Ever stumble upon a treasure chest you almost walked past? That's how I feel about Eli Lilly (LLY) these days. When I last weighed in on LLY earlier this year, I was hesitant, pretty much like a seasoned sailor eyeing stormy seas.
The stock's valuations at the time were sky-high, especially when stacked against its arch-rival Novo Nordisk A/S (NVO). But the market, ever the trickster, loves to flip the script when you least expect it.
Since May, LLY has soared by an impressive 24.5%, leaving most of its pharmaceutical peers scrambling in its wake. Only Viking Therapeutics (VKTX) has managed to keep pace in this high-stakes race.
So, what's ignited this rocket?
For starters, Eli Lilly finally ironed out the kinks in its supply chain. By early August 2024, the shortages plaguing their weight-loss blockbuster, Mounjaro, were a thing of the past.
Those bottlenecks had put a damper on Mounjaro's performance in the first half of 2024, but now the gates have swung wide open.
But that's not all. LLY's got some serious production muscle coming online from the first half of 2025. This isn't just adding fuel to the fire — it's like pouring jet fuel on a bonfire.
That means we could see Mounjaro and Zepbound sales shooting for the moon in late 2024.
Now, here's the masterstroke. In January 2024, Eli Lilly launched LillyDirect, a direct-to-consumer platform that's nothing short of ingenious.
By slashing prices for self-pay patients on Zepbound, they're not just expanding their market reach—they're throwing a wrench into the burgeoning market for compounded GLP-1 drugs.
Let's crunch some numbers for more context.
A four-week supply of 2.5 mg Zepbound via LillyDirect costs $399 out of pocket. That's in the same ballpark as the $199 monthly fee charged by telehealth platforms like Hims & Hers Health (HIMS) for compounded GLP-1 injectables.
Contrast that with the eye-watering $1,790 monthly price tag for Novo Nordisk's Ozempic or the $1,990 for Wegovy, and it's clear why Lilly's strategy is turning heads and opening wallets.
All this momentum has Lilly's management grinning like the cat that ate the canary. They've bumped up their 2024 revenue guidance to a staggering $46 billion — a 34.8% year-over-year leap.
As for earnings, they're forecasting an adjusted EPS of $16.35, a jaw-dropping 158.7% increase from last year. Even a market veteran like me has to tip his hat.
Wall Street analysts are also joining the party, projecting Lilly's top and bottom lines to grow at a compound annual growth rate of 26.1% and 66.7%, respectively, through 2026.
Now, you might be scratching your head and thinking, "Isn't LLY overvalued at this point?"
Surprisingly, despite a forward P/E ratio of 55.39x — well above its historical averages — Lilly's forward PEG ratio sits at a comfortable 1.30x. That's lower than its 5-year mean of 2.19x and even the sector median of 2.00x.
In plain English, there's still some juice left in this orange for value investors.
But let's not get ahead of ourselves. Viking Therapeutics is hot on Lilly's heels with its VK2735 candidate, boasting impressive Phase 3 trial results.
Imagine 14.7% weight loss from baseline in just 13 weeks with their injectable version — that's actually warp speed compared to Lilly's current offerings.
And it's not just Viking sharpening their knives. The GLP-1 arena is set to become a battlefield, with up to 16 new drugs potentially launching by 2029.
So, where does that leave us? I'm cautiously upgrading Eli Lilly to a Buy, but I'm keeping my eyes wide open.
The market is frothy, perhaps a bit too exuberant for my taste. You might want to hold your horses and wait for a pullback into the $780–$845 range before jumping in.
Keep an eye on Lilly's balance sheet, too. Expansion at this scale doesn’t come cheap.
The company’s net debt has swelled to $25.53 billion, a hefty 59.6% increase from last year. Annualized interest expenses are creeping up as well, now at $734.4 million.
It’s not a five-alarm fire, but it’s smoke worth watching.
Eli Lilly has made bold moves in the GLP-1 market, positioning itself as a leader while others scramble to catch up. The question is, are you ready to take a seat at the table?
After all, in the words of the great Kenny Rogers, "You've got to know when to hold 'em, know when to fold 'em." And right now, LLY's hand is looking pretty strong.
