Is Eli Lilly Stock a Buy After Winning FDA Approval for Ebglyss?

Eli Lilly (LLY) stock has been tracking sideways as of late September after the company received Food and Drug Administration (FDA) approval for its new eczema drug, Ebglyss. This groundbreaking treatment is aimed at individuals aged 12 and older suffering from moderate-to-severe eczema that is not adequately controlled by topical treatments.

Overview of Ebglyss

Ebglyss is administered as a monthly injection, which can be used either with or without topical corticosteroids. On September 25, Eli Lilly revealed that more than 80% of patients who had received Ebglyss over a three-year period successfully managed their eczema symptoms. Despite this positive news and having reached an intraday record high on August 22, 2023, Eli Lilly shares have seen a downward trend since then.

Weight-Loss Drug Developments

In addition to Ebglyss, Eli Lilly’s weight-loss drug, tirzepatide, has shown promising results. A study lasting three years indicated that the drug reduced the risk of developing type 2 diabetes by 94% in individuals with prediabetes and obesity. Those receiving tirzepatide also lost an average of 22.9% of their body weight, compared to only 2.1% among placebo recipients. Furthermore, on August 27, Lilly announced a lower-cost version of tirzepatide, marketed as Zepbound, which will be priced at least 50% lower than other similar obesity treatments.

Recent Expansions and Financial Earnings

Beyond the development of Ebglyss and tirzepatide, Eli Lilly has been busy expanding its reach and product portfolio. On September 4, the company revealed a partnership with Eva Pharma to enhance access to Olumiant, another treatment aimed at inflammatory conditions. Eli Lilly recently also reported impressive second-quarter earnings, with adjusted earnings of $3.92 per share on $11.3 billion in sales, an 86% surge from the previous year. This performance significantly exceeded the anticipated earnings of $2.74 per share as per FactSet.

Diabetes and weight-loss drugs Mounjaro and Zepbound brought in $973 million more than projected, and Eli Lilly raised its sales outlook for the year by $3 billion. The company has also recently completed the acquisition of Morphic Holding for $3.2 billion, focusing on a treatment for ulcerative colitis and Crohn’s disease.

Stock Analysis of Eli Lilly

As it stands, Eli Lilly stock is not currently forming a base but remains above its 50-day and 200-day moving averages. The stock enjoys a strong Relative Strength Rating of 90, which places it in the top 10% in terms of 12-month performance. Additionally, Eli Lilly holds a robust Composite Rating of 98, reflecting excellent fundamental and technical metrics.

Market Competition and Challenges

The race to develop new weight-loss drugs is intensifying, with Eli Lilly facing increasing competition. The stock experienced a dip in July following announcements from Pfizer (PFE) and Viking Therapeutics (VKTX) regarding additional obesity treatment testing. Criticism of high drug prices, including from President Joe Biden and Senator Bernie Sanders, has also weighed on stock performance.

However, Eli Lilly is advancing its next-generation weight-loss drug, retatrutide, which aims to target three hormonal pathways instead of the two that tirzepatide targets. The company is also developing an oral version of its weight-loss treatment, orforglipron, which is expected to be the first weight-loss pill to hit the market.

Alzheimer’s Disease Treatment Progress

In addition to its other advancements, Eli Lilly’s Alzheimer’s drug, donanemab, received FDA approval in July and will be marketed as Kisunla. This medication works by reducing the protein beta-amyloid buildup, and it demonstrated efficacy in slowing cognitive decline by 22% to 29% over 18 months.

Conclusion: Buy, Sell, or Hold?

As it stands, Eli Lilly’s stock is considered neither a buy nor a sell. Although it exhibited a bullish sign by regaining its 50-day moving average on August 9, it isn’t currently forming a base for investors. While the company reported strong sales and earnings growth that outperformed expectations, investors should monitor the evolving markets for weight-loss drugs and Alzheimer’s treatments closely.