Although Eli Lilly (LLY +0.83%) is a leader in the GLP-1 space, the drugmaker continues to develop new and potentially better treatments for people to lose weight. Not everyone has success with GLP-1 drugs or can effectively tolerate them.
Recently, the company released trial results that suggested a combination treatment involving tirzepatide (the active ingredient in Zepbound), along with another drug, resulted in even greater weight loss. But there was a catch — discontinuation rates were higher. What does this ultimately mean for investors, and is the healthcare stock worth buying on this news?
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Trial participants achieved weight loss of up to 23.3%
After a period of just 48 weeks, patients who took tirzepatide along with eloralintide, which is an experimental drug that targets amylin, a natural hormone, but not GLP-1, achieved considerably more weight loss than just taking either drug alone. Patients who took a treatment that involved both drugs lost up to 23.3% of their weight versus just 14.8% with tirzepatide. Meanwhile, people who only took eloralintide lost up to 12.3%.
The one concern with the trial, however, was that a large number of people who took the combination treatment stopped it due to side effects. The discontinuation rate was as high as 27%, potentially suggesting that it wasn’t well-tolerated among patients. But dosing can have a big impact on that, and the company’s President of Lilly Cardiometabolic Health, Ken Custer, says high discontinuation rates weren’t uncommon for tirzepatide either when it was in a mid-stage trial several years ago.
Today’s Change
(0.83%) $9.67
Current Price
$1,179.27
Key Data Points
Market Cap
Day’s Range
$1151.67 – $1179.82
52wk Range
$783.85 – $1292.65
Volume
8.9K
Avg Vol
2.5M
Gross Margin
83.40%
Dividend Yield
0.57%
Eli Lilly’s growth potential remains promising
Overall, these recent trial results were a net positive for Eli Lilly, as they suggest the company is on a promising path as it continues to look for ways to build up its lead in the anti-obesity market. Rather than just sitting back on its approvals thus far, the company has demonstrated a strong willingness and eagerness to stay ahead of the competition. It’s already dominating the anti-obesity market today, and yet, it’s still looking for the next best solution for patients. That’s a sign of a great growth-oriented business.
The one potential obstacle for the stock today is its valuation. Eli Lilly has a market cap of more than $1 trillion, and it trades at close to 40 times its trailing earnings. Its valuation is steep. I do, however, believe it can still rise higher given its dominance and success. But investors may want to temper their expectations. Eli Lilly’s stock is up around 10% this year, and while it may be an excellent long-term investment, its gains may be modest in the near term.
