This Blue-Chip Stock Is Cooking Up a Major Growth Catalyst
With cardiovascular diseases representing one of the leading risks for patients with Type 2 diabetes, doubling their likelihood of experiencing heart attacks or strokes, this development positions Mounjaro to become physicians' top choice for a massive patient population. As the company prepares to submit the heart health data to global regulators by year-end, the path is set for potential regulatory approval and favorable insurance coverage as early as 2026.
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In this article, we'll delve deeper into Eli Lilly's recent announcement, unpack its strategic implications, and explore why investors should closely monitor this blue-chip pharmaceutical stock as it cooks up this potentially game-changing growth catalyst.
About Eli Lilly Stock
Eli Lilly and Company (LLY) is a leading global pharmaceutical firm specializing in the discovery, development, and marketing of a broad portfolio of medications. The company has a strong presence in key therapeutic areas, including diabetes, oncology, immunology, and neuroscience. Its product portfolio features well-known diabetes treatments such as Basaglar, Humalog, Jardiance, Mounjaro, Trulicity, and Zepbound, which also target obesity. LLY has a market cap of $707 billion.
Shares of the drugmaker are down 17.3% in the year to date. Although LLY stock started the year on an upbeat note, climbing to highs above $900, concerns over healthcare reform, tariffs, and a slowing economy eventually drove it down. Last Thursday, U.S. President Donald Trump sent letters to 17 major pharmaceutical firms, including Eli Lilly, urging them to reduce drug prices for U.S. consumers. Also, Trump said on Tuesday that U.S. tariffs on pharmaceutical imports would be announced 'within the next week or so.'
LLY Stock Plunges as Weight-Loss Pill Trial Disappoints
LLY shares are down more than 14% at the time of writing after the company reported disappointing late-stage trial results for its experimental obesity pill, overshadowing strong quarterly results. The company said that in a Phase 3 trial, patients taking a 36-milligram dose of its oral GLP-1 drug, orforglipron, without food or water restrictions, experienced an average weight loss of 12.4%, equivalent to 27.3 pounds, over 72 weeks. That falls short of the 15% average weight loss seen with Novo Nordisk's (NVO) injectable Wegovy. It also misses Wall Street's expected range of 12% to 14%, according to analysts at HSBC.
Equally important were side effects, as nearly 25% of patients on the highest dose withdrew from Lilly's study, according to Jared Holz, a healthcare strategist at Mizuho Securities. Investors are looking for a 'more well-tolerated drug,' he said, emphasizing that the pill could be used as 'more of a consumer product.'
Weight-loss pills represent the next key battleground in the obesity market, and investors had believed Lilly held an edge over Novo. However, the latest data have cast doubt on Lilly's claim to market leadership. Meanwhile, unlike Novo, which recently trimmed its growth forecast due to headwinds in the GLP-1 market, Eli Lilly raised the midpoint of its full-year revenue guidance by $1.5 billion to a range of $60 billion to $62 billion.
In an interview, Lilly CEO David Ricks stated that the company wasn't disappointed with the results, even though they came in 'one or two points below what [the] Street had' expected. Ricks added that the goal was to create a pill that was easy to take, scalable for mass production, and delivered weight loss results comparable to other GLP-1 treatments, 'and that's what we've achieved.'
While investors are underwhelmed with today's news, Lilly still has more in its pipeline, so let's take a closer look at one of its potential upcoming growth catalysts.
Eli Lilly's Mounjaro Makes Cardio Advance
Last Thursday, Eli Lilly announced that its top-selling diabetes drug, Mounjaro, demonstrated heart health benefits in a late-stage trial that directly compared it to the company's older treatment, Trulicity.
Mounjaro achieved the study's primary objective by proving it was not inferior to Trulicity in treating patients with Type 2 diabetes and established cardiovascular disease. Notably, the study involved over 13,000 patients with Type 2 diabetes and heart disease across 30 countries and spanned approximately four and a half years, making it the largest and longest clinical trial to date on tirzepatide, the active ingredient in Mounjaro. The study revealed that patients taking Mounjaro had a 16% lower mortality rate compared to those on Trulicity. Also, patients on Mounjaro had an 8% lower risk of cardiovascular death, heart attack, or stroke compared to those taking Trulicity. In addition, Lilly said that patients on Mounjaro experienced greater improvements in blood sugar levels, weight loss, and blood pressure. The most frequently reported side effects for both drugs were mild and related to the gastrointestinal system.
The results come at a time when Trulicity, another top-selling Eli Lilly drug, is approaching patent expiration in 2027, potentially strengthening Mounjaro's position in the diabetes market. They were strong enough for Mounjaro to meet the predefined statistical threshold for non-inferiority compared to Trulicity, but it fell short of the higher bar for superiority, disappointing some investors and causing the stock to drop 2.6%.
Some clinicians noted that the results, especially the reduced risk of cardiovascular events, weren't surprising, as they had expected Mounjaro to provide cardiovascular benefits. However, the difference in all-cause death rates between Mounjaro and Trulicity is 'really quite profound' and 'definitely something clinically meaningful to us as clinicians,' according to Dr. David Broome, clinical assistant professor at the department of internal medicine's metabolism, endocrinology, and diabetes division at the University of Michigan.
Tirzepatide, the active ingredient in Mounjaro and Zepbound, which Lilly markets for weight loss, has quickly emerged as one of the pharmaceutical industry's fastest-selling drugs. It has already established itself as a leading treatment option for Type 2 diabetes and obesity. In Q1, Mounjaro sales more than doubled to $3.8 billion, while Zepbound, still in the early stages of its launch, generated an impressive $2.3 billion, highlighting strong demand. In Q2, Mounjaro sales increased 68% to $5.2 billion and Zepbound sales nearly tripled to $3.4 billion. And the latest study is especially important to Lilly's efforts to expand tirzepatide's dominance, given the close connection between diabetes, obesity, and cardiovascular risk.
Lilly stated that it believes the new data strengthens the case for making Mounjaro the top prescribing choice for patients with Type 2 diabetes, who face twice the risk of heart disease or stroke compared to those without the disease.
Eli Lilly is set to present the study at a medical conference in September. The company intends to submit the heart health data to global regulators by year-end and noted that this could lead to approvals of Mounjaro for this purpose in 2026, potentially improving insurance coverage and boosting prescriptions. More precisely, Lilly aims to expand Mounjaro's label to include an indication for cardiovascular risk reduction. 'These findings strengthen the case for Mounjaro as a potential front-line treatment for people with type 2 diabetes and cardiovascular disease,' Ken Custer, president of Lilly's cardiometabolic business, said in a statement.
Success is expected to strengthen Lilly's position against Novo Nordisk's rival GLP-1 drug, semaglutide, which the Danish pharmaceutical company markets as Ozempic for diabetes and Wegovy for weight loss. Novo has already demonstrated that both Ozempic and Wegovy lower the risk of heart attacks and strokes in patients with obesity and diabetes. Both drugs include labeling that highlights these benefits, giving Novo a competitive edge in coverage negotiations with insurers and government programs.
What Do Analysts Expect for LLY Stock?
Despite LLY's underperformance this year, Wall Street analysts remain highly bullish on the stock, as evidenced by its consensus 'Strong Buy' rating. Out of 26 analysts covering the stock, 20 rate it a 'Strong Buy,' two suggest a 'Moderate Buy,' and the remaining four recommend holding. The average price target for LLY stock is $984.29, indicating solid upside potential of 53% from current levels.
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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