Eli Lilly's Stock Drops as It Slashes the Price of Zepbound: Time to Buy the Dip?

Core Viewpoint - Eli Lilly has achieved significant market success, becoming the first healthcare company to reach a $1 trillion market value, largely due to the rapid sales growth of its weight loss drug, Zepbound [1][2]. Pricing Strategy - Eli Lilly announced a price reduction for Zepbound, with new monthly costs ranging from $299 to $449, down from $349 to $499, aimed at increasing accessibility for out-of-pocket patients [2][5]. - This price cut follows previous agreements with the Trump Administration to lower Zepbound prices for eligible Medicare and Medicaid patients [4]. Competitive Landscape - The decision to lower Zepbound's price is partly a response to Novo Nordisk's recent price cut for its anti-obesity drug, Wegovy, which could attract cash-paying patients away from Zepbound [6]. Market Concerns - Investors may worry that the price reduction could slow Zepbound's sales growth, especially given Eli Lilly's high valuation at 33.3 times forward earnings compared to the healthcare industry's average of 18.2 [7]. Long-term Prospects - Despite short-term concerns, Eli Lilly's long-term outlook remains strong, bolstered by its drug pipeline, including orforglipron, an oral weight loss medication, and retatrutide, which shows promising results in clinical trials [8][9][10]. - Eli Lilly reported third-quarter revenue of $17.6 billion, a 54% increase year-over-year, with adjusted earnings per share soaring 495% to $7.02 [11]. Investment Appeal - The company's robust pipeline, investments in artificial intelligence, and local manufacturing capacity enhancements contribute to its attractiveness as an investment, despite recent developments related to Zepbound [12].