Eli Lilly Falls More Than 10% in a Month: Buy, Sell or Hold the Stock?

Core Insights - Eli Lilly and Company (LLY) has experienced a 10.6% decline in stock price this month following disappointing third-quarter results, missing both earnings and sales estimates while lowering financial guidance for the year [1][2] Financial Performance - The total revenue guidance was narrowed from a range of $45.4 billion to $46.6 billion down to $45.4 billion to $46.0 billion, and earnings per share guidance was sharply cut from $16.10 to $16.60 to $13.02 to $13.52 due to IPR&D charges related to the acquisition of Morphic [2] - Despite the disappointing sales performance, Lilly's revenues were up 42% on an organic basis in the third quarter, with a projected year-over-year revenue growth of 50% in the fourth quarter [21] Product Performance - Mounjaro and Zepbound, key drugs for diabetes and obesity, generated sales of $11.0 billion in the first three quarters of 2024, accounting for approximately 45% of total revenues [6] - Sales of Mounjaro and Zepbound were impacted by inventory issues, with channel inventory decreasing at wholesalers in the third quarter [7] - Lilly is balancing demand and supply for these drugs and expects increased demand activities in the fourth quarter, which should benefit sales in 2025 [8] Competitive Landscape - Lilly's tirzepatide medicines face strong competition from Novo Nordisk's semaglutide products, which have also missed estimates for earnings and sales [10] - Other companies like Amgen and Viking Therapeutics are developing GLP-1-based candidates that could pose future competition to Mounjaro and Zepbound [11] Pipeline and Future Prospects - Lilly has received approvals for several new drugs, including Kisunla for Alzheimer's disease, and is investing in obesity treatments with 11 new molecules in clinical development [12][14] - The company is also developing tirzepatide for additional indications, which could further boost sales [9] Stock Performance and Valuation - Lilly's stock has risen 42.7% this year, outperforming the industry and the S&P 500 [15] - The stock is currently trading at a premium to the industry, with earnings estimates for 2024 declining from $15.80 to $13.19 per share over the past 30 days [17][18] Investor Sentiment - Despite recent declines, the company still has growth prospects as demand for Mounjaro and Zepbound remains strong, suggesting investors may consider holding the stock [22]