Investor optimism for Eli Lilly ‘s diabetes and obesity treatments in 2023 lifted the stock to its seventh annual gain in a row. In the brand new yr, it ought to be the usual story. Shares of Eli Lilly have taken a breather over the past three months, as investors book profits in the highest performer and redirect money to other parts of the market. It is a trend that may likely proceed in the approaching weeks. But as 2024 progresses, Eli Lilly’s leadership within the fast-growing anti-obesity drug category – possibly price $100 billion annually in the future – may prove so apparent that the buyers return. Long-awaited approval of its Alzheimer’s drug would help, too. Eli Lilly is among the many top 10 performing Club stock in 2023, climbing over 55%. That is much better than the S & P 500 Health Care Sector index, which is down about 1%, and greater than double the general S & P 500 ‘s stellar 2023 performance. Diabetes and weight reduction Eli Lilly’s weight-loss drug Zepbound and type-2 diabetes therapy Mounjaro are a very powerful drivers of the corporate’s stock within the yr ahead, as they were in 2023. Quarterly revenue figures can be amongst a very powerful piece of data investors receive in regards to the products, which share the identical energetic ingredient often called tirzepatide. Jim Cramer has long said tirzepatide could grow to be the best-selling drug of all time. “The provision is the problem. Eli Lilly has the balance sheet to construct all of the factories needed to make Mounjaro [for diabetes] and Zepbound [for weight loss] and that is what is going to matter,” Jim said recently. “I believe the probable approval of its anti-dementia drug will function a one-two punch for the stock to go higher,” he added. LLY .SPX YTD mountain Eli Lilly’s stock performance in 2023 compared with the S & P 500. Mounjaro was approved for type-2 diabetes last yr and has handily exceeded Wall Street’s sales estimates for 3 quarters in a row. Zepbound received U.S. regulatory clearance in November and hit pharmacy shelves just a few weeks ago. Early prescription data for Zepbound looks encouraging . Investors also can be in search of updates on insurance coverage, particularly whether more health plans provide reimbursement for Zepbound, adding to its industrial viability. As Jim mentioned, manufacturing capability can be in focus, too, after Mounjaro faced supply shortages this yr as a result of strong demand. Eli Lilly has been investing heavily to bring on more production facilities, as has Novo Nordisk , its chief rival in diabetes and obesity. The Danish firm makes Ozempic for diabetes and Wegovy for obesity. They share an energetic ingredient, semaglutide. Tirzepatide and semaglutide are each considered GLP-1s, which began as type-2 diabetes treatments nearly 20 years ago before expanding into obesity and possibly other conditions like sleep apnea. GLP-1s mimic a gut hormone to enhance blood sugar control and effectively suppress appetite, which helps contribute to weight reduction. Despite being second to the GLP-1 obesity market, Jim expects Eli Lilly to ramp up production higher than Novo Nordisk, eventually giving the Club holding the upper hand. Some investors are skeptical Eli Lilly’s strong performance can proceed into 2024, said BMO Capital Markets analyst Evan Seigerman. “For all of the bulls on the market, there are definitely bears saying that this might be a slow launch, that there is manufacturing issues, that there is coverage issues. I believe that every one starts to work itself out and folks get comfort,” he said. Seigerman added that the sky-high expectations across the weight-loss opportunity could put additional pressure on the stock. “Any whiff of issues with Zepbound could really weigh negatively,” he said. Moreover, if rates of interest come down, Eli Lilly’s stock might be pressured by a rotation into riskier drug corporations, like earlier-stage biotechnology firms, Seigerman said. Within the near term, Eli Lilly’s presentation on the JPMorgan Healthcare Conference, set to be held from Jan. 8 to Jan. 11, is at all times a closely followed event. Meanwhile, in early February, Eli Lilly’s fourth-quarter earnings report — and the corporate’s 2024 guidance alongside it — represents a serious catalyst for the stock, Seigerman said. Wall Street currently expects Zepbound sales to total $3.79 billion in 2024, while Mounjaro sales are projected to be $8.44 billion, in line with consensus estimates compiled by FactSet. The combined estimate of $12.23 billion would represent nearly a 3rd of companywide revenue. “The actual fact we’re still so early on this obesity launch is a reason to own it,” argued Seigerman, who has a $710-per share price goal and buy-equivalent rating on Eli Lilly. “We’re very positive on it. I believe estimates will come up all year long.” Alzheimer’s disease One other catalyst looming early within the yr is unrelated to obesity and diabetes: The Food and Drug Administration’s decision on Eli Lilly’s experimental Alzheimer’s treatment , donanemab. That is expected to reach in the primary quarter of 2024. Investors widely expect donanemab to be approved, thrusting the drug right into a nascent market to treat the memory-robbing disease with only one commercially viable product, Leqembi. The FDA granted that therapy — made by Japanese pharmaceutical firm Eisai and its U.S. partner Biogen — full approval in July. In early November, Biogen said 800 people were currently being treated with Leqembi, though management expressed confidence in reaching its goal of 10,000 patients by the tip of March. Actually receiving clearance is most vital for donanemab. But from there, investors pays close attention to Eli Lilly’s projected launch trajectory for the drug and initial sales estimates, Seigerman said. Wall Street forecasts donanemab’s 2024 revenue at $619 million, before rising to $1.12 billion in 2025 and $1.54 billion in 2026, in line with FactSet. Seigerman said there are obstacles within the Alzheimer’s market — most notably having enough neurologists who can screen patients for the drugs — which might be limiting the adoption of Leqembi. Once Eli Lilly is officially available in the market, he said the corporate may do a few of the heavy lifting on alleviating bottlenecks that might help each donanemab and Leqembi. Other catalysts Clinical trials examining tirzepatide’s effectiveness in treating other conditions, reminiscent of sleep apnea and heart failure, are expected to be accomplished in 2024. Potential updates on Lilly’s next-generation weight-loss treatments — retatrutide, which like tirzepatide is an injectable, and orforglipron, an oral drug — represent additional catalysts. A possible “sleeper asset” next yr for Eli Lilly is lebrikizumab, a treatment for moderate-to-severe eczema that is awaiting FDA approval, Seigerman said. In October, the U.S. regulator said it identified issues at a third-party manufacturer that needed to be fixed before lebrikizumab might be cleared. Analysts expect lebrikizumab — a part of Eli Lilly’s increased emphasis on immunology drugs — to generate only $261 million in revenue next yr but achieve blockbuster status in 2026, when sales are projected to be greater than $1.3 billion. (Jim Cramer’s Charitable Trust is long LLY. 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Eli Lilly & Co. Mounjaro brand tirzepatide medication arranged at a pharmacy in Provo, Utah, US, on Monday, Nov. 27, 2023.
George Frey | Bloomberg | Getty Images
Investor optimism for Eli Lilly‘s diabetes and obesity treatments in 2023 lifted the stock to its seventh annual gain in a row. In the brand new yr, it ought to be the usual story.