雅虎香港財經 Is Eli Lilly (LLY) a Buy on Tirzepatide Success in Sleep Apnea?
Eli Lilly and Company LLY has seen unparalleled success with tirzepatide, a dual GIP and GLP-1 receptor agonist, which is marketed as Mounjaro for type II diabetes and Zepbound for obesity.
Mounjaro was launched in mid-2022, while Zepbound was launched in November 2023. Despite a short time on the market, Mounjaro and Zepbound have become key top-line drivers for Lilly, with demand for weight loss drugs rising rapidly. Tirzepatide is also being developed for other indications, including obstructive sleep apnea (OSA) and metabolic dysfunction-associated steatohepatitis.
Recent data from clinical studies on OSA have shown that tirzepatide has reduced sleep apnea events in people with obesity.
New Encouraging Data From Sleep Apnea Study
On Friday, Lilly announced detailed data from the SURMOUNT-OSA phase III study evaluating tirzepatide for the treatment of moderate-to-severe OSA in adults with obesity, with and without positive airway pressure (PAP) therapy. In the study, patients with OSA and obesity experienced about 30 fewer disruptive events every hour of sleep, while 51.5% of patients using the PAP machines achieved disease resolution. Based on data from these studies, Lilly has filed a regulatory application to the FDA seeking approval of tirzepatidefor the treatment of moderate-to-severe OSA and obesity. It will file applications to other regulatory bodies in the coming weeks.
If approved for expanded use in OSA, sales of tirzepatide will increase further. Analysts expect tirzepatide to generate around $25 billion in peak sales.
The GLP-1 segment is an important class of drugs for multiple cardiometabolic diseases and is gaining significant popularity. GLP-1 drugs work by mimicking the hormone GLP-1, resulting in weight loss, lowering hemoglobin A1c and reducing cardiovascular risks.
The only other large drugmaker to have generated such phenomenal returns, also gaining from the GLP-1 segment’s popularity, is Novo Nordisk NVO. The stock has risen 459% in the past five years, mainly on the success of its drug semaglutide, a direct competitor to Lilly’s tirzepatide medicines. Semaglutide is approved as Ozempic pre-filled pen and Rybelsus oral tablet for type II diabetes and as Wegovy injection for weight management. Despite supply challenges, Wegovy is seeing strong prescription trends and is generating impressive revenues and profits for Novo Nordisk.
New Drugs & Pipeline Success
In the past couple of years, Lilly has received approvals for several new drugs and witnessed pipeline and regulatory success.
Other than Mounjaro and Zepbound, Lilly gained approvals for some new drugs in the past year. These included Omvoh for ulcerative colitis and BTK inhibitor Jaypirca for mantle cell lymphoma and chronic lymphocytic leukemia. Lilly expects its new drugs, Mounjaro, Omvoh, Zepbound, Ebglyss and Jaypirca, to contribute significantly to its top line in 2024.
A key asset in Lilly’s pipeline is donanemab for early Alzheimer’s disease, which is under review with the FDA. Earlier this month, an FDA committee assessing the safety and effectiveness of donanemab voted 11-0 unanimously recommending its approval. The Peripheral and Central Nervous System Drugs Advisory Committee said that the benefits of donanemab outweighed the risks despite some safety concerns. The FDA is expected to give its decision later this year.
Donanemab will be the second drug on the market to treat Alzheimer's disease if approved. Biogen BIIB and its Japan-based partner Eisai’s Leqembi was the first therapy approved by the FDA for early Alzheimer’s disease in the United States in July 2023. The Centers for Medicare & Medicaid Services has also granted broad reimbursement to Biogen/Eisai’s Leqembi under Medicare plans. Leqembi is also approved in China and Japan. Regulatory applications seeking approval of Leqembi are under review in Europe.
Lilly believes donanemab can generate blockbuster sales.
Stock Price & Rising Estimates
The stock is trading at a premium to the industry, as seen in the chart below.
LLY Stock Valuation
Image Source: Zacks Investment Research
However, Lilly’s stock has gone up by more than 700% in the past five years mainly due to its solid pipeline potential, particularly its obesity drugs.
Year to date, Lilly’s stock has risen 53.2% compared with an increase of 20.9% for the industry. The stock has also outperformed the sector as well as the S&P 500.
LLY Stock Outperforms Industry, Sector & S&P 500
Image Source: Zacks Investment Research
Estimates for Lilly’s 2024 earnings have moved up from $12.52 to $13.57 and from $18.50 to $19.24 for 2025 over the past 60 days.
Estimate Movement
Image Source: Zacks Investment Research
Conclusion
Lilly has consistently reported strong revenues and profits and dealt well with expiring patents and increasing competition. Lilly’s revenue growth is being driven by higher demand for drugs like Mounjaro, Verzenio, Jardiance, Taltz and others. Incremental contribution for new drugs, rapid pipeline progress in areas like obesity, diabetes and Alzheimer’s and regular M&A activity will keep the stock afloat.
Lilly is a great stock to have in one’s portfolio based on its strong overall financial performance and robust drug pipeline. Those who already own this Zacks Rank #3 (Hold) stock should continue to retain it. Consistently rising earnings estimates clearly highlight analysts’ optimistic outlook for further growth. Though LLY currently trades at a premium to the industry, any major dip in the stock’s price can be used as an opportunity to buy it for long-term gains.
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