If the price is right, sales can soar. That's true with any product -- even prescription drugs.
On Tuesday, Eli Lilly(NYSE: LLY) announced a new pricing plan for its latest blockbuster drug, Zepbound. The therapy will now be available to self-pay patients at a 50% or greater discount to the list price of other GLP-1 obesity drugs. Is Lilly stock a no-brainer buy after the company's Zepbound move?
Why Lilly's Zepbound strategy is brilliant
First of all, I think Lilly's Zepbound strategy is brilliant. It should open up a larger market for the company's obesity drug.
As James Zervos, chief operating officer with Obesity Action Coalition, explained in Lilly's press release announcing its move, "People living with obesity have long been denied access to the essential treatment and care needed to manage this serious chronic disease." He added, "Despite obesity being recognized as a serious chronic illness with long-term consequences, it's often misclassified as a lifestyle choice, resulting in many employers and the federal government excluding medications like Zepbound from insurance coverage."
Zervos is correct that some health insurers aren't gung-ho about covering Zepbound and other obesity drugs. In addition, some individuals don't have employer health insurance or aren't eligible for Lilly's Zepbound savings card program. Lilly expects that its new option will help millions of adults have access to Zepbound.
The company is charging $399 for a four-week supply of the 2.5 mg Zepbound single-dose vial and $549 for a four-week supply of the 5 mg dose. While that's still expensive, it's much cheaper than the cost of Novo Nordisk's Wegovy. Lilly is distributing the lower-cost Zepbound through its online LillyDirect channel, which allows it to eliminate any charges pharmacies or pharmacy benefits managers would charge.
Beyond obesity
Lilly's success doesn't depend entirely on its obesity drug, though. Mounjaro, which is approved for type 2 diabetes, is the same drug under the hood as Zepbound and also has tremendous commercial prospects. Together, Mounjaro and Zepbound generated nearly $6.7 billion in the first half of 2024.
Verzenio is another big winner for Lilly. Sales for the breast cancer drug soared 42% year over year in the first half of this year to around $2.4 billion. Three other products in Lilly's lineup also continue to deliver double-digit percentage sales growth: fast-acting insulin Humalog, type 2 diabetes and chronic heart failure drug Jardiance, and autoimmune disease drug Taltz.
The company has what I believe is a sure-fire blockbuster on the market now too with Kisunla. The U.S. Food and Drug Administration approved Kisunla for treating Alzheimer's disease in July 2024. Wall Street's consensus is that the drug will generate peak annual sales in the ballpark of $5 billion.
Looking ahead, Lilly hopes to win FDA approval for tirzepatide (Mounjaro/Zepbound) in treating obstructive sleep apnea in adults with obesity. It's evaluating pirtobrutinib (Jaypirca) in several late-stage studies in hopes of expanding its approved indications. The company also has several new experimental drugs in late-stage development targeting Alzheimer's disease, breast cancer, and other conditions.
Is Lilly stock a no-brainer buy?
The main argument against buying Lilly is its valuation. Shares trade at nearly 59 times forward earnings. However, investors should look further into the future to fully appreciate Lilly's growth potential. When they do they'll find that Lilly's valuation isn't concerning.
Mounjaro, Zepbound, Kisunla, and Lilly's other products and promising pipeline programs should enable Lilly to deliver impressive growth for years to come. I think Lilly's latest move to boost sales for Zepbound makes it even more of a no-brainer stock to buy than it already was.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
