Eli Lilly Reverses Its Recent Upswing On Broader Market Woes

 Eli Lilly (LLY) stock has dropped swiftly alongside the broader market despite promising news recently for its alopecia and eczema treatments.

In one final-phase study, Lilly's Olumiant helped patients with alopecia regrow a significant amount of hair over the course of 36 weeks. The results showed 80% or more scalp coverage in 42.4% of patients who received the drug. In another study, half of patients who used Eli Lilly's Ebglyss had eczema-free skin after three years. An additional 83% of patients had almost clear skin.

But Lilly stock has dropped significantly, undercutting a cup-with-handle base after the Department of Health and Human Services fired thousands of employees from U.S. health agencies and amid worries tariffs could eventually hurt the pharmaceuticals industry. Lilly is trying to bolster its manufacturing efforts in the U.S. and announced it would invest another $27 billion to do so.

In bearish news, the European Medicines Agency's Committee for Medicinal Products for Human Use declined to recommend use of Lilly's Alzheimer's drug, donanemab. In the U.S., it sells under the brand name Kisunla.

The Food and Drug Administration also removed tirzepatide from its shortage list. That means compounding pharmacies can no longer make knockoff versions of the diabetes and weight-loss drug. But it also means Lilly will have to keep up with demand for the drugs it called Mounjaro and Zepbound. Big-name compounder Hims & Hers Health (HIMS) also announced recently it would sell branded Mounjaro and Zepbound on its telehealth platform.

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

Eli Lilly Stock: Sales Narrowly Lag

In the fourth quarter, Eli Lilly earned an adjusted $5.32 per share, soaring 114% and beating calls for $5.02 a share. Sales jumped 45% to $13.53 billion, just below expectations for $13.55 billion, according to FactSet. Despite coming up short, Mounjaro sales rocketed 124%, while Zepbound put up a triple-digit gain after launching in the year-earlier period.

Sales of a similar drug, Trulicity, missed expectations and tumbled 26% to $1.25 billion. Trulicity treats type 2 diabetes and, like the tirzepatide-based products, mimics the GLP-1 hormone to improve feelings of satiety and blood sugar markers.

For the year, Lilly expects $58 billion to $61 billion in sales and adjusted earnings of $22.50 to $24 per share. The midpoints of Eli Lilly's outlook topped analysts' forecast. The Street projected $58.77 billion in sales and $22.76 earnings per share.

Eli Lilly Stock Analysis

Eli Lilly stock is trading below its 50-day and 200-day lines.

Shares are forming a cup-with-handle base with a buy point at 935.63, according to MarketSurge. But shares could struggle to retake their moving averages and all buys are risky in this market.

Shares have a declining Relative Strength Rating of 50 out of a best-possible 99, IBD Digital shows. This puts LLY stock just narrowly in the middle of all stocks when it comes to 12-month performance. The RS Rating was a higher 85 just a month ago.

Lilly stock also has a Composite Rating of 90, a measure of fundamental and technical metrics.

Recent News Around Lilly Stock

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

In a recent study, Lilly's Zepbound topped Novo's Wegovy in the first-ever head-to-head study.

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

LLY stock fell in July after Pfizer (PFE) and Viking Therapeutics (VKTX) announced plans to run additional testing for obesity treatments. A weight-loss treatment study from Roche (RHHBY) also pressured Lilly shares.

Lilly is also working on a next-generation weekly shot called retatrutide. While tirzepatide loops in two hormonal targets to stoke weight loss, retatrutide targets three. Its oral weight-loss drug, dubbed orforglipron, is also expected to be the first weight-loss pill to hit the market.

In other news, Lilly's Alzheimer's drug gained FDA approval in June. But European officials declined to recommend it.

Kisunla works by removing a built-up protein called beta amyloid. In testing, Kisunla worked better in patients whose amyloid included a protein called tau. Across all patients, donanemab slowed cognitive decline by 22% to 29% over 18 months. In patients with intermediate levels of tau, donanemab slowed the decline by 35% to 36%.

It rivals Biogen (BIIB) and Eisai's (ESAIY) Leqembi.

In the U.K., Kisunla is now approved for patients with one copy of a genetic mutation that makes them more susceptible to developing early-onset Alzheimer's disease or non-carriers. People with two copies of that mutation are more likely to experience brain swelling as a result amyloid removal.

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