Eli Lilly has outperformed the S&P 500 for five years in a row as Wall Street recognized its huge opportunity in obesity drugs. Six in a row is not out of the question. Year-to-date performance: Up 33.7% Price-to-earnings ratio: 34.3 compared to five-year average of 34.5 Our rating: Buy equivalent 1 Our price target: $1,000 LLY YTD Mountain Eli Lilly's year-to-date stock performance . '24 Review The dominant theme for Eli Lilly this year was the launch of its key GLP-1 obesity drug Zepbound, which was approved by the Food and Drug Administration in late 2023. The success was quite remarkable: according to analyst estimates from FactSet, sales should be around 5.1 billion US dollars. At the end of last year, Wall Street forecast Zepbound revenue of $1.9 billion. Upward corrections of this magnitude explain why the stock followed up its 59 percent jump in 2023 with another strong year. Eli Lilly has steadily increased supply of Zepbound and its sister drug Mounjaro, used to treat type 2 diabetes, to ease short-term shortages amid booming demand. But just as importantly, the company announced a series of additional production investments, likely one every few months, as a sign of long-term confidence in the GLP-1 market. Given Lilly's decades-long quest to combat Alzheimer's, it's worth noting that the company's first successful treatment for the memory-robbing disease, Kisunla, was approved in July, although it hasn't yet made a significant contribution to sales. Looking Ahead: Eli Lilly's ability to expand the available supply of Zepbound and Mounjaro in the new year will be critical. That seems obvious at first glance, but there is a more nuanced explanation: removing these products from the FDA's shortage list will impact the ability of so-called compounding pharmacies to make unauthorized copies of the drugs. Another area to watch in 2025 is whether the FDA expands Zepbound's labeling, which would allow the anti-obesity drug to be prescribed to treat other conditions such as obstructive sleep apnea and increase the risk of heart failure reduce. This would help build the case for more comprehensive insurance coverage and therefore greater revenue opportunities. Updates to Eli Lilly's weight loss pipeline could also be important, particularly expected late-stage trial results for the obesity pill or Forglipron. Interim results released in June 2023 showed it was highly effective, and Wall Street sees oral versions of obesity treatments as crucial to meeting maximum demand. Zepbound and its main competitor Wegovy from Novo Nordisk are taken as an injection once a week. In the coming year, investors will be keeping a close eye on health care policy outside Washington, especially as noted drug industry critic Robert F. Kennedy Jr. awaits confirmation to lead the Department of Health and Human Services. Although Kennedy Jim recently said he sees GLP-1 as part of the solution to America's obesity crisis, he has often derided the drugs in the past. Additionally, it is unclear what the new Trump administration might mean for the Biden White House's proposal to expand Medicare and Medicaid access to GLP-1. Positive news from Novo Nordisk and other hopeful challengers like Viking Therapeutics could put pressure on Lilly shares in the near term, but we are confident the company can hold its own, thanks in large part to its manufacturing capacity advantages. Jim Cramer recently named Eli Lilly one of the portfolio's 12 core holdings through 2025. (Jim Cramer's Charitable Trust is long-LLY. See a full list of stocks here.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable foundation's portfolio. If Jim discussed a stock on CNBC television, he waits 72 hours after the trade alert is issued before executing the trade. THE INVESTING CLUB INFORMATION SET FORTH ABOVE IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, ALONG WITH OUR DISCLAIMER. THERE ARE NO fiduciary duty or duty IN RECEIVING YOUR INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
An Eli Lilly & Co. Zepbound injection pen was arranged on Thursday, March 28, 2024, in the New York City borough of Brooklyn, USA.
Shelby Knowles | Bloomberg | Getty Images
Eli Lilly has surpassed that S&P 500 five years in a row when Wall Street recognized its enormous opportunity in obesity drugs. Six in a row is not out of the question.
