysis
Eli Lilly stock is now far below its 50-day moving average and 200-day line following the dive tied to the third-quarter report.
Shares have a middling Relative Strength Rating of 49 out of a best-possible 99, IBD Digital shows. This puts shares in the bottom half of all stocks when it comes to 12-month performance. Lilly stock also has a strong Composite Rating of 77, a measure of fundamental and technical metrics. That rating has declined markedly over the last few weeks.
Recent News Around Lilly Stock
The race to develop new weight-loss drugs continues to heat up.
Lilly stock fell in July after Pfizer and Viking Therapeutics announced plans to run additional testing for obesity treatments. A weight-loss treatment study from Roche also pressured Lilly shares.
Further, Eli Lilly stock fell after President Joe Biden and Sen. Bernie Sanders criticized the prices it and Novo Nordisk charge for their obesity treatments, Zepbound and Wegovy.
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 Food and Drug Administration 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 and Eisai's 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 Right Now?
Eli Lilly stock was a sell when it undercut its 200-day line in heavy volume. Shares are also below their 50-day line, which is a bearish sign.
Notably, Lilly's third-quarter report dragged on shares. Though growth remains strong, sales of its two biggest products lagged expectations.
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.
