Eli Lilly’s stock has fallen 23 percent since its August filing. Is it buying or selling?| The investor’s business daily

Eli Lilly (LLY) stock continued its five-month slide in late January after the company cut its sales guidance for the fourth quarter.

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The company now expects sales of $13.5 billion. That’s about $400 million below the low end of preliminary guidance, and includes $3.5 billion from type 2 diabetes drug Munjaro and $1.9 billion from anti-obesity drug Zepbod. All three of Lilly’s guides have lagged expectations.

Eli Lilly’s stock fell 7% on Jan. 14. Shares peaked at 972.53 on August 22. Since then, shares are down about 23% from early trading on Jan. 23.

Leerink Partners analyst David Reisinger said there are still key incentives coming up. Zepbound has received Food and Drug Administration approval to treat obstructive sleep apnea. That could expand Medicare coverage for weight-loss drugs. Lilly is also working on an obesity pill called Orforglipron. Analysts expect it to be the first oral drug in its class to hit the market.

Notably, the FDA ruled in late December that the chemical backbone behind Zepbond and Munjaro was lacking. This means that compounding pharmacies will no longer be able to offer knock-off versions of popular drugs.

Promisingly, before Thanksgiving, Joe Biden proposed that Medicare and Medicaid pay for obesity treatments. The idea is to increase the use of Zepbound Novo Nordisk()Non-governmental organizations) rival drug, Wegovy. Today, Medicare does not pay for obesity drugs unless they reduce the risk of heart attack or stroke.

So, is Lilly stock a buy or a sell now?

Eli Lilly Stock: Sales, Earnings Delay

In the third quarter, Eli Lilly earned an adjusted $1.18 per share, widely missing expectations for $1.45, according to FactSet. Sales rose 20 percent to $11.44 billion, but missed forecasts of $12.09 billion. Lilly said it sold Zyprex, a drug for schizophrenia and bipolar disorder. Total revenue, excluding Zyprex sales, rose 42 percent from a year ago.

But sales of Lilly’s flagship product, tirzepatide, missed expectations. Munjaro brought in $3.11 billion in sales. Sales rocketed 121%, but fell short of forecasts for $3.77 billion. Weight-loss drug Zepbord generated $1.26 billion in sales, while Street Call lost $1.73 billion.

The company said third-quarter sales in the U.S. were “negatively impacted by production declines in the wholesale channel.”

Lilly cut its outlook for the fourth quarter, prompting analysts to lower their expectations. The road projects adjusted earnings of $5.30 per share and $13.77 billion in sales. Revenues rocket 113% while sales grow 47%.

In January, Eli Lilly said it expects $45 billion in sales for 2024. That’s $4 billion above the midpoint of its first guidance for 2024, but up from the company’s most recent outlook for sales of $45.4 billion to $46 billion. Eli Lilly projects sales of $58 to $61 billion for 2025, surpassing forecasts.

Eli Lilly stock analysis

Eli Lilly stock briefly touched its 50-day moving average on January 10th. But that was short-lived and shares fell below that key mark on January 14, when Lilly cut its fourth-quarter and 2024 guidance.

LLY stock is consolidating with a 972.53 buy point; Marketing promotion. But stocks may struggle to break above their 50-day line.

Shares have a low relative strength rating of 26 out of 99, IBD Digital shows. This puts LLY stock in the bottom quarter of all stocks when it comes to 12-month performance. Lilly stock also has a composite score of 69, a measure of fundamental and technical metrics.

Latest news about Lilly stock

The race to develop new weight loss drugs continues to heat up.

In a recent study, Lilly Zepbon topped Novone WegoVin in its first head-to-head study.

Participants with obesity and one other health condition — but not diabetes — lost up to 20.2% of their body weight over 72 weeks. In comparison, Wegovi recipients lost 13.7% of their body weight. That translates to 50 pounds and 33 pounds, respectively.

LLY stock fell in July Pfizer (PFE) and Viking Therapeutics (VKTX) announced plans to conduct further research into obesity treatments. Weight loss treatment study with Roche (RHHBY) also put pressure on Lilly’s shares.

Lilly is also working on retatrutide in the next generation weekly dose. While tirzepatide targets two hormones for weight loss, retatrutide targets three. An oral weight-loss drug called Orforglipron is expected to be the first weight-loss pill to hit the market.

In other news, Lilly’s Alzheimer’s drug Donumab received FDA approval in July. It is sold under the brand name Kisunla.

Kisula works by removing a protein called beta amyloid. In tests, Kisula worked better in patients with a protein called amyloid tau. In all patients, donumab reduced cognitive decline by 22 percent to 29 percent at 18 months. In patients with intermediate levels of tau, donamab reduced the reduction by 35% to 36%.

It’s rivals. Biogen (BBB) and Isaiah()Isaiah) of this group.

In the UK, Kisula is now approved for patients with early-onset Alzheimer’s disease or with one copy of a genetic mutation that makes them more susceptible to non-carriers. People with two copies of that mutation are more likely to develop brain swelling caused by amyloid removal.

Is LLY stock a buy or sell?

Eli Lilly’s stock was traded on January 14. The move makes it difficult for LLL stock to break out of the consolidation by giving the shares a ceiling at its 50-day moving average.

Lilly’s third-quarter report in particular dragged on LLL stock. Although growth is strong, sales of the two largest products have lagged behind expectations.

It will be key to see how the markets for weight loss drugs and Alzheimer’s treatments fare.

To find the best stocks to buy and watch, check out the IBD Stock List. Also, make sure you register on stocks to buy or sell.

Follow Alison Gatlin on Twitter @IBD_AGAtlin.

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