Eli Lilly stock is Tuesday's IBD Stock Of The Day. Shares are bounding off their 50-day line as Lilly's Alzheimer's treatment appears to be "very competitive" with Biogen's drug, analysts say.
Over 18 months, patients who received Lilly's experimental drug experienced a 29% slower decline in cognition than placebo recipients. That's "very competitive" with Biogen's Leqembi, RBC Capital Markets analyst Brian Abrahams said in a note to clients. Leqembi led to a 26% slower decline in its final-phase study.
There are trade-offs between the drugs. Eli Lilly's donanemab requires less frequent infusions, but it also carries a higher risk of side effects.
"We expect (the Food and Drug Administration) to approve donanemab by year-end 2023, and we look forward to uptake relative to Leqembi," Leerink Partners analyst David Risinger said in his note to clients.
In afternoon trading on the stock market today, Eli Lilly stock was up a fraction to 451.20. For the first time since April, shares are bouncing off their 50-day and 10-week moving averages, MarketSmith.com shows. Investors can keep an eye on a buy point of 450, near the 21-day line.
Eli Lilly Stock: Two Key Markets
Eli Lilly has tentpoles in two important markets: Alzheimer's treatment and weight-loss drugs. Over the last week, the company had news in both segments.
On Monday, Lilly unveiled the full final-phase results of donanemab in Alzheimer's treatment.
Like Biogen's Leqembi, Lilly's donanemab works to remove abnormal plaque in the brain known as beta amyloid. Donanemab appears to work better in younger patients with earlier-stage disease and low to medium levels of a protein called tau in their brains, Leerink's Risinger said.
Drugs that remove beta amyloid can lead to swelling in the brain known as amyloid-related imaging abnormalities, or ARIA. Donanemab requires less frequent intravenous infusions and removes amyloid at a more rapid clip than Leqembi, but it's also tied to higher incidents of ARIA.
"Overall, nothing we heard changes our view regarding the market dynamics between Biogen's Leqembi and donanemab," he said.
He kept his outperform rating on Eli Lilly stock.
Bolstering Weight-Loss Drugs
Eli Lilly stock also jumped Friday after the company announced its acquisition of Versanis Bio for up to $1.93 billion. Versanis' leading drug is called bimagrumab. The company hopes adding bimagrumab to drugs like Lilly's Mounjaro will help maintain muscle mass while bolstering fat loss.
Mounjaro is currently approved as a type 2 diabetes treatment. But Lilly is hoping to gain FDA approval this year for the medicine as a weight-loss drug. Mounjaro works by mimicking gut hormones that control satiety and slow how fast the stomach empties itself.
Drugs in this class, known as GLP-1 antagonists, can lead to extreme weight loss. But that's often due to muscle mass loss. When patients stop taking their obesity treatments, the weight often rebounds.
Versanis, a privately held company, is already testing bimagrumab in combination with another GLP-1 drug, Novo Nordisk's semaglutide. Alone, bimagrumab led to 22% fat loss over a year and 4% muscle gain in patients with diabetes. But the drug carries several side effects, including diarrhea. GLP-1 drugs already carry gastrointestinal side effects.
Analysts Project Strong Earnings Growth
Promisingly, Eli Lilly stock has a strong Relative Strength Rating of 88, according to IBD Digital. This means shares rank in the top 12% of all stocks when it comes to 12-month performance.
The company is on deck to report its second-quarter earnings on Aug. 8. Analysts polled by FactSet expect adjusted earnings to surge 44% to $1.98 per share. Also, analysts expect sales to increase 17% to $7.57 billion. They call for Mounjaro to bring in $744 million in sales.
Analysts expect Mounjaro to become a blockbuster this year, bringing in $3.39 billion in sales. Further, that's primarily in diabetes treatment sales as Mounjaro isn't approved as a weight-loss drug.
Eli Lilly stock analysts expect donanemab to generate $8 million in sales this year, and hit blockbuster status in 2025 with $1.89 billion in sales.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
