Eli Lilly looks to extend its winning streak over the broader market to 6 years

Eli Lilly has outperformed the S & P 500 for five straight years as Wall Street woke up to its massive opportunity in obesity drugs. Six in a row is not out of the question. Year-to-date performance: Up 33.7% Forward price-to-earnings ratio: 34.3 versus five-year average of 34.5 Our rating: Buy-equivalent 1 Our price target: $1,000 LLY YTD mountain Eli Lilly’s year-to-date stock performance. ’24 look back The dominant theme for Eli Lilly this year was the rollout of its all-important GLP-1 obesity drug Zepbound, which was approved by the Food and Drug Administration in late 2023 . It has been quite the success: Sales are projected to be roughly $5.1 billion, according to analyst estimates compiled by FactSet. At the end of last year, Wall Street forecast Zepbound revenues of $1.9 billion. Upward revisions of that magnitude help explain why the stock has followed up its 59% leap in 2023 with another strong year. Eli Lilly has steadily increased supply of Zepbound and sister drug Mounjaro, which is used to treat type-2 diabetes, in an effort to alleviate near-term shortages amid booming demand. But just as crucially, the company announced a slew of additional manufacturing investments , with a new one seemingly every few months , in a sign of long-term confidence about the GLP-1 market. Given Lilly’s decades-long quest on Alzheimer’s , it’s worth noting the company’s first successful treatment for the memory-robbing disease, Kisunla, was approved in July , though it hasn’t been a material revenue contributor just yet. ’25 look ahead Eli Lilly’s ability to expand available supply of Zepbound and Mounjaro in the new year will be crucial. That seems obvious on its face, but there is a more nuanced explanation: Keeping those products off the FDA’s shortage list will hamper the ability of so-called compounded pharmacies to make unapproved copies of the drugs. Another area to watch in 2025 is whether the FDA expands the label on Zepbound, which would allow the obesity drug to be prescribed as a treatment for other conditions, such as obstructive sleep apnea and cutting heart failure risks . That would help build the case for broader insurance coverage and, in turn, a bigger revenue opportunity. Updates on Eli Lilly’s weight loss pipeline could also be significant, most notably the expected readout of its late-stage trial for obesity pill orforglipron. Mid-stage results released in June 2023 showed it was highly effective, and Wall Street sees oral versions of obesity treatments as being critical to meet maximum demand. Zepbound and its leading rival, Novo Nordisk ‘s Wegovy, are taken via once-weekly injection. In the year ahead, investors will keep a close eye on health policy out of Washington, especially with noted pharmaceutical industry critic Robert F. Kennedy Jr. awaiting confirmation to run the Department of Health and Human Services. Despite recently telling Jim he sees GLP-1s as part of the solution to the U.S. obesity crisis, Kennedy has frequently derided the drugs in the past . Additionally, it’s unclear what the incoming Trump administration could mean for the Biden White House’s proposal to expand Medicare and Medicaid access to GLP-1s . Positive updates from Novo Nordisk and other hopeful challengers such as Viking Therapeutics could in the short run put pressure on Lilly shares, but we’re confident in its competitive moat, due in large part to its manufacturing capacity advantages. Jim Cramer recently named Eli Lilly as one of the portfolio’s 12 core holdings heading into 2025. (Jim Cramer’s Charitable Trust is long LLY. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

An Eli Lilly & Co. Zepbound injection pen arranged in the Brooklyn borough of New York, US, on Thursday, March 28, 2024.

Shelby Knowles | Bloomberg | Getty Images

Eli Lilly has outperformed the S&P 500 for five straight years as Wall Street woke up to its massive opportunity in obesity drugs. Six in a row is not out of the question.

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