Eli Lilly stock hits all-time high: What’s been driving the pharma giant’s share price higher?

Eli Lilly (LLY) is experiencing a banner year, as its stock price has reached new all-time highs in June. The surge comes on the heels of a series of positive developments for the pharmaceutical giant, including the success of its GLP-1 weight-loss drugs and an FDA committee recommendation to approve its new Alzheimer’s treatment.

The company is showing signs of disruptive growth. Here’s a quick recap of how Eli Lilly  got here and what investors might expect moving forward.

Eli Lilly is cashing in on weight-loss drugs

The weight loss market is a multi-billion dollar industry, and Eli Lilly has positioned itself as a lead player with its GLP-1 drugs, Zepbound and Mounjaro. These injectable medications have led to significant weight loss and improved glycemic control in patients with obesity and type 2 diabetes.

J.P. Morgan Research forecasts that the GLP-1 market will exceed $100 billion by 2030, and total GLP-1 users may number around 9 percent of the overall U.S. population.

Other analysts are even more bullish on the future GLP-1 market. Some analysts have said combined sales of Zepbound and Mounjaro alone could be as high as $100 billion a year, according to Barron’s.

While Lilly is working through supply chain issues as it ramps up production of its GLP drugs, profits are already rolling in. Overall revenue for the drug company jumped 26 percent during the first quarter of 2024 compared to the same time last year. It’s now one of the best-performing stocks in the S&P 500 for the year.

Eli Lilly’s new Alzheimer’s drug moves forward

Eli Lilly’s investigational drug, donanemab, has brought a glimmer of hope to the fight against Alzheimer’s. An infusion given once per month, donanemab targets amyloid beta plaques, one of the hallmarks of Alzheimer’s disease.

In a recent Phase 3 clinical trial, donanemab slowed the progression of memory and thinking problems by 29 percent overall in patients with early Alzheimer’s.

But the drug showed notable negative side effects, too. Swelling and bleeding in the brain — a known risk for this class of drugs — occurred in some clinical trial participants taking donanemab, and three patients died.

Outside advisors to the U.S. Food and Drug Administration voted unanimously that the benefits of the treatment outweighed its risks during a meeting on June 10. The vote paves the way for the FDA to make a final decision on donanemab. While the federal agency isn’t bound by the panel’s recommendation, it historically follows its advice.

A similar Alzheimer’s treatment manufactured by Biogen and Eisai, called Leqembi, also gained FDA approval last year after going through a similar advisory committee process.

But Leqembi’s launch has gotten off to a slow start, and Eli Lilly may face similar hurdles if its drug gets full FDA approval.

Eisai reported sales of only $27.1 million in its most recent fiscal year. While the company is projecting sales to reach $360 million in the current fiscal year, it still suggests a sluggish performance so far. Difficulties getting patients access to the Alzheimer’s drug, potentially due to insurance and supply chain issues, could be contributing to the slow initial uptake.

What else could be causing Eli Lilly to rise?

Blockbuster weight-loss drugs and a new Alzheimer’s medication may have catalyzed Eli Lilly’s stock price, but the company is giving investors other reasons to be optimistic.

  • Strong overall financial performance: Eli Lilly has consistently reported strong revenue and earnings growth, especially in the first quarter of 2024. This financial performance bodes well for investor confidence.

  • Increased profit estimates: The company raised its revenue guidance by $2 billion for 2024 and is now projecting revenue of $42.4 billion to $43.6 billion, due to strong Mounjaro and Zepbound sales.

  • Healthy pipeline: In addition to donanemab, Eli Lilly has a pipeline of other drugs in various stages of development and FDA approval, including treatments for active Crohn’s disease and sleep apnea.

  • Growing its manufacturing base: Eli Lilly is also racing to increase supply of its GLP drugs, with seven manufacturing sites either ramping up or under construction as of April 2024.

  • Strategic acquisitions: Eli Lilly has been actively pursuing strategic acquisitions to expand its product portfolio and strengthen its position in key therapeutic areas. Acquisitions, such as that of cancer drug maker POINT Biopharma Global in December 2023, are seen as positive developments for the company’s long-term growth.

The stock’s shares went for about $868 in early June, up more than 93 percent over the last year.

Bottom line

Eli Lilly’s stock price is riding a wave of optimism and strong earnings. The success of its weight-loss drugs, the promising early results for donanemab and the company’s dominance in the pharmaceutical industry are key factors likely driving the surge. Eli Lilly seems well-positioned to capitalize on its current momentum and continue its growth trajectory in the Big Pharma market.

However, investors should remain cautious. The full impact of donanemab on the Alzheimer’s treatment market remains to be seen, and the drug development process is inherently risky. Still, the disruptive nature and massive market audience for its obesity drugs positions Eli LIlly to remain profitable for years to come.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.

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